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Invacare Corp (NYSE:IVC)
Q1 2020 Earnings Call
May 8, 2020, 10:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Invacare First Quarter 2020 Conference Call and Webcast. After the management overview, we will open the call to questions. [Operator Instructions] This conference is being recorded today, Thursday, May 7, 2020. I will now turn the call over to Lois Lee, Invacare's Director of Treasury and Investor Relations.

Lois Lee -- Director, Treasury and Investor Relations

Thank you, Kevin. Joining me on today's call from Invacare are Matt Monaghan, Chairman, President and Chief Executive Officer; and Kathy Leneghan, Senior Vice President and Chief Financial Officer.

Today we will be reviewing our first quarter 2020 financial results, and providing investors with an update on our transformation and our response to the COVID-19 pandemic. To help investors following along, we have created slides to accompany this webcast. For those dialing in, you can find a link to our webcast slide presentations at invacare.com/investorrelations. Further information can be found in our SEC filing. Before Matt begins, I'd like to note that during today's call we may make forward-looking statements about the company that by their nature address matters that are uncertain. Actual future results may differ materially from those expressed in our statements today due to various uncertainties. And I refer you to the cautionary statements included on the second page of our webcast slide and in our first quarter earnings release.

For an explanation of the items discussed in today's call that are considered to be non-GAAP financial information, such as constant currency net sales, constant currency SG&A, free cash flow, adjusted EBITDA, and adjusted net loss, please see the notes in the appendix of our webcast slides and in the related reconciliations in the slides and in the earnings release posted on our website.

I'll now turn the call over to Matt Monaghan.

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Thank you, Lois, and good morning. First of all, we want to start today's call with a huge thanks to our associates who are doing a great job creating a safe work environment so our vital products can continue getting to people in need. There are so many critical changes that had to take place to keep our operations safe and running, and tremendous work to get through the endless challenges of keeping a global supply chain operating in this dynamic environment. It's been inspiring to see the impact from our creative, hardworking and passionate associates, from our customers, and from our suppliers.

Obviously, the past few months have been challenging for everyone, both personally and professionally, since COVID-19 has impacted virtually every aspect of daily life. All of our medical device facilities have been permitted to remain open with safe work practices in place. We're proud to be part of the virus response, and we continue to prioritize association. Turning to slide four. The pandemic has impacted our business units in varying ways, creating opportunities for some and challenges for others. We've been experiencing strong global demand for respiratory products, primarily the high-flow stationary oxygen concentrators, as well as for bed systems. These products are being deployed in expanded medical facilities and are helping patients transition out of acute care settings to convalesce at home or in long-term care facilities.

While we're taking steps to increase production, we're unable to predict the extent to which we can increase supply due to do extensive pandemic-related challenges at our suppliers, the additional costs being incurred to operate, and the challenging logistics issues of expediting materials. We expect incremental demand of respiratory products and bed systems to continue into the second quarter. For now, we're unable to predict when demand will peak and when it will decline to lower levels. We were very pleased with the mobility and seating performance in first quarter 2020. As mentioned on prior calls, we have been growing our commercial organization and improving our new product launch processes. The results in mobility and seating, especially with power wheelchairs, was strong. The consequences of the pandemic has limited end user's access to clinicians and to healthcare facilities where fittings and trials of configured products typically occur. As a result, we began seeing the beginning of a global decline in mobility quotes and orders toward the end of the quarter at varying degrees based on local factors in each country. And we expect a temporary decline in orders in the near future.

Mobility and seating demand is expected to rebound with the resumption of elective care, easier access to clinics and the loosening stay-at-home orders. Predicting the exact profile of the change in demand is difficult, but we generally expect recovery to begin as early as third quarter. With all these dynamics taken together, we anticipate second quarter 2020 consolidated financial results will be challenged by somewhat lower sales and potential pressure on profitability with specific actions to offset adverse effects as best we can. Turning to slide five. For high-demand products we've increased staffing levels to help combat supply chain issues and to increase manufacturing output. We have simplified product mix to increase output. In other areas we have executed actions to protect profitability and preserve liquidity. As a result of quarantine protocols and public health actions, our sales force has found creative ways to connect with, support, and educate our customers and to engage with end-users, including performing virtual settings and service.

A key enabler to potential noncontact delivery is the LiNX power wheelchair control technology, which allows clinicians to wirelessly program wheelchairs from a safe distance. With LiNX, we're able to ship power wheelchairs fully configured and programmed from the factory that work just as the clinician and end-user had expected right out of the box, potentially without further adjustment. And for our customers, LiNX provides great remote diagnostics capabilities for power wheelchairs and portable oxygen concentrators. This allows providers to troubleshoot issues remotely and to limit the number and duration of in-person repairs.

In terms of cost containment, we have reduced spending where the volume of work has decreased. We're continuing to keep transformation initiatives for 2020 to simplify how customers do business with us, improve operations and lower cost. To increased financial flexibility, we have proactively borrowed on our bank credit facility. In some countries we have participated in programs to preserve cash and improve liquidity, such as deferring certain tax gains. And finally, we're reprioritizing capital expenditures to concentrate on projects which provide the greatest near-term benefits. On slide six we turn our attention to our first quarter 2020 operating results. We entered 2020 intending to build on our previous transformation progress. And I'm pleased to report strong results in the quarter across all business segments. Excluding the gain from the sale of Dynamic Controls, operating loss improved almost 97% to nearly breakeven, and adjusted EBITDA more than tripled to $5.9 million. This was driven by real operating prudence that yielded expanding gross profit from better sales mix, improved material and freight cost, and reduced SG&A expenses. We also made significant progress in our free cash flow usage, which improved by 51%, $12.4 million, driven by higher profitability and reduced working capital. Overall, these results demonstrate the value of our plan and our ability to guide our business through significant change to drive strong results.

Turning to slide seven. A key component of our transformation is the successful introduction of new products to drive profitable sales growth. During first quarter 2020 we launched our new AVIVA power wheelchairs with the AVIVA FX, a front-wheel drive system launched in North America, and the AVIVA RX, a rear-wheel drive system launched in Europe. The AVIVA product family has been designed with great features that benefit the end user and our customers. They have great seating and positioning systems and drive incredibly well. The systems are modular and easy to service, and include our unique suspension which results in a smooth, very stable ride. We have seen tremendous interest in both platforms and expect this to continue. During the quarter we built on the strong interest of our recently introduced Maxx Mobility standing power wheelchair with powered seating on a front-wheel drive platform that moves to a standing position for many benefits to the occupant. And we've added we've since added the same standing capability on the AVIVA FX front-wheel drive chair. Both products are eligible for full U.S. Group three reimbursement, which we accomplished intentionally through our design so more people could stand.

And in North America lifestyles, we recently introduced new beds, new therapeutic support surfaces, new safe patient handling products which have been available in Europe since late 2019. With support sales growth in North America, we made key improvements in the quarter with a larger sales force, more demonstration units in the field and improved training for our sales force and customers. As a result, in North America we achieved 16% growth in powered mobility, driven primarily by new products, leading to overall constant currency net sales growth of 4% in mobility and seating. As the impact of the pandemic recedes, we expect these products, teams and processes to drive profitable sales growth. Beyond driving innovation, we progressed with our plans for process improvements. Our previously announced plant consolidations in Germany and our IT modernization project each remain on track for meeting their 2020 objectives. Once completed, we expect better experience for our customers, better engagement with our associates and ultimately improved results. To leverage our resources and to get the most from the various technology investments, we've divested our Dynamic Controls business in early March. We're pleased to have closed that transition with a leading electromotive equipment company, which we expect to pave the way for great innovations in the future. These initiatives, plus previous transformation actions led to expanded gross profit across all business segments and lower SG&A expenses in first quarter.

Looking ahead, while near-term results maybe unfavorably impacted due to the pandemic, we expect continued improvement in profitability once the environment stabilizes. Overall, I'm proud of our accomplishments in this very challenging environment, and I expect our transformation to continue, making a meaningful impact in the future.

I'll now turn the call over to Kathy.

Kathleen P. Leneghan -- Senior Vice President and Chief Financial Officer

Thanks, Matt. As a reminder, the first quarter 2020 results were largely ahead of the impact of COVID-19 on our business as our European fiscal quarter ended in February, and the majority of stay-at-home orders did not take effect until mid-March.

Turning to slide nine. Reported net sales decreased 2.2%, and constant currency net sales increased 0.1%, primarily driven by growth in respiratory and mobility and seating products. Gross profit increased 130 basis points to 28.8% primarily due to lower material and freight costs, partially offset by unfavorable foreign exchange. Constant currency SG&A increased 4.5%, or $2.9 million, driven by reduced employment costs and favorable foreign exchange transaction. Operating loss, excluding the gain on the sale of Dynamic Controls, improved by $4.3 million, driven by reduced SG&A expenses and increased gross profit, offset by higher restructuring costs. Adjusted EBITDA was $5.9 million, up nearly 280%, driven by improved operating results. The company's free cash flow usage was $12 million, a 51% improvement due primarily to higher profitability and reduced working capital. Turning to slide 10. During the first quarter, reported net sales in Europe decreased 3.1%, primarily due to unfavorable foreign exchange. Constant currency net sales decreased 0.6% as increases in respiratory and mobility and seating products were more than offset by decreased sales of lifestyle products. Gross profit increased 90 basis points, driven by favorable freight and R&D costs. Operating income increased $1.1 million, due to reduced SG&A expenses and improved gross profit, offset by lower net sales and unfavorable foreign exchange translation of $500,000.

Moving to slide 11. North America reported net sales increased 0.8%, and constant currency net sales increased 1%, driven by growth in mobility and seating and respiratory products, offset by decreased sales of lifestyle products. As previously mentioned, constant currency net sales growth in mobility and seating of 4% was driven by a 16% growth in power wheelchairs, primarily driven by improved commercialization of new products and partially offset by a decline in manual mobility wheelchairs. Gross profit increased 150 basis points, and operating loss improved by $2.3 million, or 53%, driven by improved product mix, lower cost in material, R&D and freight.

Turning to slide 12, all other, which is composed of the reported sales in the Asia Pacific region, decreased by 14.8%. And constant currency net sales increased by 2.4%, driven by higher sales of lifestyle and respiratory products. Gross profit increased 270 basis points due to lower warranty and R&D expense. Operating loss improved by $1.6 million, driven by an improvement in the Asia Pacific businesses' operating profit as corporate expenses were flat. Moving to slide 13. As of March 31, 2020, the company had total debt of $304 million, excluding operating lease obligations of $15.5 million capitalized on the balance sheet. To increase financial flexibility, the company proactively borrowed $21.6 million on its bank credit facility during the quarter, and drew an additional $9.2 million subsequent to the end of the quarter. At quarter end the company had approximately $99 million of cash on its balance sheet. The increase was primarily the result of cash from bank debt and net proceeds received from the sale of Dynamic Controls, partially offset by cash used to fund operations.

Our free cash flow is in line with typical seasonality as the company historically has higher cash usage during the first quarter due to the payment of customer bonuses earned in the prior year, and the buildup of inventory, which will be consumed throughout the year. In addition to reducing discretionary spending, the company will access government programs to bolster short-term liquidity, including the temporary delay of direct and indirect tax payments as well as government-based loans as available. The company believes that generation of adjusted EBITDA, cash balances on hand and free cash flow will support the ongoing transformation plans and enable us to address future debt maturities. On slide 14 we have outlined our financial and operating assumptions for the near term. While we have experienced elevated demand for respiratory and bed systems, in the short term this benefit will be more than offset by the decline in the sales of mobility and seating products. However, we anticipate mobility and seating product sales will begin to recover with the resumption of elective care as the pandemic subsides and countries ease restrictions related to the pandemic.

We expect this unusual sales pattern will have an unfavorable impact on product mix, negatively impacting margins. As a result, we are taking operational and cost management actions to mitigate this margin dilution, such as salary reductions for senior executives, including our Board of Directors; instituting partial work schedules; furloughing a limited number of associates; and adding temporary surcharges to mitigate the significant increases from supply issues and expedited materials. These actions, in addition to proactively borrowing on our bank credit facilities, strengthen our balance sheet and preserve liquidity to support our continued transformation efforts. In the near term, we will continue to actively monitor the impact of the pandemic on our business, and we will take actions to preserve profitability and free cash flow.

I will now turn the call over to Matt.

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Thanks, Kathy. Prior to the impact of COVID-19 we made great progress, transforming Invacare with improved financial performance and more new products and better ways to engage with customers. This has been reflected in significant improvement in both adjusted EBITDA and free cash flow usage for first quarter 2020. While we're dealing with many opportunities and challenges, we remain confident in our transformation strategy. We'll continue to take actions to keep our associates safe and, as things unfold, we'll take the necessary actions to manage our improved profitability and free cash flow.

Thanks for taking time for our call this morning. We'll now take questions. Kevin?

Questions and Answers:

Operator

[Operator Instructions] Our first question today comes from Bob Labick of CJS Securities. Please go ahead.

Pete Lucas -- CJS Securities -- Analyst

Hi, good morning, It's Pete Lucas for Bob.

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Hi, good morning.

Pete Lucas -- CJS Securities -- Analyst

In terms of your IT transformation with Birlasoft, has that been impacted by travel restrictions? And are you still expecting implementation in 2020?

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Yes, I'll take one, Pete. The program remains on track. It's been really remarkable how effective that the folks working on that program have been despite changes in shelter-in-place orders. I think maybe we've even gotten a little bit of productivity without so many folks on airplanes to and fro every week. There will be times later this year where we'll have to convene to do the normal kind of physical implementation as it gets integrated into factory systems in North America. But fundamentally, the program is on track for 2020 objectives, that we're really pleased with that.

Pete Lucas -- CJS Securities -- Analyst

Great. And turning to respi, you talk about elevated demand and hard to predict the peak and when it would return to normal. But from what you're seeing now, do you think that normal could be higher than a new normal could be higher? Do you think you'll see some longer-term tailwinds from this beyond the current crisis?

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Hard to say. There are two elements that I think build to what the future is going to unfold to show us. One is, there will be a crest in the emergency planning for expanded care facilities in major metropolitan areas or country responses. But effectively the vast number of people who have suffered from the Coronavirus are going to essentially behave like a cohort of new COPD patients or people who probably need some form of long-term respiratory therapy. So, yes, we do have a version of a scenario that says over the medium to long term there could be some elevated sustained demand for respiratory products.

Pete Lucas -- CJS Securities -- Analyst

Great. And then just on mobility and seating. Generally you discussed the 90-day lag from order to chair. Do you think once clinicians are back out and serving patients, that number can be reduced?

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Good question. That 90 days typically reflects the United States insurance reimbursement verification process, so different in other countries. In some countries we've seen a shortening or a more limited verification process. So there could be a swifter resumption. I think everybody in the United States, all our great customers, who are out trying to contact end-users are looking for any way to make that process faster. There is a fair amount of pent-up demand of people who really need these products to get out and about with safe independent daily living. We're certainly doing things on our side to make sure we're ready as quickly as possible in all the locations. So it could be a little faster, but there generally is an insurance process, so we're not banking on that.

Pete Lucas -- CJS Securities -- Analyst

Great. Thanks. And the last one from me, just in terms of the supply chain. Can you talk about what you're seeing in terms of your ability to get high-demand products to customers in a timely but cost-effective manner? It seems costs have gone up for delivery of products. And any changes you've seen over the last few weeks?

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Yes. It's really been a crazy global supply chain. As you can imagine, it takes a 100% of particle components to make every product. And like lots of companies, our suppliers are all over the world. We buy components from places like Italy, and China, and even across the United States. And you could imagine, in all those places local shelter orders have made it more difficult for those suppliers to us to assemble work force, and for their suppliers to do the same thing. So we've got a small army of people who are working really hard everyday to overcome those. And then squeeze into what is effectively more expensive and much more limited logistics capacity around the world. So costs have been extraordinarily high. We do have elevated outputs. So we're pleased with that. We're doing everything we can to make sure that that's getting out to folks. And we'll see how that continues. I assume, as markets reduce shelter orders and people become more familiar, a way to safely co-exist with the virus, our suppliers will be more comfortable and more predictably able to resume production on a standard schedule, and it will take less extraordinary efforts to get those things. We're trying to do everything that we can, first of all, to prioritize our workers' safety and to get units out because they are in such needs. And we're doing whatever we can to offset those costs and other challenges to keep margins as neutral as possible.

Pete Lucas -- CJS Securities -- Analyst

Very helpful, thank you.

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Okay, thanks.

Operator

Our next question comes from Matt Mishan of KeyBanc.

Brett Adam -- KeyBanc -- Analyst

This is Brett on today for Matt. My first question is around the step up in profitability really across the business. And you cited some SG&A efficiencies in Asia and Europe as some of the key drivers there. I'm wondering if you could speak a little bit more on some of the actions put in place enabling that improvement, and whether we should think of them as, I guess in Asia a more COVID-related or sustainable going forward?

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Yes, maybe Kathy and I can both split the answer on this one. A lot of the SG&A actions really continue to benefit us and shareholders from things we did through July of last year roughly, and then, the continuation of those benefits and a good engagement with customers. And Kathy, you want to give a closer break down of that?

Kathleen P. Leneghan -- Senior Vice President and Chief Financial Officer

Yes, no, that's absolutely true. The savings that we saw in Europe on the SG&A side of the house are primarily people related. They were actions that were taken last year to reduce our structure in Europe. And we are seeing that benefit in the first quarter results. I would just remind that from a European perspective they are on a month lag, so their quarter ends in February. So that would have been ahead of the impacts that we would have seen on COVID-19 as we come into Q2. The related savings on the European side of the house as well as the North American side of the house are related to actions that were taken last year, and we're seeing those benefits in the first quarter.

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Yes, and I think generally to amplify Kathy's comments, really we're extraordinarily pleased with first quarter 2020 results specifically because they are almost entirely ahead of the pandemic response. So good strong yields from intentional actions coming from what we've learned about ourselves and great new products last year and just good management of the overall business process with a lot of streamlining that's already going on.

Brett Adam -- KeyBanc -- Analyst

Okay. Thanks a lot for the additional color. And then, moving on to your Q2 commentary, and this might be a little bit of a tough one, but is it possible to quantify or at least provide some order of magnitude around what the sales volume declines might look like under a base case scenario?

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Yes, we haven't quantified that so far, mostly because it's quite fluid. There is a chart in the deck, page four, I think, where we've kind of tried to show the two elements at play. There is quite significant extraordinary demand for beds and respiratory, that's going up. And that started at the very, very end of first quarter. The mobility and seating business is seemingly relatively benefiting from this lag from quotes, especially in North America. And the decline will probably be a little bit later and offset than what we saw for an increase. And we'll see how those two things come together. The size of those businesses are relatively comparable. But the amount of increase for some and decrease for the other is different by country because of pandemic-related health practices and because of the way healthcare is administered and reimbursed in social programs. And of course the margin is different between our mobility and seating segments, typically higher, than it is on beds and respiratory devices ahead of the pandemic, let's say, on a standard basis. So we're just not ready to say how those are exactly going to bounce up. But I would say generally we believe the management team.. It's going to be within our bandwidth to more or less make these things work together throughout the balance of the year. Not saying that we're going to end up where guidance is. We know we're close to that. There's tremendous amount of time ahead of us. But in order of magnitude, these seems to be within the relative gain like we've measured in the managed in the past.

Brett Adam -- KeyBanc -- Analyst

Okay. Thanks a lot. And then last one from me. Hopefully as we're passing the worst part of the crisis, to this point you guys have been pretty active in drawing on credit facilities and taking other proactive precautions to preserve cash and just given the reference today to accessing certain government-based loans and other programs to bolster short-term liquidity. Can you talk a little bit more about the expected uses of cash this year? How much more you may need to raise and then when you maybe begin to transition back to some level of normal activity?

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Sure, Ben. I'll start, and then probably hear from Kathy too. I think probably most of our listeners today are in the United States who have one perception of what government programs are, but more than 50% of sales for us are outside the United States. And governments all over the world are helping local economies and workforces and everyone deal with the pandemic. And there have been some very swift opportunities to do simple things like defer VAT or GST taxes or payroll taxes. And some of those we're able to take advantage of. We have an estimated difference in cash flow usage, our drawn and credit facilities were prophylactic. But Kathy, I'd like to hear your comments augmenting that.

Kathleen P. Leneghan -- Senior Vice President and Chief Financial Officer

No, absolutely. When we speak to accessing programs, from Matt's point, a significant amount of our business is in Europe. There are many programs to defer both direct and indirect taxes during the pandemic timeframe to later in the year, and in some cases into 2021, and those are the things that we will take advantage of as we go through the year of 2020. But as we noted previously and we are still committed to that, we do believe our focus on generating positive EBITDA, the cash that we have on hand as well as free cash flow generation into the future will provide us the funding that we need for the transformation.

Brett Adam -- KeyBanc -- Analyst

Hi guys, thanks a lot. I appreciate the extra color.

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

All right, thanks, Ben.

Operator

Our next question comes from Mike Matson of Needham & Co.

Mike Matson -- Needham & Co -- Analyst

Please yeah, thanks for taking my questions. So I guess it sounds like you're expecting at this point a decline, a sales decline in the second quarter. I'm just curious, is that I would assume that that's based on what you're seeing in April and early May with these combined positives and negatives with the two areas that are being impacted by COVID-19? Is that a fair assessment? And to be clear, you are wanting us to kind of model some sort of decline for Q2?

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Hi, Mike. Good morning. Yes, thanks for your question. I think what we started seeing not surprising in March, and it depends of course by country around the world where we serve customers and clients, the shelter-in-place order has really restricted the ability to interact with end-users who have to be fitted, especially for custom products, custom power wheelchairs, custom manual wheelchairs. So starting various countries in March, we started seeing a reduction in quote volumes which we knew would lag into second quarter and result in somewhat lower sales. It's still evolving. And we want to set the expectation of investors and analysts that the increase in beds and respiratory is not essentially going to be exactly offsetting mobility and seating. We may see a net decline. It's too soon for us to get a magnitude of that. And as we answered in one of the prior questions, there is some flexibility probably in how different governments respond to this, or insurance reimbursement response to this. But yes, we want to make sure people aren't coming into this overly exuberant about the significant increase in demand on one side fully offsetting everything. It may not work that way. So probably some slight decline in sales would be prudent. But we do expect that to bounce back as soon as social distancing measures and access to clinics are eased, which we assume will be by third quarter. And Kathy, other comments on that?

Kathleen P. Leneghan -- Senior Vice President and Chief Financial Officer

No, I think that that's true. Obviously, mobility and seating as well is higher-margin products for the company, which is why we're anticipating that there will be some pressure on margins. But as we mentioned, we will take actions to reduce discretionary spending. And we have taken actions already as it relates to reducing payroll costs to try and mitigate that decline as much as possible.

Mike Matson -- Needham & Co -- Analyst

Okay, thanks. And then, what do you think happens to all the extra bed surfaces and oxygen concentrators that are being sold in the pandemic? And is there any risk here that these things sort of get resold in the secondhand market and reduce future demand for your products? Or do you think that they'll end up being sort of stockpiled somewhere, not end up being resold or reused elsewhere?

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Yes, good question, Mike. We're not expecting a sales desert after this peak, I think. And I would look at beds and respiratory devices differently. Beds, it's going to be a long time before the number of people who need to be cared for and the bed goes down to normal levels. And we believe that those beds will find a way into places where people need to be cared for. A lot of our beds are very suitable for home care and are are otherwise designed for long-term care. So it's natural that these will go into places where an increased population of people will need care. On the respiratory side, as I said earlier, it seems like early medical reports are indicating that there are some significant long-term respiratory problems for people who have had even moderate or mild forms of Coronavirus.

So it's there is a whole another cohort, it's potentially a large number of people who are going to need respiratory therapy for a long time. And it's really only successfully treated with high-flow devices, five liters at a minimum and 10 liters per minute, more often than not. So we're very fortunate to have a top-rated product in each of those categories. And we expect that to continue to be able to support people convalescing for the long term.

Mike Matson -- Needham & Co -- Analyst

Okay, thanks. Then the Dynamic Controls sale was is there any revenue headwind from that? Or was that really just kind of a captive supplier to you guys that you've now sold and sort of getting outsourced effectively?

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

I think we did have some amount of external sales. Kathy, do you want to frame that for Mike?

Kathleen P. Leneghan -- Senior Vice President and Chief Financial Officer

Sure. They did have external sales. They sold scooters and power wheelchair control systems into the European, and Asia, as well as the U.S. market. So there will be some headwind. If you take a look at the Q1 results, the impact, obviously, since we sold it in March wasn't a full quarter impact. So that impact for Q1 was estimated at roughly $1.3 million. So you'd be able to extrapolate that over the quarter on a go-forward basis. But so there will be some headwind related to Dynamics that we would pull out of the numbers from a constant currency perspective, that will be correct.

Mike Matson -- Needham & Co -- Analyst

Yes, so you said I just want to be clear, it was a little the number was a little unclear. Could you can you just confirm, did you say $1.4 million in the first quarter?

Kathleen P. Leneghan -- Senior Vice President and Chief Financial Officer

Yes, $1.3 million was the impact in the first quarter.

Mike Matson -- Needham & Co -- Analyst

$1.3 million...

Kathleen P. Leneghan -- Senior Vice President and Chief Financial Officer

Yes.

Mike Matson -- Needham & Co -- Analyst

And when did the deal close?

Kathleen P. Leneghan -- Senior Vice President and Chief Financial Officer

March 7. So it's basically a one month impact, yes.

Mike Matson -- Needham & Co -- Analyst

Yeah. Okay, thank you.

Kathleen P. Leneghan -- Senior Vice President and Chief Financial Officer

That's all I have. Thanks, Mike

Operator

And with that we will conclude the today's question-and-answer session. I would now like to turn the call back to Mr. Matt Monaghan for any additional and closing remarks.

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Okay, thanks, Kevin. And thanks everybody for taking time on today's call. Kathy, Lois and I are available for any follow-up questions. You can coordinate those through Lois. Hope you have a great day. Stay safe. Thank you.

Operator

[Operator Closing Remarks].

Duration: 35 minutes

Call participants:

Lois Lee -- Director, Treasury and Investor Relations

Matthew E. Monaghan -- Chairman, President and Chief Executive Officer

Kathleen P. Leneghan -- Senior Vice President and Chief Financial Officer

Pete Lucas -- CJS Securities -- Analyst

Brett Adam -- KeyBanc -- Analyst

Mike Matson -- Needham & Co -- Analyst

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