Anika Therapeutics, inc (ANIK) Q2 2021 Earnings Call Transcript

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Anika Therapeutics, inc (ANIK -0.62%)
Q2 2021 Earnings Call
Aug 5, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, everyone and welcome to Anika's Second Quarter 2021 Earnings Conference Call. As a reminder, this call is being recorded. I would now like to turn the call over to Mr. Mark Namaroff, Executive Director of Investor Relations and Corporate Communications. Please go ahead, sir.

Mark Namaroff -- Executive Director of Investor Relations and Corporate Communications

Thank you. Good evening, everyone and welcome to Anika's Second Quarter Conference Call and Webcast. Our Q2 earnings press release was issued after the close of the market today and is available on our Investor Relations website located at www.anika.com as our supplementary PowerPoint slides that will be used for the discussion today. With me on the call today are Dr. Cheryl Blanchard, President and Chief Executive Officer and Mike Levitz, Executive Vice President and Chief Financial Officer and Treasurer.

During today's call, Cheryl and Mike will review Anika's second quarter 2021 financial results with key business highlights as well as discuss our outlook for 2021. Please take a moment and open up the slide presentation referred to Slide Number 2. Before we begin, please understand that certain statements made during the call today, constitute forward-looking statements as defined by the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations, including statements with respect to the impact of the COVID pandemic on Anika and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please see our SEC filings and our most recent Forms 10-K and 10-Q for more information about risk factors that could affect our performance.

In addition, during the call today, we may refer to a number of adjusted non-GAAP financial measures, which includes adjusted gross margin, adjusted EBITDA, adjusted net income, and adjusted earnings per share, which are used in addition to results presented in accordance with GAAP financial measures. We believe that the non-GAAP financial measures provide an additional way of viewing aspects of our operations and performance, but when considered with GAAP financial results and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results for the most comparable GAAP measurements are available at the end of the available presentation slides and in our second quarter press release.

Now, I'd like to turn the call over to our President and CEO, Dr. Cheryl Blanchard.

Cheryl Blanchard -- President and Chief Executive Officer

Thanks, Mark and good evening, everyone. Please turn to Slide-3. We are now halfway through what is shaping up to be a successful transformative year for Anika, even in light of the challenges we've all faced during the pandemic. It's starting to feel like things can begin to return to a more normal dynamic even as COVID continues to throw curve balls. As COVID restrictions begin to ease during the quarter, our sales and marketing teams continue to ramp up efforts to promote Anika's growing product portfolio and brand at trade shows and conferences. Our teams have also been engaging surgeons directly as we have increased in-person training and the safe and effective use of our products.

We're seeing the first signs that this is paying off as surgeons, who were previously unaware of Anika is focused on joint preservation, now see that our portfolio provides meaningful solutions for them to treat their patients, so they can return to active living. I view this direct engagement as a tremendous opportunity as we communicate the new and transforming Anika story and describe our value proposition in the early intervention orthopedic continuum of care. We are, however, remaining cautious with respect to COVID, especially with the spike of the Delta Variant and its rolling impact on the healthcare systems in the US and around the world. Just this week, it's being reported that certain US hospital systems are shutting down elective procedures temporarily. Even with this in mind, we're confident that we can deliver on our 2021 targets of double-digit revenue growth with positive adjusted EBITDA and positive operating cash flows.

We also feel very good with where we are in our multi-year strategy and are pleased with our performance this quarter even though we're still early in this journey. Let me start by reviewing some highlights from the quarter and then Mike will go into the financial details and review our 2021 outlook.

The quarter-ended with revenue up 24% over Q2 last year some of the growth was due to the favorable comparison to the second quarter last year when COVID was at its worst and greatly impacted our joint preservation and restoration business. We're now seeing surgical and injection procedure volumes at around 85% on average of pre-COVID levels and we expect to see strong growth into the second half of the year.

Joint preservation and restoration showed strong recovery with revenue up 79% over last year despite COVID market access headwinds and we continue to make progress in our transformation, focusing on commercial integration and product launch execution. Our joint pain management business was up 9% on recovery from COVID, noting that the full initial impact of COVID last year was not in Q2, but due to customer ordering patterns extended into the second half of last year.

With the recovery year-to-date, we believe our joint pain management business has largely stabilized and we are raising our revenue outlook for this year as Mike will discuss with you in his section. The profitability equation for Anika remains attractive with adjusted gross margins of 70% in the quarter at or above our targets for the year, translating to positive adjusted EBITDA and positive operating cash flow and we ended the quarter with over $97 million of cash on the balance sheet. As we described in June during our Investor Day, Anika's double-digit revenue growth along with healthy profitability will set us apart from our peers and provide tremendous opportunity for shareholder value creation.

The second quarter was also marked by some significant milestones for the business. At the end of the quarter, we initiated the limited market launch of our WristMotion total-wrist implant with Dr. Arnold Peter Wise of University of Orthopedics in Rhode Island, successfully completing the first surgery on June 30th.

As a reminder, the total risk system was cleared by the FDA last October and is a modular joint preservation system that replaces both the radial and carpal sides of the risk joint to preserve more natural motion into mimic native patient anatomy. Wrist arthritis can be incredibly debilitating and painful and restoring pain free motion is at the core of who we are. Considering that most wrist arthritis is still treated with fusion, meaning patients have very limited wrist motion postoperatively, we think they deserve better with a differentiated motion preserving solution.

We're excited about the early interest in this product as we march toward full market launch in September. We also received 510-k clearance for a reverse shoulder system during the quarter. This foundational clearance sets the stage for the development and expansion of our shoulder implant portfolio in the future and in the first step for Anika toward entering the large and fast-growing reverse shoulder market. As a result of achieving this regulatory milestone subsequent to quarter end, we paid an earn out of $10 million in accordance with the Arthrosurface acquisition agreement.

After the close of the quarter, we attended in person, the first major trade event of the year at the combined meeting of the American Orthopedic Society for Sports Medicine and Arthroscopy Association of North America in Nashville. I was personally thrilled to be able to attend, to be at our booth and to see surgeons engage in our product-specific training.

The conference and trade show were well attended and enabled Anika to begin increasing its awareness and presence within the orthopedic surgeon community, highlighting our expanded product portfolio in sports medicine as well as regenerative and bone preserving joint solutions. I've also recently been able to meet with a number of surgeons and seeing in person their excitement around the Anika story and how important our focus on joint preservation and addressing unmet needs with meaningful solutions is for them and their patients.

The next industry conference at the end of the summer is AAOS, the American Academy of Orthopedic Surgeons, which will be great coming-out party opportunity for Anika assuming COVID dynamics don't further delay the conference, as happened in 2020.

Some of our plans include surgeon training as well as key product highlights and promotional events around core brands such as Tactoset and anatomic shoulder implant.

Before I turn the call over to Mike to review our financials for the quarter, I'd like to take a few more minutes to review our product development progress on Slide 4. As I described earlier, we took the first steps in launching our total-wrist platform with the first surgery performed in June and full market launch on track for September of this year. Tactoset, our HAA enhanced regenerative solution, to treat insufficiency fractures is doing very well with growing demand in the US. Surgeons are truly seeing its advantages, including better healing characteristics, flow ability, and set time. Our expansion plans for Tactoset are on track for an additional 510-K later this year.

We continue enrollment in clinical studies for both our single-stage cartilage repair product HYALOFAST and our second-generation OA pain solutions CINGAL. We will provide clinical trial updates as enrollment progresses as we remain focused on bringing these two exciting products into the US market.

Please turn now to Slide 5. As I described during our Investor Day in June, we're in the early innings of Anika is multi-year strategy. We see 2021 taking us through the transformation phase, integrating the two acquisitions of Arthrosurface and Parcus, putting in place a strong commercial team, and making the investments in systems, people, and processes that are going to allow our commercial team to scale and drive growth. As we move into 2022 and 2023, we'll continue to strengthen our commercial capabilities and launch new products that are focused on joint preservation and the ambulatory surgery center call point and we'll continue to expand into additional geographic areas. We will also, in this time period and through 2024, continue our clinical trials and investing in HYALOFAST and CINGAL to bring them to market in the United States.

I would add that by no means is 2024 the endgame and is truly just the beginning for Anika as we drive accelerated growth and profitability through the expansion of the existing product portfolio. So, on Slide 6, you can see why we remain very excited about the future and we remain confident that we have the right talent and technology to drive shareholder value.

Anika will be a company that is two times larger on the topline by 2024 with strong gross margins and profitability. We're keenly focused on our strategy with an $8 billion market opportunity, number one position in the US viscosupplement market with J&J Mitek as our US marketing partner, strong commercial organization for our joint preservation and restoration business, and a robust pipeline of innovative products to help people around the world restore active living.

Now, I'll turn the call over to Mike to review the details of the quarter.

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you, Cheryl. Please turn to Slide 7.

Total revenue for the second quarter of 2021 was $38.1 million, an increase of over 24% from the second quarter last year. The year-over-year increase was due primarily to recovery from the initial impact of COVID on prior-year sales volumes. This was most pronounced in our joint preservation and restoration product family, where revenues rose 79% to $11.9 million in the quarter. This recovery also drove growth year-over-year in our joint pain management revenues, which increased 9% from Q2 of last year to $24.3 million in the quarter. These results also reflect some favorable timing globally in the second quarter and as a reminder, for year-over-year comparisons, customer ordering patterns last year delayed a portion of the initial impact of the COVID pandemic on this product family from the second quarter into the second half of 2020.

With the strong recovery from the initial impact of COVID and organic growth in our joint preservation and restoration products, our overall revenue mix increased in the second quarter. With joint preservation and restoration revenue increasing to 31% of Anika's total revenue, up significantly from 22% in the same period last year.

Other revenue rose slightly $1.9 million compared to $1.8 million last year. Our gross margin in the second quarter was 55% up from 40% in the same period last year, and includes the impact of $3.8 million of non-cash acquisition accounting related amortization and fair value step up expenses associated with Arthrosurface and Parcus and $2.1 million of product rationalization charges. Excluding these charges, adjusted gross margin was 70% up from 64% in the same period last year. The year-over-year improvement is primarily the result of the recovery from the initial COVID impact as reflected in both higher royalty revenue and higher sales volumes.

The product rationalization charges quarter was associated with an inventory reserve for legacy products, for which we decided in the quarter not to incur additional cost to resterilized based on current assessments of demand for those products. As a reminder, we had a $1.9 million charge in the second quarter of last year related product rationalization of the ancillary products in our other product families. From a spending standpoint, while we continue to manage our operating expenses prudently, we are intentionally investing in product development as well as processes and systems to meet our commercial growth objectives.

Our research and development and SG&A expenses together totaled $25.3 million in the second quarter, that's up from $19.1 million in the same period last year, reflecting expenses to support future growth, such as increased clinical trial cost and investments in our commercial and related support organization. As well as higher incentive compensation on growing sales and increased spending in areas just trade shows and medical education. Spending last year had been largely curtailed at the outset of COVID and the growth in spending this year is in line with our strategic growth objectives.

During the second quarter, we also recorded a net benefit of $13.7 million or $9.8 million net of tax, resulting from the reduction in fair value of our contingent consideration liability associated with the acquisitions of Arthrosurface and Parcus. As the quarter ends, the fair value of our remaining contingent consideration liability was $16.9 million, of which we paid $10 million, subsequent to quarter end associated with the achievement of a regulatory milestone. As a reminder, we evaluate the estimated fair value of contingent consideration every quarter based on Monte Carlo valuation approach and therefore, this value can change from quarter to quarter.

Our net income for the quarter was $6.5 million or $0.45 per diluted share, that's compared to a net loss last year of $7.7 million or $0.54 per diluted share. The net income in the period reflected the benefit associated with the change in fair value of contingent consideration, excluding this benefit and excluding the non-cash charges discussed earlier and the other standard adjustments described in our earnings release and online presentation, we achieved adjusted net income of $1.4 million or $0.09 per diluted share. That's slightly from the $1.2 million or $0.09 per diluted share we had in the same period of last year. We generated adjusted EBITDA in the second quarter of $6.1 million, up from $5.6 million in the second quarter of last year. The increase was primarily due to the recovery from the initial impact of COVID, offset by the incremental investments supporting our future growth in our business transformation initiatives.

Lastly, we have positive operating cash flows of $4.3 million for the quarter and our balance sheet remains strong with $97.2 million in cash at the end of the second quarter.

Please now turn to Slide 8. Now, I'd like to review our full-year outlook for 2021. We continue to be confident about the second half of 2021 as our business transformation progresses and we continue to recover from the initial COVID impact. That said, COVID related headwinds remain an unfortunate reality and our outlook is subject to the often-changing dynamics associated with the global vaccine rollout and adoption rates regionally, along with the variance of the COVID disease such as the current Delta variant. These dynamics remain fluid and could have a material impact on our results and expectations. Based on our progress to-date through the year, we are raising our fiscal 21 outlook to 11% to 14% year-over-year revenue growth. That's up from our previous range of 10% to 13%.

The year-over-year growth is driven by joint preservation and restoration revenue growth in the upper 20% to low 30% over 2020. We expect strong growth in the second half of this year, weighted more to the fourth quarter based on normal seasonality. This reflects our assumption that the impact of COVID continues to lift allowing us to have growing presence with customers and improving our ability to increase access for our expanding product portfolio within healthcare systems. We now expect mid-single-digit growth in 2021 joint pain management revenues over last year, up from our previous outlook of low single-digit growth. As we believe that business has stabilized and the market is showing signs of a gradual recovery. In other revenues we continue to expect annual revenue to be down low-to-mid single digits for these legacy products.

With regards to gross margin, we continue to expect gross margins to remain fairly consistent between 2020 and 2021, excluding the impact of Arthrosurface and Parcus acquisition-related expenses and product rationalization charges. With regards to spending, in 2021 we are on track with our increased investments in commercial infrastructure and capabilities including people, systems, and processes that support our transformation and will enable us to scale as we grow. Investment continues in research and development according to the product pipeline outlined during our June Investor Day presentation. Further, as the restrictions associated with COVID have begun to ease, we've seen higher marketing and sales-related expenses, including the ability to attend trade shows and other industry events in person.

Overall, we are investing ahead of growth in support of our longer-term growth and profitability targets. Therefore, we expect operating expenses to increase over 2020 as a percentage of revenue. As we laid out during our recent Investor Day, we expect adjusted EBITDA margin 2021 to be in the low-to-mid teens as we invest in this exciting business transformation. We remain focused on our multi-year accelerated profitable growth targets and are on track for doubling our 2019 revenues.

With an over 20% adjusted EBITDA margin by 2024. I will now turn the call back over to Cheryl.

Cheryl Blanchard -- President and Chief Executive Officer

Thanks, Mike. Please turn to Slide 9. Anika has finally been able to begin to get out there with our exciting joint preservation transformation story. Our focus since the acquisitions early last year has remained on building out the processes, team, and tools that we need to scale this business in ways that will drive real value for all of our stakeholders with patients at the center of everything we do.

This team is laser-focused on becoming the leader in joint preservation with a differentiated product portfolio, new product development pipeline, and commercial team to drive access along the early intervention continuum of care. We're happy to take your questions now.

Questions and Answers:

Operator

[Operator Instructions] Our first question from Yung Lee of UBS.

Yung Lee -- UBS. -- Analyst

Thanks, guys, for taking our questions. I guess maybe to start at a high level. You made some comments about the Delta Variant impact and I'm just wondering what are you seeing in the market out there and the hospitals shutting down elective procedures comment? How much does that really impact Anika given a lot of your revenues and procedures are done and doctor's offices and ASCs?

Cheryl Blanchard -- President and Chief Executive Officer

Yes, it's a great question. Our injection business is office-based and a lot of our sports medicine procedures are ASC based, but we still have total shoulders and more on the legacy Arthrosurface side of the business. Those procedures can still be done in hospitals and we have seen just this week, the various hospital systems that are delaying elective surgeries or temporarily suspending them or however, they're describing it and we have seen cases get canceled as a result of that. I think it's difficult to predict to what extent that will impact us in the third quarter, but I think we have done a good job of kind of sizing that up and our numbers that we're projecting out for you are taking all of that dynamic into consideration. Mike, I don't know, if you have anything to add to that?

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, I think it's important, this is a difficult time to make these types of estimates, but there is a historic seasonality that stronger in the fourth quarter and I think, it will be interesting to see we see more and more people are getting vaccinated. I think, things are moving in the positive direction overall and it feels like doctors are in a much better position to handle COVID and keep their practice is going.

We've weighed all of that as we think about our guidance and our direction and we're really excited frankly about where this business is going. There is a short-term impact of this. We'll see how that plays out, but we're also seeing some really good dynamics out there in the field. So, we're watching it closely.

Yung Lee -- UBS. -- Analyst

Okay, great, that's very helpful. Maybe just to follow up a little bit on the seasonality comments, consensus currently has around I think $36 million $37 million, is that a range that you're comfortable with just a little bit lower than the Q2 numbers? I was also wondering if you can talk a little bit about the seasonality for the joint pain management business as far as the preservation and restoration businesses.

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, it's a great question. So we raised our guidance for the full year to mid-single digit in the joint pain management business based on where we are year-to-date. One of the things that we've seen historically in the joint pain management business is that Q2 tends to be the strongest quarter of the year. As I look back, I'm new to the business, been here a year now, but as I look at the last several years, I think that's been fairly consistent apart from COVID last year. So there is potentially some normal seasonality but with COVID it's a little bit hard. There's not a whole lot that's normal during this time of COVID.

Things are becoming much more normal this year than last year, thankfully. I think in joint pain management, Q2 tends to be the strongest quarter of the year. I mean that's reflected in our guidance. I think as you look at what we said for the full year and the other thing that I think is relevant for the second quarter for joint management is we had some favorable timing on international sales and that's just we sell through distributors outside the United States and Q3 tends to be slower in Europe with the way that that works. So, so there was some favorable timing in the second quarter. So, as it relates to joint preservation, I think in traditional orthopedics, the fourth quarter tends to be the strongest quarter of the year. I mentioned that in my earlier remarks, that we expect the growth to be weighted toward the 4th quarter this year. Again, COVID dynamics do play into that, but I think there's just somewhat some normal seasonality in there, but what we'll see how it goes this year. As I say, things are moving more to normal, but they are not fully back to normal.

Yung Lee -- UBS. -- Analyst

Okay, great, very helpful. I'll get back in queue. Thank you.

Operator

And next we'll hear from Jim Sidoti of Sidoti and Company.

Jim Sidoti -- Sidoti & Company -- Analyst

Hi, good afternoon. Thanks for taking the questions. It sounds like you're expecting some so some pretty significant growth on the joint preservation side, you said you would [indecipherable] and so I assume that's really what's fueling their growth in 2021. But as we look in 2022 to 2023, is the pipeline forward the next couple of years have similar new product rollouts?

Cheryl Blanchard -- President and Chief Executive Officer

We've talked also about the fact that we had launched Tactoset in late 2019 just before COVID hit. So, Tactoset is another product that's contributing to a lot of that joint preservation growth driver. The soft tissue repair products are part of it the total wrist that we just launched and we'll be moving into full launch in September. Those things will start to contribute meaningfully, especially into next year. We also talked about continuing expanding the Tactoset franchise and we're making investments in moving those expansion plans forward with 510K moving forward here in this year. Then as you look into 2022 back, we didn't put those slides in this deck, but if you go back to the Investor Day deck, we kind of showed the more detailed new product development pipeline from 2022 to 24, where we have a number of projects listed around soft tissue repair, regenerative solutions, and some additional bone preserving implants. So, there's really a steady cadence of new product launches and that really plays into also the fact that we continue to make investments in our commercial infrastructure to drive all of those R&D projects in those commercial launches as we move into the out years. So, it's really rolling all of that up together.

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, Jim, just as we talked about at the Investor Day in June, it really is, as Cheryl said, an equal contribution from commercial execution and from the product innovation. I just had the opportunities out in the field in the last few weeks and one of the things that I saw was that this combined portfolio and this focus on joint preservation really is resonating with surgeons and so I think when you put some of the pieces together, you hope one plus one is more than two and I think that's really what we see and what we're expecting. I wouldn't want to understate the value of the commercial execution now that we have this broader portfolio with the regenerative solutions. The Anika brings to the table soft tissue repair and bone-sparing technologies. So, I think it really is both of those and we tried to delineate how that accelerates as we go through the next few years, with the new product innovation on top of that.

Jim Sidoti -- Sidoti & Company -- Analyst

Then if you look at the balance sheet, you've got almost $100 million in cash. You made a payment earlier this month. But you still going to have quite a bit of cash on the balance sheet. Now I know acquisitions are in that 2024 target of double revenue, but are acquisitions on the table, is that something that you're looking at or do you thinking you have enough on your plate right now with all the new products that you're really not focused on acquisitions?

Cheryl Blanchard -- President and Chief Executive Officer

Yes, you're right. The revenues target is really based on the organic growth that we're driving and things that are in the pipeline and the commercial execution piece, but we do have an eye toward additional acquisition; what we got our eye on right now and we're definitely interested. We remain focused on staying in those soft tissue, bone preserving joint and regenerative solutions areas and staying on target in terms of our strategy. But we think there are some opportunities out there to complete some acquisitions and those will simply add to the strategic imperative that we've already put out there and continue to accelerate our growth opportunities.

Mark Namaroff -- Executive Director of Investor Relations and Corporate Communications

I would just add, I think this move to joint preservation growing from the $1 billion addressable market to the $8 billion addressable market, we recognize that we're still a small player in that space and so while we don't need to do acquisitions to the organic growth, as Cheryl mentioned, we can definitely accelerate that growth where it makes sense. So, we don't feel a requirement to do it, but on the other hand, we see the big market opportunity in front of us. We believe the strategy makes a lot of sense and so we're being very thoughtful about how we use the balance sheet to accelerate our growth.

Jim Sidoti -- Sidoti & Company -- Analyst

Thank you.

Operator

Thank you. Next, we'll hear from Mike Petusky of Barrington Research.

Mike Petusky -- Barrington Research -- Analyst

Good evening. Cheryl. I just think I missed this. The Tactoset expansion, what is that specifically?

Cheryl Blanchard -- President and Chief Executive Officer

Yes, we actually have not stated publicly what specifically that is, where we see additional opportunities from clinical unmet need perspective where we think Tactoset is a great fit and so we're going through that development process and regulatory process right now. But we have yet to be public about what that looks like. But we look to be yet this year.

Mike Petusky -- Barrington Research -- Analyst

Okay. So, maybe we'll hear more about that in the next quarter or two something like that?

Cheryl Blanchard -- President and Chief Executive Officer

Next quarter or two, I would say, yes.

Mike Petusky -- Barrington Research -- Analyst

On the slide deck, see the estimate on the last patient out on HYALOFAST and CINGAL. Would you guys, do you want to give an update on where enrollment is currently on the CINGAL pilot and on the HYALOFAST trial, like what percentage enrolled you are at this point on both of those?

Cheryl Blanchard -- President and Chief Executive Officer

Again, we haven't been that specific with our updates. But we announced those dates in June at our Investor Day, based on a lot of detailed planning around understanding what the dynamics are as we try to run clinical trials in this COVID environment and especially with HYALOFAST, where we have a number of OUS sites that we can't even travel to, so we took all of those things into consideration and those dates are still according to how we're executing on those plans and so I would just use those dates as your -- you're thinking about timing on those products. Again, we'll continue to update progress on those things if anything changes, but everything continues to hold according to those dates we put out there in June.

Mike Petusky -- Barrington Research -- Analyst

All right. On the pain management business and Mitek, I want to understand if the inventory it Mitek is based on your best intelligence? Is that sort of normalized at this point or is there a bit of stocking? You sort of alluded to favorable timing, but I wasn't entirely sure it was directly related to Mitek, can you just clarify for me to the best of your knowledge inventory levels at Mitek normalized right now or possibly a little stocked or whatever you can say there?

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Absolutely, I'm happy to answer that question. What I was alluding to on timing is a couple of elements. One, there is general seasonality in the US. Then outside the US, there was favorable timing that we don't expect here in the coming quarters. Just in terms of the timing there and with those distributors. As it relates to Mitek's inventory, the good news is there was an issue with that in the first quarter and then they were eating into that last year after the COVID impact. They didn't finish and they've really gotten much closer to normal. So, they're much closer to normal on the level of inventory from the visibility we have.

Mike Petusky -- Barrington Research -- Analyst

So, would you say there is still a little bit excess to be worked at this point or no?

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

I don't view their inventory levels as being a driver of what our results are going to be. A far as I can tell there that's not an issue.

Mike Petusky -- Barrington Research -- Analyst

Thank you.

Operator

There are no further questions at this time. I'll turn the conference back over to Dr. Blanchard for any additional or closing remarks.

Cheryl Blanchard -- President and Chief Executive Officer

Great, thanks. Thanks, everyone for your attention today, your support of Anika and we look forward to speaking next on our Q3 call this fall. Have a great night. Thanks a lot.

Operator

[Operator Closing Remarks]

Duration: 36 minutes

Call participants:

Mark Namaroff -- Executive Director of Investor Relations and Corporate Communications

Cheryl Blanchard -- President and Chief Executive Officer

Michael Levitz -- Executive Vice President, Chief Financial Officer and Treasurer

Yung Lee -- UBS. -- Analyst

Jim Sidoti -- Sidoti & Company -- Analyst

Mike Petusky -- Barrington Research -- Analyst

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