Q3 2020 Ekso Bionics Holdings Inc Earnings Call

[music].

Greetings and welcome to the Ekso Bionics third quarter 2020 financial results Conference call. At this time all participants are in a listen only mode. A brief question answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference.

This is being recorded for opening remarks, I'd now like to turn the call over to David David carry of Lazard partners. Thank you David you may begin.

[music].

Thank you operator, and thank you all for participating in todays call joining me from Ekso bionics, or just pure rock President and Chief Executive Officer, Jack Golsen, Chief Financial Officer, Bill Szot, Chief Commercial officer earlier today, Ekso Bionics released financial results for the quarter ended September Thirtyth.

<unk> a copy of the press release is available on the company's website.

Before we begin I would like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Any statements contained in this call that are not statements of historical fact should be deemed to be forward looking statements.

All forward looking statements.

And our future financial or operational expectations for our expectation that the regulatory landscape gardening products and operations.

Based upon managements current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ not anticipated or implied by these forward looking statements.

Accordingly, you should not place undue reliance on these statements.

Well at least the description of the risks and uncertainties associated with our businesses. Please see our filings with the Securities and Exchange Commission.

Exit disclaims any intention or obligation, except as required by law to update or revise any financial or operational projections or where.

Do much worry outlook or other forward looking statements, whether because of new information future events or otherwise.

This conference call contains time sensitive information and is accurate only as of the broadcast day today.

Over 29 2020.

I will now turn the call over to Joc pure rock.

Thanks, David and thanks to everyone for joining us today.

First I'd like to recognize our excellent team members for their continued commitment and support as we collected we prioritize serving our customers through this challenging time.

The need for improved care remains at the forefront for patients recovering from stroke spinal cord injuries and traumatic brain injuries.

Our team at Exco is elevating the standard of care for Norway rehabilitation with our groundbreaking extra weight our exoskeleton.

Inpatient rehab centers worldwide are adopting our technology as they recognize the excellent our deliberate better patient outcomes.

On the industrial side of our business, our new <unk> newly introduced you go exoskeleton has already generated strong customer enthusiasm. This.

This latest advancement provide key benefits to industrial workers in different settings to increase productivity reduced accumulated injuries and lessen the strain on the shoulder lower back in total we are showcasing the benefits of our exoskeleton solutions in both the medical and industrial settings.

We are pleased that we achieved third quarter revenues of $2.9 billion, the 28% sequential increase over Q2, as we continue to navigate through the cobot related challenges.

Well by our commercial team, we successfully raised customer engagement levels by leveraging our virtual selling approach to remain connected with our customers.

As a result of our efforts, we achieved 90% of revenues in the third quarter compared to the same period last year.

Given where we were at the beginning of the pad that make in late March and early April. We believe we are on a path to recovery. However, with the recent rise in cold cases across the country and around the World World. We are cautiously optimistic in our near term outlook.

We generated 22 total X so in our bookings in the third quarter, including 17 bookings for new units.

Most orders had been delayed and not cancelled because of the academic our order pipeline remains solid.

A major achievement and then in the third quarter was or 63% overall gross margin, which was seven percentage points above the record we set in the second quarter.

In terms of our operational performance, we continue to manage cost well, resulting in the lowest quarterly use of cash.

Our actions have made us a leaner and more efficient business, which has resulted in margin expansion.

In addition to our strategic and operational flexibility proceeds from our previously completed financing and subsequent warrant exercises strengthened our cash balance and put us in solid financial position.

I'm proud of the way our team delivered under these challenging circumstances.

Our commercial sales team is getting the job done and we believe our adaptive approach to customer engagement is making a meaningful difference.

At this time I will turn the call over to Bill who will provide an update of our medical device segment global commercialization strategy.

Thank you Jack.

We are pleased to report better than expected Q3 results and I'm proud of our commercial teams performance as we kept focused on extending the benefit of an extra program across the globe.

Our commercial team continues to expand our installed base by leveraging multiple acquisition options, including our new subscription model.

Altogether, our approach helps facilitate a strategic sale that we believe is working well.

We continued to gain traction with our network strategy and are excited about our prospects moving into 2021.

Let me briefly touch on some specific examples of how we're achieving success.

We previously shared news about our new pilot program with Vibra healthcare, which was delayed several quarters due to the pandemic.

We're now moving forward and starting our first pilot in Q4.

We continue to advance our relationship with kindred healthcare and work with their transitional care Hospital organization to launch one of our first subscription programs.

The Kessler Foundation purchased an additional excellent are in support of a new clinical research initiatives.

That's all be hosting a webinar on acquired brain injuries Dr. Karin on senior research scientist from Counsellor on Thursday November 12, as part of a highly attended clinical Webinars cheers.

That's will be onyx as the first and only exoskeleton set as FDI approved for the treatment of acquired brain injury.

Today, we highlight another patient success stories with one of our partners at Sony Vue Rehabilitation hospital, how they utilize the excellent or to help kind of a patient at Sony Vue and are incredible journey following a serious brain injury.

In October 2019.

Oh he was in a serious motorcycle accident. It was airlifted to the hospital suffering multiple internal injuries fractures and a traumatic brain injury well.

While still in a cola she was transferred to some of your rehabilitation hospital and eventually woke up with the help of Sony views amazing team, including the therapy dog.

The excellent or was a key component of recover.

Her physical therapist, Erika GE said the progression. She has made using ekso is amazing.

First session. She walked maybe 10 stops and now she's walking 12 other stops routinely.

Holly is recovered remarkably well with support from our family and the team at Sony Vue and continues treatment and sunny views outpatient facility.

We wish Kylie continued success.

We're becoming more efficient and shortening the sales cycle highlighting the continued strength of our commercial sales organization as evidenced by a strong showing from our north American team, leading the way in the third quarter.

We delivered approximately $2.7 million national health revenue compared to $2.1 billion in the second quarter of 2020 and $3 million in the same period 2019.

Outside of the U.S., we gained traction in certain international regions with several units sold and a pack and you may all regions in the third quarter.

Looking ahead, while overall customer interactions are improving we remain cautious regarding our outlook, what the uptick of covert cases and the U.S. in Europe.

We believe the strategies, we implemented in the broad reach of our commercial sales team will allow us to remain active with our customers, enabling us to drive a mission forward well just to amplify human emotion, helping accelerate a person's recovery and ability to achieve movement.

At this time I'd like to turn the call back to our CEO Jack.

Thanks, Bill before I turn the call the Jack Glenn I'd like to provide an update on our industrial segment.

Our industrial customers have become accustomed to our innovative technologies that transformed the way they think about construction and manufacturing.

Customers, who use axios industrial technologies benefited from increased and more consistent labor productivity reduced worker fatigue and injuries and an expanded labor pool we.

We have taken the next step in delivering on all these fronts with the August launch of Ego. You go is our next generation endurance boosting assisted upper body exoskeleton that helps augment human capabilities. It was developed in collaboration with customers to address the unique challenges of the industrial workforce.

EBITDA was making productivity more predictable by reducing fatigue related injuries lowering company costs and improving employee morale.

Evil has already received an enthusiastic response in the form of several new customer orders and pilots across a variety of industry verticals, such as construction food processing and logistics.

This morning, we announced our first customer for evoke EG and builders a general contractor that provides construction services and represents our largest order in the construction and vertical today.

Email addresses many of the productivity and health risk challenges faced by construction workers. We're pleased to deliver this solution to EG and look forward to providing more updates on this exciting product.

Now I will turn the call over to Jaclyn to review, our third quarter financial results.

Thank you Jack.

We had a solid quarter, achieving sequential revenue growth driven by an increase in x., so and our volumes.

Operationally, we generated a record overall gross margin and reduced our quarterly use of cash to the lowest level in the company's history through prudent expense management.

Now onto a summary of our third quarter financial results.

So generated third quarter revenue of $2.9 million compared to $2.3 million in the second quarter of 2020 and compared to $3.3 million for the third quarter of 2019.

Our gross profit for the third quarter was $1.8 million, representing a record gross margin of approximately 63% compared to gross profit of $1.8 million and gross margin of 53% for the same period a year ago.

This was driven by an increase in higher average selling prices for Ekso NR, Inc.

An increased proportion of medical device sales and overall revenue composition lower unit production costs.

Introduction of vivo and higher service margins.

Our early actions to preserve our cash and align our cost structure with the current operating environment enabled us to significantly lower our operating expenses.

Operating expenses for the third quarter of 2020 were $4.2 million compared.

Compared to $5.5 million for the.

Third quarter 2018.

Reduction of approximately $1.3 million or about 24%.

For the three months ended September 32020, we recorded a gain on warrant liabilities of $4.5 million due to the revaluation of warrants issued in 2015 2019 and 2020.

Compared to 4.4 million dollar gain associated with the revaluation of warrants issued in 2015 and May 2019 for the same period in 2019.

Net income for the third quarter, 2020, which benefited from the revaluation of warrants with $2.5 million or 30 cents per basic share and a one cents loss per diluted share compared to net income of $2.2 million or four cents per share in the third quarter of 2019.

We continued to reduce our utilization of cash to adapt to current market conditions and used $1.6 million in cash from operations, excluding restructuring charges, the lowest our history compared to $4.6 million in the same period in 2019.

Turning to year to date results revenue for the first nine months of 2020 with $6.6 million compared to $10.2 million for the same period in 2019.

Gross profit for the first nine months of 2020 with 33.7 million compared to gross profit of $4.9 million for the same period in 2019.

Gross margin for the first nine months of 2020 increased to 56% from 48% for the same period in 2019.

Operating expenses for the first nine months of 2020 were $14 million a decrease of $4.7 million.

Or about 25% compared to the prior year period.

For the first nine months ended September 32020, we recorded a loss on warrant liabilities of $1.6 million due to the revaluation of warrants issued in 2015, 2019, and 2020 compared to a $6 million gain associated with the revaluation of warrants issued in 2015 and May 29.

<unk> for the same period in 2019.

Net loss for the first nine months of 2020 also impacted by the revaluation of warrants.

With $11.8 million or $1.75 cents per basic share and $1.78 cents per diluted share compared to $9.4 million or $2.01 per share in the same period in 2019.

Cash used in operating activities for the first nine months of 2020 with $7 million compared to $14.3 million for the same period in 2019.

As of September 32020, we had a strong cash balance at $14.5 million. This.

This includes net proceeds of 2.5 million from the exercise of warrants in the third quarter.

Please see our 10-Q filed earlier today for further details regarding the quarter.

Operator, you May now open the line for questions.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.

He is one moment, please while we poll for questions.

Our first question comes from the line of RK Ramakanth with H.C. Wainwright. Please proceed with your question.

Thank you good.

Good morning, Jack and Oh.

No.

Congratulations on a good quarter.

It is nice to see.

Oh you are you are on the path to the color potentially here.

I understand the cautious optimism as well.

Well overall, obviously the quarters seems it seems to be going the right direction in terms of the placements itself I believe you had said the.

22.

And our placements out of which 13 where new.

So as time goes along.

Are you seeing any.

Decline in terms of the sales cycle in terms of the time it takes between.

Initial touch point on that sale.

I'm not sure. If this is the kids.

Oh, Okay. No is it getting to the most optimal time fine that you would like to see or you still have.

Something to squeeze out a bit.

Yeah.

Hey, our case, Jeff Jeff Thanks for the question.

You know, obviously, we didn't see it coming over to bill on.

Yeah, we've been doing a lot of things to help reduce the time and the costs associated with selling the product.

You know I think that sales cycle.

If anything is probably extended during this this.

This period of time, mostly given it's done certainly on the customer decision making.

Sorry, but I do think there are some things were doing that or shortening the sales cycle, a dual talk about that a little bit.

But you know.

Overall, I'd say no we're still not satisfied we think there's still a lot of opportunity to shorten the cycle on our side and we're working on some of those right now, but I'll kick it over to bill.

Yeah, Hey, RK.

Hi.

Well you know what I'd say is just going advanced technology in general, especially in the front end of market adoption. It takes a lot of steps right. So there's a lot of different stakeholders you have to get on board and typically you see anything from from maybe three months I'm on the short side to 18 months or longer side I know that that's a large swing.

But it's our job really to accelerate there's a couple of different ways you do it but almost every deal were involved with starts and ends with clinical support. So we really have to have the support of our what we call clinical champions I'm just start and then really from there the way we accelerated its just by helping justify or validate the program value.

So whether it's operational efficiency, the ROI or whatever so important to the executive group and then finding different acquisition options that will help them get something done sooner. So as you can imagine right now in this environment, there's some capital constraints.

But what's helped us actually accelerate our sales cycle, a little bit better. It's just having more flexible options. So whether that's doing something with purchase terms our rental program.

Or subscription it that those types of options are helping us get into conversation a little bit sooner or about the transaction and really aligning with executives to find an option that will work for them.

Very good and.

And then also build you were talking about your past.

Yeah I think this is the first time I've heard India. So how you know.

It's good to see these countries outside the U.S. I'm getting into the business.

How sustainable is this is this line in that sense, you know, India and other countries and do you are you do you need to be doing more or less.

Or how sustainable that is.

So let me just real quick to kind of correct that is actually.

EMEA or Europe, Okay, mostly Europe, although we do have a partner in India.

So to answer your question, obviously, we are focused on.

On having a global presence and so.

We've been very focused on on Asia, and there are certain countries within Europe that where we're very focused on but it's a methodical approach we want to make sure that you know we're going deeper in the REIT countries first and learning more but.

But we do have some partners throughout the globe and then we'll continue to evaluate what markets make the most sense to invest and on a go forward basis.

Okay. Thank you and then one question for John Glenn Obviously, United States, It's nice to see the uptick into operating margin.

So.

I suppose specifically in the DNA expenses, we'd see that line going down pretty yeah at a decent clip starting from 2.1 million in Q1 to 1.7 now so how much of that.

Is almost done or not is there more more to get out of that operating margin.

That's my job.

Sure Yeah, RK so yeah.

We feel really good about obviously you know that the burn the cash burn in the quarter as you noted that you like.

A record for us as far as you know the lowest that Weve had an industry. The company. So we have.

You know been making great progress there from the margin standpoint, and from the Opex standpoint, I think that the structure that we have right now and we continue to look at and certainly an area that we think we can become even more efficient, but we're pretty comfortable with I would say that you know the infrastructure and the structure, we have especially in the DNA side right now going forward. So I.

I'd say, that's probably going to remain fairly stable.

Great. Thank you and congratulations again and talk you soon.

Okay, great Okay. Thanks.

Thank you there are no further questions at this time I'd like to turn the floor back over to Mr. pure ask for closing remarks.

Thank you, Kevin and I. Thank you all for joining us today before closing the call I'd like to reiterate it radar quarter highlights.

Led by our commercial team, we realize an improving revenue trends and higher levels of customer engagement, while the increase in Corby cases, it's something we continue to track and May impact the timing and predictability of future sales, we will look to take advantage of opportunities in our pipeline, both domestically and internationally by increasing user adoption and education operate.

Finally, we achieved record gross margins and significantly lower their costs from the prior year period.

As you know a leaner organization with a solid cash balance we were taking great measures to achieve margin expansion I believe we are well positioned financially.

Lastly, we are pleased to have lost even though our next generation exoskeleton that was built based on feedback we received from our Trailblazing excellent best technology.

At this point, we've generated a positive response from customers and their employees, who you vivo we will share more on this unique product in quarters to come.

Going forward, we remain committed to delivering long term value for patients customers and shareholders. Thank you for joining us today.

This concludes todays teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

[noise].