Q4 2020 Rewalk Robotics Ltd Earnings Call
Ladies and gentlemen, thank you for standing by and both of them to the Q4 2020, we walk robotics.
The conference call.
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Now back to Andy conference to our CFO ARIA the on Orange the floor is yours.
Thank you Jay.
Good morning, and what it kind of to rework robotics fourth quarter of 2020 the earnings call.
This is already gone the reworks CFO and with me on today's call is Larry just in the ski.
Oh.
This morning of the company issued the press release detailing financial results for the three and 12 months ended December 31, 2020. This press release and the webcast of this call can be accessed through the Investor Relations section of the rework website at www, the three walk dot com.
Before we get started the started I would like to remind everyone that any statement made sense of todays conference call that express the belief expectation projection forecast anticipation or intent regarding future events and the company's future performance may be considered forward looking statements as defined by the private Securities Litigation Reform Act.
These forward looking statements are based on the information available to rework management as of today and involve risks and uncertainties, including those noted in this morning's press release and reworks filings with the SEC.
Such vote, sorry, such forward looking statements are not guarantees of future proof of future performance.
Actual results may differ materially from those projected in the forward looking statements rework, specifically disclaims any intent or obligation to update these forward looking statements except as required by law.
A telephone replay of the call will be available. Shortly after completion of this of course, you will find the dial in information in today's press release and the Alka of webcast will be available on the company. The web web site at Www, the three walk the dot com.
For the benefit of those who may be listening to the replay or archived webcast. This call was had been recorded on February 18 2021.
Since then we walk may have made the announcements related to the topics discussed.
So please reference the company's most recent press releases and SEC filings.
And we debt I'll turn the call over to <unk> CEO, Larry Jasinski Larry.
Thank you Laurie.
Good morning, everyone and I am glad to start 2021, as we foresee a healthier and very active year ahead of us.
Q4 in 2020 results were greatly impacted as we lost access to clinics and patients for much of the year due to the Covid virus.
Nonetheless, we maintain sales and importantly achieved key milestones for building the business. We also improved our financial status through careful management through this pandemic.
The fourth quarter was impacted by the second locked down cycle of 2020, as we achieved 1.22 million in sales compared to 1.18 million in the prior year quarter.
For the full year sales were $4 4 million compared to $4 9 million in the prior year.
In 2020, Covid left us with over four months of almost no direct access to our patient and rehab population contrast of the full year access for the entire prior year.
Yes.
Nonetheless in Q4, we were able to make meaningful progress with coverage of the REIT walk exoskeleton and in financial management of the company.
First the Medicare Hicks fixed code took effect on October one and we added two new contracts in Germany.
The issue take fixed code defines the acceptance of the new category of Exoskeletons, which facilitate submission of claims to Medicare and other health insurers in the consistent and orderly manner and is a key step in the Companys average with pursuing coverage determinations.
The two new German contracts include of private insurers.
<unk> K K Mobil oil.
As a public group that initiated coverage for their constituents.
On the financial side, we control the expenses carefully and recalibrated, our investing to invest and commercialization, which continued to reduce our burn rate.
At the end of 2020, we completed repayment of our outstanding debt with gross capital, which we've been paying down at about the rate of about one 6 million per quarter.
Yeah.
Our 2020 commercial focus.
Let's do expand remote customer outreach and qualified customers from when the market reopens the.
This initiative resulted in establishing 171 active we want cases between Germany.
The U K and the U S at year end.
These efforts support our business, where we could gain access in 2020.
And have established the pool that will impact our sales and results in 2021 and 2022.
The restore mylan and many touch lines were not able to be marketed effectively remotely as the hands on demos needed with the new technologies of this type.
The most important initiatives for the three product lines, our national accounts and VA penetration.
For restore early trial activities with the NHS in the UK and with three chains in the U S were planned in 2020, and we'll be starting as clinic conditions allow access in 2021.
These changes will be a model and of baseline for expansion of these products entering 2021, we of 'twenty to restore targets 74 active my own targets and eight many touch targets.
We maintained our field team throughout 2020 to source targets and make contacts remotely with potential users. We also greatly expanded our online clinical.
Technical and scientific information programs for remote interactions.
Participation from Covid incidents was extensive and a leading the source of interest all product lines in 2000 of anymore.
There are several key milestones to watch in 2021 that are based on activities from 2020 in the preceding years.
Each will have an impact on our efforts to develop this new and emerging market.
First.
In the German federal Social Court, which is the highest court for social jurisdiction of Germany. A ruling is expected regarding whether supply of an exoskeleton as a direct or indirect compensation of disability.
A ruling is a direct compensation will advance the case for every qualified we walk candidate and increase the provision of systems to all public and private payers.
This would be of precedent for all German courts regarding exoskeletons.
Second.
In Germany to additional supply contracts that are in progress, which when combined with the six contracts already achieved we have almost all major German groups under contract.
Third.
In the U S. The successful Hick picks code issuance will be followed with applications in the pursuit of coverage contracts.
Fourth in the UK the utilization of the restore system.
And eight M&A NHS the valuation centers will expand experience and is intended to build the base for widespread adoption of the technology.
I'd now like to turn the call back over to Ari for a review of the financial details.
Thanks.
Larry discussed of the revenue numbers I will just add some metrics regarding the quarter on the activity in our insurance pipeline as we look forward into 2021, and I will then turn to our gross margin expenses and cash position.
So during Q4, we have received full of new rent of approval in Europe, and four units converted from final quarters. Our total number of Sci pending insurance cases was 98 at the end of the year compared to 96 of the previous quarter with 84 all of these cases in Germany and 14 in the U S.
Of the cases in Germany, which are currently already covered under the contract represents 44% of the total cases and we are now walking on implementation within the sales as Larry will provide details shortly.
Turning into our gross margin.
All of our annual 2020 margin than 50% of revenue compared to 56% in 2019. Our Q4 2020 margin was 33% compared to 61 percentage of the previous the a quarter. The quarterly decrease was affected mainly by $150000 of salvage spot write off related to our older rehab in person.
All of the designs as well as some changes in revenue mix the yield the reduction of 60 of 6% was also affected by the one time inventory write off as well as the effects of our overall the reduction in revenue compared to last year and the change in mix.
We ended the year with $14 $2 million in operating expenses and $3 $2 million in the fourth quarter of 2020 compared to $16 8 million in 2019, and $3 9 million in the previous quarter the.
The reduction was affected by two major elements first is our reduction in R&D employee and employee related expenses consulting of material as we finished the development of our restore product of 2019.
And second is showing in our sales and marketing, which is a positive 400000 dollar of affecting the fourth quarter due to our PPP loan forgiveness.
In 2020, we have repaid in full of our careers loan, which accounted for $900000 in interest of payments and principal payment of $6 million the.
This will no longer affect our bottom line as well as our cash flow requirements going forward.
Our net loss for the year, 2020 was $13 million and $2 $9 million in the fourth quarter compared to a net loss of $15 6 million in 2019, and $3 6 million in the <unk>.
The of course.
Do you see the net loss is the lowest since our IPO and shows our commitment to be as efficient as possible in order to get us to breakeven as soon as the weekend.
Our non-GAAP net loss for the fourth quarter of 2020 was $2 7 million compared.
Compared to a non-GAAP net loss of $3 2 million in the fourth quarter of 2019, and our 2020 and non-GAAP net loss was $11 9 million.
Compared to $14 million in 2019.
We ended 2020 with $23 million in cash and we have received additional $13 $2 million from warrant exercises in 2021.
Our cash flow flow from operation was $12 6 million, including the $900000 in interest expense the.
This is our strongest balance sheets for the last five years, which allowed the removal of our going concern qualification from our Auditor report.
With that I'd like to turn the call back to Larry for some final remarks.
Thank you Laurie.
I'd like to start by further discussing the development of coverage in Germany.
We now have six active contracts in Germany. The <unk> covers essentially all individuals for work related accidents.
We have public and private insurers covering $25 3 million lives and.
And we expect that coverage reach as many as an additional $35 million more lives in 2021 with the new contracts currently under discussion.
Our next focus for these contracts will be on improving the effective implementation.
Limitation through all aspects of the supply chain of the insurers.
These insurers are still learning how to manage the detailed contracts and have had to adjust with the pandemic interrupting the flow.
We of bone the communication through the individual insurers organizations has taken some time.
We have also observed that the supporting groups from medical assessment would benefit from further training and information on the standards for the selection of the while candidates.
Our efforts in 2021 will focus on basic factors that strengthen the performance of these contracts. These will include tactics such as increased case manager of communication.
The additional materials via secure online support.
The increased follow up training patients to ensure they achieve high skill levels and in providing more published information in areas such as bone density to help guide assessments.
Additionally, we are eager for the return in 2021 of German industry events, such as re of care, which traditionally provide a significant generation of re all candidates to our pipeline.
The short term U S growth was based on DAA activity and a focus on workers' compensation the cases.
Longer term growth will be driven by a percentage of CMS coverage pathway at a local or national level.
The VA centers will begin to be more active as the Kobe Covid vaccine is more widely implemented.
In Q1 2020, the co op study completed enrollment in the Multicenter randomized study, which was considered and conducted at many of the top.
The sites. This will open up the centers that had diverted 30 to 40 Sci individuals and potential we want candidates to research instead of personal sales each year.
We have identified a significant number of entrants that we will seek to move into training in 2021.
The VA co op study remains in a holding pattern on completing all follow up activities due to the pandemic, we do not yet have a forecast as the wind or how the VA will process and publish the data at this time.
We are aware that no significant adverse events reported during the study and expect this much larger data set will be similar to prior studies on the benefits of being able to walk.
Our long term efforts with CMS and private coverage are based on the new established code and the extensive dataset that we will complete this year.
That key day data includes one of <unk>.
Dosing of the literature history for Exoskeletons that has been reviewed by medical directors.
To the first published randomized clinical trial of exoskeleton assisted walking. This included 50 patients and was published on August four 2020.
This study control concluded the users were able to achieve reasonable more of the skill milestones three.
Three.
The reward of real World data survey for the FDA has examined the use patterns of 57 individuals and will be submitted for publication in 2021.
Fourth.
The EBITDA 160 patient randomized trial of publication date has not yet been identified but enrollment was completed over a year ago and follow up is completed on over 130 patients prior to the Covid shutdown.
We anticipate the VA will move forward and published in this in a reasonable timeframe.
Five of the company is sponsoring an additional study focused on economic data that we expect the published in 2021 the.
The study is analyzing all medical cost four years post spinal cord injury prior to exoskeleton use.
Compared to the results once they started walking again.
The study will help define the payback period for an exoskeleton via Defrain medical treatments, such as surgeries for pressure sores.
Treatment for UTI.
Other interventions along with reduced medications for pain specificity, the old programs and infections.
Operationally and financially our primary goals are.
First in.
In 2021, we expect to achieve sales growth year over year as we gain field access due to the management of the pandemic.
We expect the relaunch will grow as our large field team gains traction.
As we implement the German contracts with.
With the court decision in Germany.
With the VA reopening and the workman's compensation cases in the United States.
In addition, our ability to relaunch restore.
The mile cycle and the many touch the lines into a more open market will also provide sales growth.
Second we expect in 2001 that total operating cost will be kept level other than some increases in travel and commissions with gross sales.
Third.
We target a national or local coverage application with CMS during 2021.
Fourth.
We will consider processing some of our Harvard based technologies through the FDA CMS Medicare coverage of innovative technologies breakthrough categories.
For processing and coverage at the time of the FDA clearance.
This landmark program features a national coverage decision for products deemed the breakthrough and automatically establishes for years of Medicare coverage. After device is cleared by the FDA in the U S.
This rule, which CMS published in January improves access to innovative devices of persons with life threatening.
Irreversibly debilitating diseases or conditions.
The Harvard technologies into the home design for stroke patients.
And we're also consider applying for designs for multiple sclerosis and knee osteoarthritis.
Each of these concepts of targeted for personal use.
The use at home and in the community.
We believe these factors will reduce our cash requirements and improve our financial position in parallel the longer term initiatives are consistent with the vision, we have laid out for this company.
Thank you everybody for your time and your interest today at this point I'd like to turn the call over for questions. Operator could you. Please go ahead of the instructions.
Thank you Sir at this time, if you would like to ask the question. Please press star one once again she will die cast. The question. Please press star one to withdraw your question. Please press the pound key.
Yeah.
Our first question comes from the line of <unk>.
The cooler.
The come in of HD wind right. Your line is open.
Thank you this is RK from H C Wainwright.
Good morning RK.
Your line.
Thanks.
Larry with your 2021 milestones of one of the things you've talked about of us.
The German court ruling or died of embedded compensation for exoskeleton use.
Can you expand on this a little bit.
What is what is the real court case.
As you said if it is.
And then it's going to be better obviously, but you know.
Just like to understand what's the premise for this court case.
How does it impact you know.
Your relationship with the different payers in Germany.
Certainly well this particular court case.
Is with the federal court.
And in the German system.
The comparative to the Supreme Court, the United States almost there are multiple levels. So this is the highest level of court in the country for determining social decisions.
To date most of decisions the decisions that have been made on Exoskeletons are rebuilt in particular have been done at the lower level of social courts.
And the roughly 30 pending cases still in the social.
Of course.
This case was advanced by one of the larger insurers in Germany.
Through the highest court.
I think in part to achieve a decision from the highest court that will define things for all of the lower courts. The.
The specific case parameters I don't know that I can discuss.
Even though I'm well aware of them. It is a very favorable case, we think.
As does our counsel.
But the ruling as a direct compensation.
Basically would eliminate any of the other challenges to the use of this product of direct compensations, meaning.
Does the reward or an exoskeleton of general provide an ability to walk that you cannot otherwise get.
If it were considered indirect compensation.
Suggests you could go back to the wheelchair.
So our expectations. This is an easy one to document we know the specific cases, a favorable one in terms of how well it works for the individual.
And that court decision has been in process for about a year in the half.
And as forecast.
Mid year this year.
Okay and then.
Hugh.
There are about 84 pending cases in Germany.
Im expecting the implementation of some of those.
In 2021.
That is the court case.
Does this basically do this 84 cases right on the decision from the from the Court case, our day, we'll be working independently of the court case.
Most of those are independent of the court case, the insurers have been processing, our limitation has actually been more COVID-19 related there the.
Only cases affected by the court decision or the the approximately 30 specific court cases that exist.
The others are falling under the contracts and have been being followed by both the <unk> and the insurers.
And just to add to this point of the RK One thing I'll go to the 84. So there was about 30.
In case it in the court cases, we have 'twenty either in the rental.
The rent on that of the end of the year I'm talking about or pending in the season, meaning that they completed the rental on the are still waiting the final decision and the rest is ongoing cases in the.
Reimbursement process basically.
Okay. Thanks, one last question on the German insurance.
You stated.
Tension of you will have like 60 million lives.
On the contract once once you have the.
Six of the difference.
Not only of the client.
So the additional two so all of the 15 million lives.
What is.
Generally the potential candidates that cash.
Dan.
Could use an exoskeleton.
What we have published our estimates of the German market a few times.
So your German population data is not quite as precise as of the us due to privacy laws, but approximately 60 to 80000 Germans.
The spinal cord injury and APA.
Approximately one third of those would meet all of the inclusion criteria. So your potential market is.
Fairly significant there the 20 26000 range.
I think that market is accessed over time and depends on the health of the individual patients. So it will continue to be a smaller number.
But on the whole from a top down its a significant number that the.
We see as part of the year.
Central growth for this industry over over the coming years as these become the standard of care for all users.
Yes.
Certainly can see that.
And then on.
On the hits the Pts cards.
That you received in 2020.
Yeah.
I'm sorry.
Made some remarks about how you would be.
Commercializing based on the court.
Hum.
Could you could you just highlight some of your comments again, please I'm sorry about that.
Okay.
Most of our U S focus in 2021, we will continue to be in the VA as we now see the centers getting vaccinated.
And we believe the will open up so we have a number of candidates that will try to pass forward with the VA and with workmen's compensation on the case by case basis.
Regarding the <unk> code, we can use that for applications. Our primary short term focus is getting and completing all of the major data elements that we believe are most needed to support coverage decisions as a policy.
So some from a revenue and.
Most of our prosecution of the cases is outside of the Xbox code of.
Some people can apply using the code at this point.
And our real work with CMS is too.
The present, a very strong database for coverage and.
The variable for us the most is the timing of a few of those components.
And specifically the VA.
When we can gain access to that data and included we believe it strongly improves and strengthens our position would have to randomized clinical trials that we could cite ones already published and the other one.
We think with the vaccine will get the moving again in terms of getting of the data analyzed but that is the real driver of data will drive our results with CMS more than any other factor at this point.
Thank you. Thank you for taking all my questions.
Thank you once again, if you would like asked the question. Please press star one.
Okay.
So operator I think we are are set then if theres no further questions at this time.
I would ask everyone to please.
Refer to our website for information if they are looking for any elements from this call or to reach us through the Investor relations. So we can answer questions that anybody may have.
So thank you for joining us and we appreciate the interest and the time, you've invested and we work today.
Thank you.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect have a great day.
Okay.
Yes.
Okay.
And the.
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Yes.
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Moving on.
Your line.
No.