Q1 2021 Ekso Bionics Holdings Inc Earnings Call
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Hello, and welcome to the extra bionics first quarter 2021 financial results conference call and webcast. At this time all participants are in a listen only mode.
And that's the session will follow the formal presentation. As a reminder of this conference is being recorded.
Some of my pleasure to turn the call over to Matt Steinberg with the Saar Finn partners. Matt. Please go ahead.
Thank you operator, and thank you all for participating in today's call.
Joining me from Exo Bionics are Jack <unk>, President and Chief Executive Officer, Jack Line, Chief Financial Officer, and Bill Shaw Chief Commercial Officer.
Earlier today and so by on.
And it's released financial results for the quarter ended March 31st 2021.
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 and.
And he's statements contained in this call that are not statements of historical facts should not be deemed to be forward looking statements on.
All forward looking statements, including our future financial or operational expectations or our expectations of the regulatory landscape governing our products and operations are based upon management's current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our businesses. Please see our filings with the Securities and Exchange Commission and so disclaims any intention or obligation except as required by law to update or revise any financial or operational projections of regulatory 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 today April 29th 2021 and.
I will now turn the call over to Jack PURA.
Thanks, Matt and thanks, everybody for joining us today.
We are off to an encouraging start in 2021 during the quarter. Our primary objectives were geared towards raising customer engagement levels, expanding physician awareness of our innovative exoskeleton devices and the medical community and sharing with them our new subscription access model I am pleased that we made great strides across each of these goals.
And in doing so increase the number of multi unit orders with top network operators globally.
And the quarter, we recorded 16, and our bookings, including seven units of our new subscription offering both up on a sequential basis.
As we highlighted on previous calls we transitioned our selling strategy to a subscription model to facilitate faster XO and our adoption of.
This transition has had an effect on near term revenues due to the nature of revenue generation.
Extremely pleased with the early results of this model it.
It has helped us drive faster adoption and earlier success with customers and we received in the past as Bill will highlight in a moment. The subscription model also led to a higher number of units per order.
For the first quarter, we recorded revenue of $1 $9 million up 30% from the first quarter of year ago.
We achieved this while our revenues continued to be impacted by the effects of the COVID-19 pandemic. However, we are seeing business conditions start to normalize as COVID-19 cases, and hospitalizations continue to decrease.
On the industrial side, we are pleased with continuing positive customer feedback of our Evo upper body exoskeleton devices.
We have a number of customers actively trialing evo across a variety of diverse industry verticals and believe we can win opportunities and the growing and potentially very large industrial market.
Financially, we achieved record gross margins and continued to manage our expenses prudently underscoring our lean and efficient operations.
Looking ahead, we are well positioned to invest and our growth supported by our strong cash position from our February financing.
Now I'd like to turn the call over to Bill for an update on our medical segment and global commercialization strategy.
Thank you Jack the first quarter was a solid start to the year for our commercial team, we increased customer engagement and access levels, while making it simpler for them to adopt our leading exoskeleton solutions with our newly launched subscription model.
As part of our network strategy, we are focused on launching multi site programs with network operators and are pleased to have closed deals with three of the top five and patient rehabilitation operators and this includes completing our pilot program with fiber health care and that was previously delayed due to COVID-19.
For the first quarter of 2021, we delivered approximately $1 $7 million and XO health revenue or.
Our conversion and renewal rate remains strong at 86%, we already have more than the $700000 of contracted revenue under our new subscription model.
Our subscription offering and allowing our customers to make larger unit commitments and the last time that for the short term will impact our top line as revenue will be recognize monthly over the term of the contract similar to how SaaS companies record revenues cash.
Capital acquisitions, often required more approval levels, including top executive sign off with our subscription model, we are seeing less approval levels being needed and believe this offering will be the catalyst for accelerating adoption with inpatient rehabilitation centers.
Not only of removing some of the capital barriers, but we're also shortening the sales cycle for example, and Q1, we closed the deal on four days after an in person and validation of it.
We now have a customizable approach that is working.
And we are accelerating conversations with our customers, especially with those experiencing budgetary pressures the small.
And is also directly led to an increase and the number of units per order. One example of this positive development comes from Kindred health.
Kindred expanded its inpatient service with what was the four unit water two of seven unit commitment based on the subscription offering.
We will continue to update our progress with this new offering.
Internationally, we are seeing positive momentum throughout our global network, we piece together, two strong consecutive quarters, and Europe, indicating pent up demand and.
And the APAC region, we expanded our footprint by entering into a partnership with the Royal rehab and Australia Royal rehab as the leading provider of rehabilitation and disability support services and this partnership further solidifies our goal to increase the accessibility of our robotic technology and the APAC region.
Educational Webinars remain a key component to our strategy and building physician and clinician awareness of our technology as part of this.
Initiative, we announced the partnership with the U S Physiatry and March to gain greater recognition of our devices and to educate on how to successfully implement robotics and the rehabilitation centers.
U S physiatry as the largest and patient physician practice and the U S focused exclusively on the physical medicine and rehabilitation.
As part of the partnership USPS Physiatrists team of experts will lead a four part of lecture series that will be opened of physicians clinicians and other health care leaders across the globe.
Earlier. This month, we hosted our first webinar of the series focused on XO and our education that was well attended by many of the industry's top specialist.
And look forward to of continued partnership with the U S. P.
In addition to these popular webinar events and the gradual opening of facilities with the COVID-19 cases on the decline we are increasing the number of live in person interactions of rehab centers or on site cameras are getting closer to normal rates, enabling us to enhance customer education.
We remain cautiously optimistic about the current COVID-19 outlook, we are encouraged with heightened customer engagement levels and our existing pipeline opportunities.
And so it's helped patients take more than $130 million XO aided steps and over 300 institutions around the world and today, we highlight another success story from one of our newest centers and Akron, Ohio.
Zoom of rehab hospital partner with Vibraharp, which initially designed the six month pilot program elected to proceed with an early capital purchase after only three months, we're happy to share of recent patient success story.
Zuma rehab hospital Therapist's saw 70 year old male who had a stroke and February and consequently completed two and a half weeks of and patient therapy. The patient was excited to try on innovative extra technology to help them through the rehab process the.
Patient made rapid progress initially requiring two advanced therapist, the progress quickly with the XO and Ara to work independently or needing the supervision of one eight.
After starting XO and our training his therapist noted marked improvements and function reduce the ataxia improved balance and more efficient walking.
Both physical therapist attributed the patients quick and significant progress to the use of XO and are to achieve functional recovery.
We are pleased by virus quick adoption of our innovative technology and look forward to continuing our partnership and sharing the success stories.
Looking ahead.
We will continue to leverage our new subscription model. The shorten the sales cycle increased predictability of deals and reduce capital barriers for our customers. We believe the strategy combined with our effort to increase customer education and awareness of our innovative devices, along with our strong clinical training and program support and drive future adoption of XO and <unk>.
Our technology.
And with more virtual webinar events increased onsite customer activities and continued market penetration of our network strategy. We are excited to accelerate our commercial success.
At this time I'd like to turn the call back to our CEO Jacques Chirac.
Thanks, Bill I'd like to provide and update on the progress with our industrial segment.
Our upper body exoskeleton Evo continues to receive promising feedback from customers and incorporated this innovative device into their industrial related workflows and.
The first quarter, we conducted extensive evaluations gathering feedback at the executive and worker levels. We've heard from most of that Evo adds value by mitigating fatigue, making productivity more predictable and reducing the risk of injury.
During our limited and targeted post launch of evaluation period, we added several new customers and have an even greater number of potential customers actively trialing evo across different applications. We are pleased with the overwhelmingly positive results, thus far and I would like to highlight a couple of encouraging customer testimonials.
One customer's employee who previously was unable to perform of his job due to a work related shoulder injury returned to work earlier than expected primarily due to evo.
This lightweight exoskeleton alleviated stress caused by the overhead work he was performing enabling him to execute his tasks, while reducing further risk of injury.
And that really helped the employee of return to work safely and confidently, but also provided the customer with peace of mind. The projects can be completed on time with less risk to their employees.
Another example, highlights the drywall and seller, who had a labor intensive overhead construction tasks that had to be conducted repeatedly.
He will support of this grooming work by lowering the time needed to complete each task from 20 minutes to five minutes of 75% productivity improvement with this remarkable increase and worker efficiency Evo demonstrated that it can enhance productivity, while also making all.
Put more predictable.
To date, we are working with customers and the logistics construction food processing aerospace and solar installation verticals and are targeting applications, primarily or evoke and enhance worker productivity and improve worker safety.
Moving forward our objective is to further accelerate adoption within our targeted segments.
Finally, our subscription model of supported of our commercial efforts free though similar to the excellent and our subscription model is helps shorten the sales cycle and reduce capital barriers. We intend to continue the sales strategy and driving greater adoption and a faster pace now.
Now I will turn the call over to Jacqueline and review of first quarter financial results.
Thank you Jack.
Extra generated first quarter revenue of $1 $9 million compared to $1 $5 million per the first quarter of 2020.
Gross profit for the first quarter was $1 $2 million.
Presenting of record gross margin of approximately 65 per cent.
Compared to a gross margin of 60% in the fourth quarter of 2020, and 43% for the same period a year ago.
The increase in gross margin was primarily due to higher average selling prices for <unk> and increased proportion of medical device sales.
Lower production cost of the Evo compared to the previous generation and best and higher service margin.
Our actions to preserve cash our cash and align our cost structure enabled us to lower our operating expenses.
Operating expenses for the first quarter of 2021 were $4 4 million compared to $5 4 million for the first quarter of 2020 a reduction.
And of approximately 19%.
Net operating loss and the first quarter of 2021 fell to $3 2 million from $4 $8 million and the prior year period.
And our increased revenues and leaner cost structure.
Gain on warrant liabilities for the quarter ended March 31, 2021 was de Minimis from the revaluation of warrants issued in 2019, 2020, and 2021 compared to a $2 $5 million gain associated with the revaluation of warrants issued in 2015 2019 and 2020.
For the same period in 2020.
Cash used in operating activities and the first quarter of 2021 with $2 million.
As of March 31, 2021, we had a strong cash balance of $49 5 million, which included growth proceeds of approximately $40 million from a public offering strengthening and our cash position and extending our cash runway to execute on our growth strategy.
Please see our 10-Q filed earlier today for the further details regarding the quarter.
Operator, you May now open the line for questions.
Thank you and other conducting a question and answer session, if you'd like to be placed and the question queue. Please press star one on your telephone keypad.
The confirmation tone will indicate your line is and the question Hugh.
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Our first question today is coming from RK from H C. Wainwright Your line is non life.
Thank you and.
Good afternoon, and Jack and the Act.
Few questions from me.
And to start off on the top line.
Suddenly and it's good to see that.
You got 30 per cent.
And this revenue compared to the first quarter.
But however, and you look kind of going into the fourth quarter of last year.
The but on the on.
The flip side.
Place more units.
And you.
You know on the the increase and the number of your interest places book.
Basically coming from the subscription units, which obviously it says that the subscription system is working right.
So.
I want to understand and your thoughts on it.
Is that because partly it being the first quarter instead of some amount of seasonality involved and number two.
Is this going to be the trend in the short term and the sense.
And as you move into the subscription system, obviously quarter to quarter. The revenues could could look a little weak compared to the previous year, but in the lungs of that and.
And the subscription finally should.
Converting to and system sales.
After the subscription period is done.
Yes.
Yeah, Hey, RK.
And for me and thanks for the question the.
And Youre generally spot on it as we've communicated in the past we really.
Shifted.
Focus on to the subscription offering and as a result of that a lot of a lot of.
Deals, which would otherwise have been capital.
Or not existent have come in and subscription so.
And we really think that this is of great offer for both of our customers and for the company because it gives us a lot more predictability and.
And we believe is going to drive a lot faster adoption, but it will have a short term impact and revenue and and the second thing I wanted to just maybe correct a little bit on this is that on.
Unlike the.
The offer we had in the past it was really a.
A bridge to the capital purchase.
And we view the subscription offering certainly we'll always sell of subscription.
Capital sale, but we view this as the.
Something that we would renew over time.
And as being the large majority of what happens versus converting two of capital purchase and we'll see how that plays out, but where we're going into it with that expectation.
And Jack line or Bill if you if you want to add anything to that feel free.
Well, the only thing I would add the arcadis.
And again, we really look for the subscription program to really accelerate unit growth and that's going to be our key obviously as you've mentioned, it's going to have of the top line effect and in the near term, but it's really about getting units out there and growing the use.
On it.
Yeah, Yeah, Yeah, I mean, it's not a it's not a bad thing and.
And two.
You know and to have a declining sales, but to have a decline and the sales on the rights of the reason.
Yeah, Okay and stuff.
On the non consent.
And then and in terms of talking about multiple unit sales.
Sales.
Hum.
Can you kind of elaborate a little bit more as to what is the appetite.
And especially when you go the subscription route.
For some of the centers.
And so just and on to.
The subscriber multiple units rather than and the comparator.
Compared to previous times of man.
And what I've been a little bit of a battle and even to get one Kathryn sales done.
Yes, great question and I think we are.
And we're starting to see evidence of that right now our belief is that we will be able to drive more multi unit commitments, we were able to do that in Q1.
Obviously within the network.
Greater and we are.
We've been able to have fairly significant discussions with multiple other network operators around more of a programmatic approach to deployment of everyone's going to do it differently.
But that's.
It's certainly from our perspective of very effective way and I think we're starting to see on that side.
Interest and doing more of programmatic.
On the central decision, making moves.
But it'll be a combination of of.
One by one versus.
Central decision, making and I'm going to ask bill the filling of a little more color on that.
Yeah. The only thing I'd add is just that in the past right RK, we would do a rent to own and kind of pilot program. The customer would still have to budget dollars to be able to convert or acquire of that technology over time right with the subscription offering.
They seem to be very pleased that they can actually roll this out to multiple sites at one time, whether they want a pile of the technology and different markets or maybe had one specific market a little bit harder.
They don't have the necessarily have the budgeted from a capital perspective, because they can just take it out of and operational budget and then with the success of the program. If they do decide to acquire that could do that but the reality is they were just renew it and extend it and.
And so that's why we're seeing a lot of interest and multi units.
Okay, perfect and one more question on the XO and matter of part of it in terms of onsite demonstrations.
As the pandemic on.
The other as more and more people getting vaccinated.
And I don't know what the status of the time to make it it can vary from day to day, it's the state to state.
How are the.
How are you seeing the trends in terms of in lighting your folks onto the site.
The conduct onsite demonstrations.
Is that right.
There's the kind of giving you some kind of the clarity on that.
The act as a leading indicator as to the US the number of units you could place.
And are in the coming quarters.
Yeah, Bill I'm, just kind of spill to take that go ahead bill.
Yeah, well I talked about being cautiously optimistic I think we believe.
And that there there is a steady recovery starting to emerge and we're hopeful to see increased spending and the back half of 2021, but engagement levels are definitely much better than they've been in the past. So as we've shared in the past right and the middle of the pandemic, we had the pivot to a virtual selling strategy and that really helped us navigate the COVID-19 climate pretty well.
But now that where we're seeing things start to come back I'd say, we're executing more of a hybrid approach.
Where we're trying to do as much of our selling process virtually as possible, but the reality is with this type of technology getting on site and doing a validation of event or a demo with the right people and the room is really important.
And so to answer your question directly yes, we are seeing centers being opened the having us come back on site.
But we're being very strategic with with where and how we're doing things, we're still doing virtual demos as well, but theres really no better path and being on site with customers seeing our technology and in real time, So we're going to try to do as much of that as possible going forward.
Okay, and so far on for the last question.
Regarding evil I know and.
You made some comments about that.
And on the industrial verticals that are trying to test.
Sure.
So could you highlight a couple of them and do.
And can you.
And I cannot comment on like when this could become a little a little bit more meaningful sort.
As the revenues go up.
And you know from what you have seen them.
The industrial verticals do you think you'll be ready to absorb this.
Sure.
So you know I did mentioned generally some verticals I'll just highlight the maybe a couple of where I think there's really a great match.
The first would be and construction, but narrowing it down a little bit too.
And the drywall installation.
The number of of customers right now who are doing a draw.
The drywall installation and Theres a lot of overhead work involved in doing that and not just placing the she rock, but also finishing muddied and sanding and.
And we've done some evaluations, where we see really great productivity improvements as a result of that and that's a fairly standard.
Activity that we think is is our product is very well suited to.
To support so that would be one the second area that we're quite optimistic about is for the same reason is in sort of field installations, where there's an awful lot of overhead fascinating and wiring associated with with that installation and again, we've got trials and that area is.
And again.
The quite large appetite for this given the.
We can demonstrate productivity improvements.
So.
And the US there are some others, but I think for a couple of highlights of those would be the two of them.
In terms of.
When it is we really see some traction taking off from a revenue perspective, a couple of things about that so first and we've been very deliberate about.
Go and a little bit slowly to make sure. We the product was fitting into the application and and the economics work out with the customer.
I think we've gotten pretty far down that path and.
At least and some of these vertical so we are now and a position that we can invest a little bit more on to.
Driving volume and that and driving more sales. So I think and the second half of this year, we should start to see some growth out of that out.
The second thing I would say about that is that we are also offering that is the subscription.
Our subscription so.
Again, we will have the same effect from a revenue perspective as revenues with the way unit delivery.
Mhm.
Great. Thanks, and thanks for taking on my questions.
You bet okay.
Thank you RK.
Thank you we've reached the end of our question and answer session I'd like to turn the floor back over to management for any further of closing comments.
Thank you all for joining us today.
To briefly recap the first quarter of 2021 with an encouraging start to what we believe will be a solid year. We expect to continue to focus on network operators, who realize the benefits of our technology and can help bring it to more patients more quickly our subscription model is helping us achieve this goal by breaking down capital barriers increasing adoption of <unk>.
And shortening the sales cycle, although this may impact revenues and the near term. We believe this provides us with inroads to expand our installed base and support our path to sustainable future growth.
We're also pleased with the continuing positive feedback on Eva on the remarkable customer stories and evaluation of results that we received to date. We believe there is a large market opportunity for evo with the number of verticals that we can penetrate.
As I stated in the past the proceeds received from our February public offering and are critical to our success and executing on our growth goals are.
Our focus remains on expanding our customer base and both the medical and industrial segments, and bringing new game changing technologies that will improve the lives of patients and industrial workers. We look forward to providing updates on our continued progress throughout the year. Thank you and have a good day.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.
Yeah.