Q2 2021 Nano-X Imaging Ltd Earnings Call
Thank you for standing by the since the conference operator, welcome to the Nano Act imaging the second quarter 2021earnings call.
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I would now like to turn the conference over to Bob. The addition of Investor Relations. Please go ahead.
Thank you operator, and thanks to everyone for joining the Nasdaq's imaging second quarter 2021 conference call on today's call. We will hear from ramp of the Atkins Chairman of the board and Chief Executive Officer, and you'd talk my young Chief Financial Officer.
Before we begin I liked mind remind everyone that managements remarks today contain forward looking statements regarding the company's financial result proposed acquisition research and development manufacturing commercialization activities regulatory process operations the impact of Covid 9.
<unk> business and other matters.
These statements are subject to risks uncertainties and assumptions that are based on management's current expectations as of today.
It may not be updated in the future. Therefore, these statements should not be relied upon as representing the company's view.
As of any subsequent date factors may cause such a difference.
Factors that may cause such a difference include but are not limited to those described in the company's filings with the Securities Exchange Commission.
We will also refer to certain non-GAAP financial measures provide additional information to investors our reconsider filiation of the non-GAAP to GAAP measures is provided with our press release with the primary differences being stock based compensation and class action related expenses.
Completion of the proposed Zebra Med acquisition is subject to among others approval of the transaction by the equity holders of zipper met.
The acquisition of USA Red is subject to the completion of due diligence and negotiations of.
The definitive agreement.
The definitive agreement with USA Rad may not be entered into.
Oh on terms or in the timeframe currently contemplated.
Both acquisitions are subject to satisfactory.
Satisfaction of the conditions to closing in the definitive agreements regulatory approvals and other customary conditions. Therefore, neither of the proposed transactions may be consummated on a timely basis or at all.
With those prepared remarks, it's my pleasure to turn the call over generics Chairman and CEO Graham POI Atkins brand.
Thank you Bob and thank you everyone for joining our call. This morning also joining me is the tuck my young our Chief Financial Officer.
After my prepared remark I will turn the call over to talk to review the financials before opening the call for questions.
Well during the second quarter and the following period, we made substantial progress towards our goal of democratizing medical imaging.
As we've said many time before roughly 2 thirds of the Walter population do north of meaningful access to medical imaging and we believe extended global access to medical imaging devices will lead to earlier detection of chronic condition.
In order to fulfill our mission, we aim to tackle the 3 significant worldwide challenges. The first 1 of course is the global shortage of medical images devices. The second 1 is the global shortage of radiologists to read these images and the third 1 is the lack of data connectivity between the patient.
Physicians and lack of data crunching our platforms.
In the context of shortage of medical imaging devices, we have made significant progress in the production signing more partners.
And the regulatory paths so concerning the first challenge that the knocks off production, we continue to make important progress towards building, a global supply chain, including scaling up our semiconductor fabrication plant in South Korea as planned we're also advancing its schedule.
With our 2 production usually guard 2 of 2 of suppliers for the multi source system in Italy, and South Korea.
Finally, our production Assembly line in Israel is fully occupied integrating does the cheap since <unk> into the systems.
Concerning the existing of new partners of M source agreements. We recently signed an abscess agreement with Ilene of pharma to deploy 1000, non Ozark system across Nigeria, the country with the population of over 200 million.
This is our first entry into the West African market, where we aim to make medical imaging of available to both public and private medical.
Institutions with disagreement we now have contract in place to deploy 61.59 o'clock you're on air. So 6150, an hour of stock units plus agreements with USA Rod and the SK telecom to deploy an additional 5500.
The units across the U S Korea, and Vietnam pending of course, local regulatory approvals and passing user acceptance tests.
We're in.
The constant communication of we are with our various partners around the globe. This includes the ongoing webinar sessions held on a monthly basis. This webinars include the virtual tours of our production sites Treaty Tomo synthesis images review and the analysis system.
System comprehensive review and assess the technical support maintenance a review as well all of that being done towards the first deployment. That's expected later on the fear in the early next year.
The third the 1 is regulatory path. So let me just remind everybody of that in April we received FDA clearance for our single source narrow skirt extra if you're a student of critical achievement for our company and an important reference point for a digital source.
In the second quarter of 2021 we submitted to the F. D. A 5.10-K application for the first version of our multi source Nanak SAARC and this is in progress with the FDA as we speak.
We're in preparation phase for sea of submission and some other regulatory bodies in other countries is expected to be submitted using the <unk> during the first half of 'twenty to 'twenty 2.
In summary, the deployment of 15000 units of monarch Sark before the end of 'twenty 'twenty 4.
<unk> is our way of meeting the first challenge by increasing availability of medical imaging worldwide.
So just to summarize the overall section we've made the huge leap off.
For what the addressing of the first challenge of shortage of global medical imaging devices in terms of production existing of new <unk> partners and the regulatory paths.
Now, let's talk about the second challenge the global shortage of Radiologists and let me just explain I mean, when you have so many devices are propelled globally. The next gating item will be radiologist.
In light of the global shortage of trained cardiologist, which creates a significant bottleneck in the imaging process. We developed the way to connect our imaging imaging device via the Internet securely upload the images to our networks cloud and then to third party network of for ideology.
Just.
Using AI based technology.
The decision support software for radiologists to streamline and optimize the load of diagnostics.
We are establishing an academic method the Nox academy to educate hundreds of radiologist and clinicians worldwide and the multiple segment to read the in diagnostic imaging from the announced arc.
I believe this can be achieved true to propose acquisition. The first 1 is the USA Rod holding Inc.
And the second 1 zebra medical vision.
Regarding the USA ride all of the zinc USA Rod holding operates the network of over 300 U S certified radiologist across the United States. Okay.
Read the medical images remotely.
We are already in partnership with them.
And have now signed a binding letter of intent for the acquisition of USA Rod holding Inc.
If consummate it is represents strategic opportunities for non ox debt is based on the following.
Starting with the fact that USA rod, it's partially because by Siemens healthier, which is significant it's really enhanced our go to market strategy potentially allowing us to place not of sock into thousands of smaller U S truck our practices and provide this end to end globally.
<unk> medical imaging solution.
Through the USA Route network, we will have direct access to the relationship with hundreds of medical practices across multiple specialties. Additionally, this will provide us instant access to trained radiologist lowered the barrier to U S market entry and the other countries around the globe.
Yeah.
This will allow us to increase our share in the value chain by providing not only the upload of of the image, but no the radiology services.
I would say rod is expected to play a significant role in Alex Academy initiative.
Under the U S. The rod letter of intent none of the intent to purchase all of the shares of USA Rod and all of the assets of its affiliate company medical diagnosis web or M. D. W.
In terms of financial details, we expect to acquire your survived for total consideration of up to $27 million comprised of $80 million of non of shares and $9 million in cash.
Of this total avion in the half billion in cash.
And shares is expected to be paid upon closing and the remaining 8 didn't ask me. The 1 is expected to be paid in cash and shares based on the achievement of certain milestone. We also expect to acquire M. D. W. For total consideration of up to $3 million in IMAX shares.
Yeah.
I'm also happy to announce that we've entered into an agreement to acquire of zebra of medical vision of deep learning medical imaging analytics company, if consumer debt. This will allow us to support our systems with highly advanced AI algorithm and bring to amount of clinical regulatory and cloud.
Deployment credibility.
The strategic opportunities if the acquisition is consummated includes creating of the next generation medical device with the imaging AI solution, leading and shaping in the U a E neighborhood of diagnosis space with the hardware capabilities from non ops and the AI cloud delivery capabilities from zebra to get.
There was the proven regulatory and quality framework.
Z price comprised principally of of expert in AI applications and software engineers.
Zebra uses a proprietary database of over 2 million of name of just cans using machine and deep learning tools.
It's another it's analysis data.
In the real time, whereas the human level of accuracy. So radiologists can receive the assistance they need to manage their growing workload with precision.
Some example of their product capabilities includes the fact that Libra is dozens of patents 7 FDA cleared products for radiology, AI and the CPT code for ideology.
Because he brought some of the world top head of serious stitcher and costs its customers, including of Polo, India Intermountain has Iran. Most of the U K in Scotland.
N of chess Albert Einstein, Brazil, J&J, and many others zebra the pricing is well aligned with non of.
The first skin model and its goal of democratizing medical imaging.
I think zebra capabilities will allow the combined companies to capture the largest share of the average of $40 per skin.
<unk> in our existing M SUS agreement.
Touching now on a few financial details of the transaction.
We expect to pay the shareholders and employees of zebra up to 200 millions of dollars.
And none of the stocks.
For 100% of the shares.
Capital of Zebra on the fully diluted basis 100 million is expected to be payable by means of not of ordinary shares to be issued upon closing.
16 million in deferred consideration is expected to be payable by means of non of ordinary shares to be issued upon signing of 3 new business contracts within 6 months of closing and the up to $84 million is expected to be payable by means of Nox ordinary shares to be issued.
Upon achievement of certain milestone zebra is expected to operate as a wholly owned subsidiary under the non sprint.
The shares.
And out of shares.
The expected to be issued to zebra amid the USA rods and the empty W. Shareholders are not expected to be registered and will be subject to restrictions on resale under the U S security laws.
This is the full alignment with our goal to provide the end to end the medical imaging for all.
If the combination of the Brian do you have survived the with the company's completed.
It has the potential to bring together the power of human radiologist and advanced AI capabilities, helping us solve the second challenge the challenge of shortage of radiologist.
All of the it's actually leads us to the search islands lack of data connectivity between patients and physicians the lack of sophisticated data analytics and population health solution, whereas none of the believes it can help solve this challenge with a net of Socs system and default proposed transactions are consummated.
We will have the radiologists of your of survived and the AI capabilities of zebra as such we would be able to create a globally connected end to end the radiology solution.
Before turning the call over to talk to review the financials I would like to provide an update on our leadership transition our.
That we announced today is we are preparing to scale globally and the integrate the new found as part of the partnership.
<unk> areas of military with served as director of if not all of <unk> for the last 2 years to fit for road and become our C. E. O area is is the world class executive with tremendous amount of experience in scaling the organization to become Global Corporation. He was most recently.
The the executive Chairman of of definitely University Hospital, and the chairman of the State Medical Research service and <unk>.
The development in the way she led its turnaround and the recovery plan.
There is served as an executive Vice chairman and CEO of of adult Kim of Carolyn shipping from a group. He was the CEO of Africa, Israel L. T D. A global holding company and President of C off net the theme the leading global the Agua Tech company, Arizona led the largest ever I P O 4 in the.
Israeli company, raising $1.3 billion in capital.
The 4 AFI development on the LSE, mainly leased we're greatly honoured to have Eric join our team.
And I'm sure that he has.
The executive experience and leadership skills to take non looks forward to execute our expected deployment and beyond.
I will continue as non executive chairman focusing on look at terms of initiatives in the future collaboration and fulfill our goal to provide the worldwide. The end to end medical imaging solution for everyone.
We're also announcing today, the Toronto and the L will replace the talk of my young our Chief Financial Officer, who will continue in his role until the end of September.
I, along with the board and leadership team would like to think it's hawk for his many contributions to get us to where we are today, including leading the organization through a very successful initial public offering last year. We are excited to welcome Rhonda and the L will join US as of August 15.
Mr than the air lease of life since the end certified public accountant accountants in both of the United States and Israel Chartered financial.
Analyst Andy is admitted to practice flow in the state of New York with over 25 years of financial and business management experience most of the nail it will be based in the USA and we work as we walked the strength that's true.
And our U S presence and to leverage the relationship with investors.
And the overall market.
At this point I would like to turn the call over to talk to review the financials. It's huck.
Thank you Ron and then just let me say that it's been a privilege of walking at Donaldson being part of creating the vision aiming to change People's lives on the global scale.
During the past 2 years I believe we have built the solid foundation from which to drive future growth the Tron and the rest of the senior management team of very capable of driving forward.
In addition of <unk>.
Had the pleasure of working with him of the meta as a member of the board of nano since late 2019 prior to the company's IPO and I wish him well in his new role.
Now turning to the numbers not true both of GAAP net loss applicable to ordinary shares for the second quarter of 2020.1 of.
The pinpoint $6 million compared to a net loss of $6.4 million for the comparable period in 2020.
Non-GAAP net loss applicable to ordinary shares for the second quarter of 2021 was $8.6 million dollar of scope there to a non-GAAP net loss of $2.9 million dollar for the same period in 2020.
A reconciliation between GAAP net loss and non-GAAP net loss for the 3 months period ended on June 30 of 2021 and 'twenty 'twenty..2 is provided in the financial resolves itself both of the press release, we issued this morning.
The difference between GAAP and non-GAAP net loss to ordinary shares.
Only due to share based compensation and secondary offering costs.
Non-GAAP research and development expenses for the second quarter of 2021 were $3.4 million as compared to $1.5 million dollar for.
For the comparable period in 2020, reflecting the increased development activities, so far nonexistent and the related the regulatory costs non-GAAP marketing expenses for the second quarter of 2021.1 million, though a lot of as compared to zero point of 5 million for the comparable periods in 2020 as we continue building.
The all brand awareness and product marketing capabilities non.
Non-GAAP general and administrative expenses for the second quarter of 2021 way of $4.1 million, though a lot of as compared to 0.9 million dollar for the comparable period in 2022 of ramped up our investment in expanding our management team and all global organizational infrastructure.
For the 6 months ended June 32021, nano reported a GAAP net loss applicable to ordinary shares of $26.3 million of.
Compared to a net loss of $13.8 million. The allows for the comparator of appeared in 2020.
Non-GAAP net loss applicable to ordinary share for the first half of 'twenty or 'twenty, 1 was $15.7 million compared to a non-GAAP net loss of $5.4 million got off of the same period in 2020, the difference between GAAP and non-GAAP net loss to ordinary shares is mainly due to share based compensation and expenses.
The to the secondary share offering which closed in the first quarter of 'twenty 'twenty 1.
Net cash used in operating activities. During the first 6 months of 2021 was $11.7 million as compared to $4.7 million in the allows in the comparable period in 2020.
As of June 30 of 2020, 1 we had approximately 47.8 million shares outstanding.
We ended the second quarter of 2021 with cash cash equivalents and marketable securities and approximately $193.4 million.
And zero debt for.
For the quarter cash uses include the funding our operating activities and investing $6.7 million in purchasing property and equipment, principally as we establish men choose manufacturing capacity in Korea.
And with that we'd like to open the call for questions. Operator, Please start the Q&A session.
Thank you we will now begin the question and answer session.
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Our first question is from Steve Halper with Cantor. Please go ahead.
A couple of questions Youll appreciate the operational update on the 15000 units by 2024.
Could you give us an update on the <unk> thousand units in 2022.
And then my second question can you give us you know.
A framework of the revenue and EBITDA contribution from the companies that you're acquiring.
Yeah sure So hi, Steve I will start with the answering the first question and then its Huck will will address the second 1. So we are on plan and we we do have all of the confidante of at least 1000 units will be shipped during 'twenty 'twenty 2 as we see things today, we have everything.
Ready and we are getting of the final integration of D. N V and of course waiting for the regulatory path, but there's no reason for us to believe that we could not a cheap at least 1000 units as you know we have of cliffs 6100.
Units of booked by customers. So we should start to see a significant ramp up as of 'twenty to 'twenty, 2 and all of the planned in the reported before.
Chuck do you want to do you want to answer the second 1.
Yeah, I would just the Stephen I would just say shows the obviously, we're not giving at this day in day, the kind of guidance on revenue, but I can say 2 of the Dara.
Our estimation, especially when it relates to the.
Zebra that move.
Move to perfect the ability of its ramping up into the population health product offering it will reach the profitability somewhere around 20 of 23.
And this is 1 of the second 1 as it relates to the U S. Iraq.
This this acquisition and the performance of the rest currently as of the cash neutral basis.
Thank you.
Okay.
The next question is from Jeffrey Cohen with Ladenburg. Please go ahead.
Oh, Hi ran the new Scott how are you.
Excellent excellent very exciting day.
So just a couple of questions from our side and particularly I missed part of it as far as the or the zebra acquisition in totality of it sounds like 60, 40 shares and cash and could you just recap there with me and then also talk a little bit about the the hundreds of milestones before.
The idea of how many milestones of are there and are they related solely to our sales numbers.
Yeah, well the first of all of the maybe I.
I misspoke its the only shares.
And it's divided to 3 tranches of shares. The first 1 is 1 hundreds of millions in ordinary shares of <unk> and that's the upon closing and then there are 3 agreements business development agreement the new ones that will actually if being signed will the will account for addition of 16 million.
The orders in the ordinary share so all shares and lastly, there is the may be a maybe a group of 7 different type of milestones that includes revenue retention et cetera are the thief. The teeth are achieved.
We'll be granting up 2 additional $84 million in the non Oaks ordinary shares and 1 point to are the 3 is important that will be done at the price at the time of the achievements. So oh, the price would be a relevant 1 of truth. So it's all shares based it sounds.
Sure.
Got it Okay, you want to rethink.
Yeah.
I think that was the was pretty accurate maybe I can just you know just in terms of the milestone. The indeed, there are about the 7 different lifestyle.
Some of them relate the 2.8 gaining the ER business projection of that came along with the acquisition and obviously the other 1 is related to <unk>.
Integrating of the zebra and the zebra of technology within the overall protocol for and get the nano, which makes it the very attractive the <unk>.
Acquisition from the performance standpoint for us.
Okay.
Got it and then secondly could you give us a little bit more color and update as.
As far as the the the current manufacturing of its transfer to your South Korean temporary facility and an update on the <unk> the new facility in South Korea, and also an update perhaps on the specific to manufacturing of.
The New York as far as production and huge growth.
Yeah, the subset of the so I will take this 1 so first of all we are we are meeting all of our timelines in terms of transferring the knowledge from Japan to Korea, as you'll recall cocky way of semiconductor manufacturing facility in Japan, the fees, providing a full solution from the chips. So the production line right now.
In Japan, as we scale up and towards the the really big demand that we have we've.
Transferring the knowledge and the manufacturing line in 2 phases. The first 1 is when we put our equipment in the temporary manufacturing site in Korea and debt will be are in charge of about half of the process of half of it is in Korea Hoffman edge of fun and this was a a lot of work.
That was done in the last Oh, let's say 6 months and this is done so we can say that this capabilities of the.
The combination of Japan Korea temporary fob with our equipment is done and we're ready for primetime there ahead of time actually the second the initiatives that we're doing out there we're investing a lot of funds actually too during the fear a this is the new factory and Oh. This is also just the develop.
Oh on schedule and we expect the 2 finalize all the building of dose the infrastructure's there by the end of the fear of starting to run some of I would say pilot early the next here and be in full operation of let's say before the end of the first half of next year.
It's important to say that this is the timeline, but are also important to say that we have full capabilities and a really scalable the type of capabilities within the attempt the factory in Japan as we speak today. So this is not the concern at all.
In terms of the tube, making Oh, we have 2 suppliers that completed the basically the integration and the as you'll recall, we already demonstrated the there of 100 the cave done from from Italy. We've done that also in Korea. So those are both of those factors are invested a lot of air force.
And I would say are taking the prototypes into production and we feel that this is a and we start to get to your absorption in Israel, we have the beautiful images.
From the new tubes are in Israel, when we integrate them into the system. So overall, we feel that the also doctors the right on time and we feel that the debt there is no.
The limitation there at all we have we're edging in a way with 2 of suppliers 1 in Korea, 1 in Italy.
Most of them are equipped to supply those tubes, 1 of ceramic coatings glass, but they are demonstrating the ability of within the non oaks cheap to have well over 100, the K V. A which is what you need for the the multi source system. So this is the second the PA.
Part of the assembly part as you'll recall, we are given the COVID-19 of we we never really started the integration into the foxconn facilities in Taiwan, and China, and we mitigated this risk of people not being able to travelers, especially the engineers by building a facility here.
In Israel in a place called the I've been here I mean, how where we have our systems integration in and.
<unk> done and I think the limitation, there would be really making a more than thousands of off the 1000 units. We don't have any limitation, there and there we have uh huh of lot of activities related to our you know our 2 V. In view of what we called the validation of verification.
As you know every time, we meet the F. T. H comes with a huge amount of external and internal documentation of testing that needs to be done all of the doctors in place and we have systems that are already working and are ready to be a scale up and the only downside is that we may.
For the Cliff for the first 1 hundreds of units we may be looking at the Liberty tire cost.
Cost than our expected simply because of the Israeli there'd be a little bit more expensive than the 1 as we clear with COVID-19 of the transfer of knowledge will be done to Foxconn and then when the ramp up mass production I think it will be or whether the meeting goes to our target the cost.
Okay got it. Thank you very much the Scott. Thank you very much and congrats on all of the news in the quarter.
Thank you very much.
Our next question is from Suraj Kalia with Oppenheimer <unk> Company. Please go ahead.
Good morning, everyone. Ron It's all can you hear me all right.
Yes, yes, suraj the perfect perfect.
Perfect.
So before I go into my questions. It's like it's been a pleasure working with you we wish you the best.
The next endeavor.
I appreciate it.
There's a lot of things happening right. So I wanted to ask the obvious why the management changed now.
Hum.
<unk>.
And I'm curious how the process has gone about the.
Timing and when this all came.
Just kind of thread the needle for us in terms of especially the timing.
And the the Sui.
Which in terms of other management.
Absolutely absolutely no. That's all the good news and and I think I think it's pretty obvious I think 2021for US was the year of our infrastructure building, where you invested the over a $40 million in Korea, and just establishing the the new factories. We went through a very very rapid growth in the teams in terms of.
Of our regulatory team as well as our you know the V. N V. A skill sets you need for a really scaling up everything from what we we we we've shown in the Arsenal of lost here to what is expected from the company in terms of deliveries and fulfill our commitment to our customers. So are the ear of 'twenty 'twenty 1.
Really about building the infrastructure and you get your read of it and getting ready to primetime and the south. So I think of that we had to to deal with the you know what the what what is it that is the missing in terms of in terms of the components needed in order to fulfill our mission and I think we spoke all the way to both our vision of the.
Okra type of medical imaging that includes not only the medical devices, but also the software part of our you know the cloud of the AI component of where does the radiologists. So that's pretty obvious why are early on the fear of when we're so that everything is on plan. We are we started to look at it.
The proposed acquisitions of 3 announced today and I would tell you that's a long process, it's not the started today.
In terms of management, what's the you also realize there's a wealth of many already that are the year of 2022, while we're going to ship a lot of products as we believe it's going to be a really of the euro of execution, it's going to be execution execution execution and as such we are really wanted to.
Make sure that we put a the right are the right teams are just getting really globally manage the DCF force, including of the integration of both of you have survived and and the zebra medical into our overall, none of say umbrella.
And as such we've we've looked to discuss our you know among the board members as the word the best people, we know that could lead this the change from an R&D company into execution company when do we get ready for primetime and the the answer was pretty obvious it took a bit of time to.
Convinced the era of military but as he will survey of already on the board and very involved in a lot of the day to day processes and with his really exceptional the big round.
The Clifton Israelis like the hero because they will see of the 3 largest out of 10 companies in Israel.
It was willing to take on the the chair of the the Chileans and really help building you know of global I'm a company from Israel that includes the the the division of non of silver Orland. That's that's how it came about this is the months of the discussion after myself of course.
Most of the founder and Chairman I will still that'd be very much involved the end of the day to day by you know hunting elephants, but the execution part, which I think we will be judged by next year Ah is planned to be managed by by areas now I cannot speak for talk but I can only tell you debt.
The newest CFO, that's coming on board he's a as we said the lives in New York and and that's the part also of what we realize we will have for next year as we integrate 2 of survival and we are working closer to investors and the capital market, we will need more presidents of more excess I would say a daily.
As to our investors as well as the capital market day in New York, and we felt that Oh, where the talk of decided to move on to his next the challenge that this would be at the right. The profile for US again. It took some time to identify and we felt in the full transparency of the dishes are the right time to to expose.
This information in the context of freely the true proposal acquisition and the there the what we feel is readiness. The prime time, that's really come into 1 of its character.
So Ron 2 additional questions from my side and I'll hop back in the queue first of zebra.
And forgive me I haven't looked at the the filings.
If additional.
Information on Zebra. So maybe it's it's it's buried in there is the color on the stock price from Zebra.
It also as I understand it.
Zebra has like a chest X ray AI software cleared.
And I'm curious how you see the implementation of integration playing out with zebra.
At least from what Cursorily I was able to glean the.
Dr. <unk> is talking about deeper imaging or relatively deeper tissue and book.
The imaging.
And based on the case.
Nano is filings or this is just kind of thing.
Brett the needle again for us.
Ron in terms of timing.
How are you all thought that is of strategic fit in terms of what you guys are doing and especially the valuation.
Yeah, absolutely. So I would I would just refer to the from high level as the euro understand where just the completed the very very long due diligence there of some thoughts about the accident integration, but from signing to closing we have sometimes and that's where the allow us really the perfect.
Our operational plan, but the overall from 30000 feet. There is no doubt that the diagnostics.
For the <unk>.
<unk>.
Would it be part of the future in developing and developed countries of maybe a support system for the geologist in developing countries. There are a lot of talks of this.
These are being of these software based the AI being the first line of defense.
To see if something is the norm I do not know.
So the first usage of.
The way, we look at the strategic usage of the very very deep knowledge.
Knowledge of Zebra into this domain is to Oh perfect. The products that the most frequent in the terms of in terms of but the allergy and try to <unk> to come up with the modules that's really Nathan.
In essence, the coupling each 1 of our nano socking to the software solutions that will go after the most of the comb on the frequent type.
Professor of modalities, but that's something that we believe after a lot of <unk>.
The diligent the theater.
Then the capabilities of Zebra team the 1 of the most impressive team I've ever seen in terms of algorithm of AI and also they are very much well known in this domain for their ability to to close the loop and actually get something sort of regulatory clearance and those sorts of partners. So this is the.
The first part of the second part of the Zebra very busy now with some of their fear is actually to build a what would become a I mean, if we're talking in terms of a patient. This is like early detection of sanitation. The also very much busy these days and working on what are we provide 1 day per.
Eventually that's true population health domain. They have the strike very very interesting partnerships. The industrial main all using the same capabilities of AI and thus we believe also of capabilities that will.
The very important for none of it's you know remember that we're going to place many many units around the world.
To scan globally, a lot of scans every day and Oh, we need someone to look at those the image of the fifth norm or not and does treated the a breadth of technology that would be helping let's say their ideology.
And the second 1 is really a crunch all of these data and try to come up with the pathway that.
That will indicate for specific patients something of that means of prevention and that's a part of the population of the initiative that the.
They are as spearheading the way we look at that so both of them are very relevant to the Donaldson and if you look back to our vision and what we want to do it's a really the sitting very aware of with ours.
Now as we move forward into the transaction, we will come with a very detailed operational plan.
But overall, we're very honored to Oh 2 of these capabilities of joining forces with zebra because theyre, absolutely because we feel it.
I used the addition to what we're trying to do and really adding the layer of intelligence to our hardware piece that the very much needed in order to fulfill our vision. So that's the basically.
What we see there now it's true of the Zebra has already 7 cleared the F. D. A products we showed a lot about their strength and it's not necessarily the dirt products would be fitting too.
The more frequent scanning needs, but that's not a problem because of their methodology of their technology and their plots from install impressive adverse of thought that there is no problem for them to adopt.
All of their technology into and modalities that were being.
The requested by our you know our customers. So that's really the the answer to your price.
And finally, Ron on the USA Rod if I could.
When did the discussions with the USA rats start.
How does the accounting now work for Ya USA, the rat contracts and is the goal of moving forward now to essentially let's say you have contracts in Belarus in Brazil, and other places that even if the scans of dawn and radiologists of not present.
Getting at the U S remote monitoring.
Monitoring, but the USA Rad is going to facilitate that just kind of and if that is the case, maybe you can walk us through how you enforce the logistics and the payment portion. Thank you for taking my questions.
Yeah, Okay. So I will let oh, well, let's just talk to answer the accounting, but again I will answer a very simple question. The simple answer a part of our total value of 2 customers is also the ability of if they want to get access to our AI modality, that's what it's about the attitude.
And you have survived the already demonstrated there of the business in the U S and dose of serving outside of the U S debt if of compliance up to the ABL today without none of it's actually to generate the lots of transactions that are connecting between patients.
Or or imaging centers into radiologists, so they've already done debt. The only thing we're asking the whereas we envision.
The this this proposed acquisition would do it.
Gave us immediately the ability to offered the.
From within and will enable us to really climb up the value chain as you recall of our business model is 14 doritos per scan, but then up to 4 day. If we are provide the agnostic. So that's the first thing and then of course for all of those countries that we signed contracts with the.
Do not have not only medical devices, but also they do not have any read the OTA just around that would be an instant and very important component to fulfill this mission and again I would just say again that are having a many many devices of generate brilliant extra images win win win.
Be a sufficient without the ability to read them and that's really how we viewed our views. The their current operation is very relevant to where we start to ramp up in the U S. Following the FDA clearance and it will pretty.
Pretty much be we should see the fruit of the actually early 'twenty 'twenty 2 in the U S and outside of the second 1 is actually the Dara geologists are committed.
A true the Nymex Academy.
To educate our other skill I'll just skip the clinicians you know the to read the non Oaks images and thoughts and initiatives that will also take a that's also will take place of so this is my answer to the synergies in the why it's very relevant immediately and they would like it's hard to talk about the.
Thank goodness.
Yeah.
I was just going to be very very how did they say that it is the to go into specifics, but I want to lay out of the principle of what we're doing when you think about the Tam.
When we have the initiated the goal of the targeting of $40 per scan.
The patient who was speaking about the 3 different parties within the $40 of framework, we're talking about the nano.
With the famous $14 per scan were talking about the service provider and we're also talking about all of the radiology is obviously on the low end and where the allergy annotation of what I think those 2 acquisition is the enabling us is actually to vertically integrate 2 of the different the business offering that until now.
We will complete the relied on the policy so even though that we still intend to maintain our third party of grant with the AI companies, we do intend to vertically integrate the AI.
But anything within the offering.
Obviously take bigger share of the margin associated with the AI portion within the fourth and the rollout and the same thing when he's comps the durability of our notation as a result of of integrating USA rather within the overhaul of the framework of nano because it will allow us to think of higher margin on something that the until now was mostly of follow through.
For the offering that went all the way straight to the third party of the Adriano station. So.
Without going into the principal obviously that will allow that looks to maintain a higher margin profile once it fully vertically integrated the 2 businesses within the overall product offering.
The next question is from Ravi Misra with Baird. Please go ahead.
Hi, Good morning can you hear me okay.
Yes, Hi, Ravi, Yes, Robyn.
Hi, Ron Hi.
Congrats on the talk a best of luck to you on future endeavors.
I guess you know more.
Questions on the acquisitions that you are announcing first you haven't mentioned as far as I can tell any kind of expectations around deal close timing, if you could kind of give us a.
Sense of when you think that could happen the these agreements.
Go through a second yeah, it's a little bit of a kind of granular strategy. It sounds like that you're going after with both of these acquisitions and kind of the hardware and SaaS provider model of that debt, where where we've all been thinking about so just help me understand in terms of you know it's off of you gave a little bit of current color on the <unk>.
Margin, but.
When you when you make that margin commentary that on gross margin like how should we think about the kind of longer term operating margin performance of the business here.
The 300 radiologists that youre getting let's say Rad potentially are those now going to be part of your kind.
Kind of employee.
The head count.
How should we think about you know.
Some of the the the imaging.
AI integration that deeper brings with your other partners. I mean is this kind of mutually exclusive of our complementary and what else needs to be done to kind of develop that <unk> cloud and the academy aspect of the the engine and I guess I'll just put my second follow up really quick there've been a lot of questions of the public streaming event that you discussed on AGA.
16 can you just give us some understanding of what that's all about thank you.
Sure. So maybe if I can start on the AR on the numbers.
Kristian and I will try to provide some of your own discharge and also on the on the event on the 16.
Yeah, I mean the gravity.
It's gonna be a killer. So let me just 2 relates right now at this early stage on when it comes to accurate the margin, but the 1 way to think about it and I want to make sure it's not being lost with all the details of the fact that.
As you think about the zebra integration moving forward.
It is the it is 2 different components. When it comes to now look first of all of I don't want to be a complete amazed that the knows they've raised continuing to be operating.
As a standalone business on there the AR under the non Wilks bran, what it means that they will continue and invest and deploy the moving to population health is the transition from the very.
Extensive triage of base business that they were very successful of building with 7 of Fda's and so forth. So first of all we do.
And we do forecast and we do protect the total time, okay zebra will bring for the it will bring.
<unk> revenue of each zone coming for those population health product offering beyond the Alco contribution to the emphasis more of them. So the overall.
Margin impact as it relates to zebra will have both components of both the impact on the non Samsung offer him, but also the on the the long revenue is there going to be rapidly building entering into the population health product offering.
Ron I think it's the.
Yeah. So let me again, yeah, just how we're a little bit Ah I think getting to the end of the hour. So let me let's use the.
Just simply talking about strategy again, I think that are the growth strategy is there from the IPO of lost here I mean, the idea of democratizing medical imaging includes component of our number 1 great access to medical devices number to provide the security platform that can actually create connectivity remotely.
The physicians and our patients using and utilizing third party services, including AI, but you Gotta do and and the third 1 is actually to have someone sufficient no matter, what not exclusive but no matter what the can read those image of again because those are the images of our no debt importantly, without some.
Ones that kind of on the analyze them. So if you look at the strategy are both acquisitions actually plays perfectly into our into the strategy because on the medical device side. We feel that we are very near to prime time, we have all of the component are needed 2021 was really a great tier of our infrastructure and we feel very.
We're confident that we're going to shoot for many units next year, the second level of connectivity and HIPAA compliant cloud you've actually of what Oh, we needed to to make sure. We are there in terms of of product readiness and I think both empty W. Our USA rather than zebra has a far more.
And than we do on day could shortcut the lot of far into the initiative and that's the huge immediate value to what are we do and the surge..1 is really has to do with the let's call. It the the eye.
So whether it's human or buy a cadre of me or by soft trend of both companies have the proven actually their capabilities in terms of all of that so you of Suraj is already operating consultants by the way a doctor or the network of 300. The radiologist. The are there many powers of about 15.
And there already are running the business in a way that is not working and they are also providing the other than 50 of finished in the U S of providing their services to other customers around the world successfully. So we are just the.
Coming into their we're integrating them into our offering but they're lucky tuck said, they have they'll sort of standalone.
Our ability to generate and be a cash positive actually and then in terms of Oh fed the AI capability of the vapor I think they've already demonstrated including you know 1 of the first AI AR based technologies product is more clear day. After so theyre really lead there. So that's the main.
So they've demonstrated their ability to come up with software that can look at the millions of images and come up with something that makes sense for.
For the acute care, which is really speak for the early detection and also.
For the prevention of Dot speaks for the population has so I think this fits perfectly into our strategy. When we go on primetime I would add to the the non OXXO otherwise what's the can open source of it the same way that we are working with big companies of the medical device and we offer them all of our technology.
In exchange for a license we will continue to be open to other services as they come so in no way, we're going to block of surf the other opportunities. So all in all we feel that this is a very very good strategic fit the factually fit exactly win with our vision from the get go and it's the <unk>.
Pointed that is much needed we just didn't want to in a way do any moves before we felt that the only the hardware side and the deep technology side, we are ready for primetime or getting ready for prime time, So that's really the context.
Great. Thanks, and just the August 16th event.
I'm sorry.
I just on that August 16th event, just curious what's that yeah. Yeah. So no no yeah. So I'm thinking of a 16, we're going to I mean, okay. So you're not let me. Let me just tell you that you know we know the ER. We are sharing today are a lot of information and 1 car and that's why are we think the.
We need to be engaging in a very robust way and not only in August 16 of but actually I would announced later wary of other dates from now until arsenic when we're going to devote a much more time in order to not only talk about the things, but actually let everybody see engage with the.
Let's say with the the production of 9 to see the actual the actual device inaction to feed the actual image of coming from the device. So it's easy to see the image of being uploaded to the cloud of that includes also the USA our rod the cloud to talk to the radiologist. The also to have the zebra.
Or are people just explaining everything.
Everything about the AI and how they fit into our strategy of so we started now August 16 of what the webinar, where we've prepared the actually in more informal I would say a dialog between.
The different component of what we have and and of course of the audience. We also will ask Aaron smelter are that will be kind of feel as of January of 'twenty 2 to join us and you know sort of investors and analysts can actually hmm.
And the team are and that's saying, we feel will give a much more color and as the following the event is I will tell at the very soon we'll have some more events planned because of either of you realize this is a very important day, but also a lot of information so we really need.
To make sense out of all of it through some of the separate events are devoted to for instance, AI or the academy or the sovereign 16, the where we are going to show practically our system at work.
The next question is from Raoul of rocket with lifestyle of capital. Please go ahead.
Hey, Ron Hey, it's Doug Thanks for taking the question of questions. I know there was there's been a bunch of questions. So far it's I'm trying to be quick, but just wanted to get some clarification on regulatory timelines. So I know you'd mentioned you've done the first Oh 10-K submission for the nano arc, but.
Can you is this.
System commercial ready or you know are you expecting to make another submission for.
For the commercial ready system, what would be the timing of that and I guess what are the key differences between these 2 submissions.
And then just following up from that given the amount of back in force that you had with the FDA for the single source of system.
And the complexity of the multi source of submission and I guess, what is your thinking around the time the timing of of an ultimate FDA clearance and whether you might see some ex U S approvals.
The approvals prior to that thank you.
Yeah, Okay, let's say adjusted just so actually we we we viewed the the Nox Sox are the.
Scott is the very significant FDA approval, because basically it cleared the technology and the multi source was the submitted and immediately we got the feedback from the FDA on some questions, but that's the process as you all know the we cannot control of the timing of the F. D. A book real we of all confident that we're in good shape, there we're going to submit.
The second submission of the none of Sark was defined the I would say and the best performance level of denial of Sark are still doing it the fear and we expect that the as we said that's where the allow us to in the U S and the outside of the U S to a sheep to the.
The very minimum of 1000 units during 'twenty 'twenty 2 nothing has changed in that the domain. The experience we had the bite the delay during the Corona time et cetera, with the F D. A.
<unk> is the definitely not the same experience fear of right now and I can only say that we already have some communication there which is all positive and we feel confident that we are in a good shape to meet the everything we've said, so far which is basically submit and get the clearance and the way that will allow us to ship the products in the U S.
Outside of the U S as planned during 2022.
Got it I appreciate that and just 1 more quick 1 from me.
Hi.
<unk> had much around the potential.
<unk> cloud filing is there anything that you.
You can add there in terms of the timing of that and ultimately what that process might look like.
Thanks.
Yeah, I mean, yeah sure I mean, a we're going to submit the everything needed in order to operate including the announced cloud, but also we're going to very closely look at the to propose the acquisition of what can we automate the utilize from there of just again.
To reiterate the both of the Brian The U S are in the M. D. W. Actually of very very strong clouds capability. That's already working in terms of a few of the rather than the M. D. W. Theyre already in operation of our 4 years of compliance and everything is done so we've already integrated our initial integration into their system just.
So it's working and it's working perfectly.
And the same will be done with zebra that also have very very strong cloud debt capability of so the answer is a we're going to submit to the very least arnon wix cloud, which is the already now in the preparation for the submission and we're going to also look very carefully and see if we can utilize what you've already done for sometimes.
And cleared.
With our partner of so that we can shortcut the and streamline our the way for prime time of a business ramp up so that's really the of the answer.
Got it I appreciate that color. Thanks again for squeezing me in guys.
[laughter] no not from.
This concludes the question Andrew.
Oh, Hi, Lee go ahead Sir.
No no. Okay. So this is the run that's picking so we know this is a lot of information from 1 call and that is why we will be engaging in a very robust investor outreach that includes both financial conferences and meeting Roadshows and we hope to meet with you either in person of Richard.
In the near future.
Meantime, we have a few upcoming events to Roberts 0.1st of all we will have and the investor Webinar and decent where management will host of public streaming event on August 16 at 830, a M E S T.
Following debt on September 30, as we will do what's called the AI day, it's being taking from the battery day of fail on mask. So we'll do a a day basically and this is where we're going to take you with the the people of our you know zebra medical and the other people from our team true of the AI initiative.
And we'll go through everything that you need to know in terms of what is the the the the directions of the AI medical in general, but also specifically what we're going to do with all of the skill set of through just looking to acquire we're also planning to participate in the hour of scenario.
The Radiology Society of North America, and that will be coming on November 28th when you will be able to see in actual practice and demonstration of our end to end the vertically integrated medical imaging solution, assuming we'd also show that our show some component that will be added.
Those proposed transaction will be consummated so you're not to conclude the if you've just heard none of the continues to take significant step to fulfill our vision together for bit their hands, we're doing decent 3 waves of the first 1 is really continuing to scale up and on the fixed shingles. The nano sorry, why isn't part of an advance.
Along for Geo literary pathway and the key territories, most noticeably in the U S. Our new relationship with 2 great companies USA, Rod holding and Zebra medical vision, if consumers will position us to make significant progress from realizing our goal of globally connected the end to end solution and finally.
The bringing in the World class C O to sustain the momentum that we currently enjoy and lead our company forward with whom I will be working actively as executive chairman.
So with that in mind I would like to thank you all for your time today and continued support and especially for your belief in our vision a vision that will improve the health of all of US. Thank you very much with that operator, we would like to start I would like to finish the call I'm sorry.
Thank you. This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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