Q3 2021 Rewalk Robotics Ltd Earnings Call
Excuse me, ladies and gentlemen. This is the operator today's conference is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience.
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Okay.
Good morning, ladies and gentlemen, and welcome to the Q3 2021 Reebok Robotics earnings conference call. At this time, all participants are in a listen only mode.
We will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone as a reminder, this conference is being recorded.
Now like to turn the conference call over to your host Mr or Ori Gon. Please go ahead.
Thank you for it.
Good morning, and welcome to rework Robotics third quarter 2021 earnings calls this is already gone and reward Chief Financial Officer and with me on today's call is Larry just ASCII, our Chief Executive Officer, Yes.
Yesterday, the company issued a press release detailing financial results for the three and nine months ended September 32021. This press release and a webcast of this call can be accessed through the Investor Relations section of the rework website at Www Dot rework dot call.
Before we get started I would like to remind everyone that any statements made on today's 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 statement.
It's all based on information available to rework management as of today and involve risks and uncertainties, including those noted in our press release and <unk> filing with the SEC such forward looking statements are not guarantees of future performance actual results may differ materially from those projected in the forward looking statements.
<unk>, specifically disclaims any intent or obligation to update these forward looking statements, except as required by law.
Elephant replay of the call will be available shortly after completion of this call you'll find the dialing information in today's press release, the archived webcast will be available on the company's website at www Dot rework dot com for the benefit of those who may be listening to the replay or archived webcast. This call was held and recorded on November.
11, 2021. Since then rework may have made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings and with that I'll turn the call over to <unk> CEO Leverages its Larry.
Larry.
Thank you Lori good morning, everyone.
We walk had an excellent Q3 with sales growth and progress on key strategic initiatives to build our business long term.
We remain on track to meet our 2021 goals and are optimistic about the future with fundamental signals coming from our submissions and efforts.
Even though the headline existed with Covid, we still found a path to reach our targets.
Our revenue reached its highest level in four years with sales of one $972 million, an increase of 37% compared to one point for $3 6 million in Q2 and increased by 164% compared to the prior year quarter of 747000.
The growth came from increased placements in both the U S and Germany.
Gross margin also increased from 51% in the previous quarter to 58% is almost all placements were in our direct markets, which carry a higher ASP.
The highlights for this quarter include first increasing the activity for the first time since the pandemic as we've been able to restart training in some centers and have initiated training for our bedroom under the VA choice program.
With VA allows training a private center near their home.
We are thrilled to see this progress with the VA, but also found that the Delta Marianna Covid once again reduce the access and delayed starts and training for many veterans.
Second we are starting to experience resupply of new systems from some of our original customers.
As the system has an expected life of about five years or 1 million steps, we had insurers in both the U S and in Germany replace systems for their high level users, who had benefited from their system over many years.
As an example, the cycle time for a re supply with the German Payor took only four days is the value and need for the system was well understood by all.
Third.
We had the initiation of a full exoskeleton system training curriculum with a renowned physical therapists training University.
This will support the future needs for fully trained students entering the clinics with a solid academic understanding and experience in the training of exoskeleton users.
They will know how to properly and effectively incorporate these systems as a meaningful element of their everyday life.
Fourth.
We completed an additional capital raise of $32 5 million on September 27th.
This increase in capital positions us with $91 2 million of cash on hand as of September 32021.
This cash will allow us to have the infrastructure and products, we need in place as we expand our coverage over 2022 and 2023.
We will also consider strategic acquisitions that can shorten our pathway to profitability.
We identified our key milestones for 2021 at the start of the year and have updated on our progress in each quarter.
Here is a summary after three quarters.
Number one.
German court decision regarding direct compensation for disability supply.
The federal Social court ruling has not yet been concluded. However, we have moved up the docket of published cases, we do not have any control over the timing and anticipate having a ruling this year or in the coming months.
A positive ruling will have a significant impact on access to exoskeleton.
Number two German insurance coverage expansion.
We have expanded discussions with private health insurers that are among the largest in Germany.
We're encouraged to see this additional interest and expect a core pace will enable us to add multiple groups to the formal contract process in the period. After the pace cases concluded.
Yes.
Number three progress with CMS.
We had announced via press release. The addition of significant and experienced leadership added to rework to lead this effort for our company and the industry.
Over the last 10 weeks are planning infrastructure and strategic contacts had been expanded.
We are focused on determining coverage coding and reimbursement pathways for key payors and to reduce the acquisition cycle time for a reward system. So appropriate individuals will have timely access to the benefits of walking.
And number four national accounts are active trials in the U K and U S have moved slowly as the Delta variant of Covid slowed utilization in action.
Tactically, we have modified our efforts to include more of our product offering by including additional product lines to broaden our reach.
We do not anticipate these national accounts will reach decisions and conclusions in 2021 at this stage.
I would now like to turn the call over to Ori for a review of financial details.
Yeah.
Reworked reported revenues for the third quarter were $2 million compared to 747000 in the third quarter of 2020.
For the nine months period ended September 32021, we have reported revenues of $4 7 million.
$33 2 million in the previous deal, which represent 49% year over year growth.
The increase this quarter was mainly due to higher number of our Sci device sold to personal users as well as two clinics, including multiple unit order to repeat University.
Our insurance performance. This quarter was also very positive with five new insurance decision to place the device for a new rental or direct purchase and 10 conversion of previously rented devices, which represents our highest number of previously rented devices consent converted in a single quarter.
Our current pipeline of active rentals consists of 13 cases, representing a total revenue potential of $1 3 million.
And our overall insurance cases is currently at 84 with 66 of them in Germany, and <unk> in the U S.
Turning into our gross margin in the third quarter of 2021 gross margin was 58% compared to 52% in the prior year quarter. The increase is mainly due to increased number of our SCR units sold in higher ASP.
All set with some increased service expenses.
As we look into our operating expenses, our 2021 third quarter Opex for $3 8 million compared to $3 $5 billion in the prior year quarter. This increase is mainly attributed to our SG&A as we had higher labor and related expenses.
The lower R&D that offset this increase is mainly due to lower employee.
Spend as well as reduced professional services.
To recap the quarterly results our net loss for the third quarter of 2021 was $2 7 million comp.
Compared to a net loss of $3 $3 million in the third quarter of 2020, our non-GAAP net loss for the third quarter of 2021 was $2 million comp.
Compared to $3 million in the third.
Third quarter of 2020, we ended the quarter with $91 $2 million in cash.
As we closed a registered direct offering in the amount of $32 5 million in gross proceeds during September 2021.
With that I'd like to turn the call back to Larry for additional remarks.
Thank you Laurie.
As we are establishing our key objectives for 2022 and beyond.
And highlight recent milestones as part of our strategy.
First we received a breakthrough designation for <unk> reboot technology.
This is our home and community based walking system for individuals with impaired gait after stroke and.
And potentially can be used for other neuro conditions, such as multiple sclerosis.
The determination of this design is innovative and is a breakthrough technology by the FDA is meaningful.
The simple goal is putting the device on with one hand like putting on a balloon.
Turning it on.
And having a combination mechanical and sensor based system that promotes improved walking.
The goal is a low cost system that both enhances the treatment started in the rehab setting and also acts as a longer term aid to walking and accessing the community.
A key goal for the system has to be calibrated for each user.
And for the system to have the capacity to match the conditions and situations, where the person's walking.
The current prevalence pool for stroke is 7 million people in the United States and $9 6 million in Europe. The incidence rates are about 800000 people in the U S and $1 $1 million in Europe.
This design is intended to support a substantial subset of these groups that require lower limit tablets.
Assistance in the years ahead.
The reward reboot is based on intellectual property license from Harvard University, which is exclusive to reward for medical applications involving products that help restore more normal gait patterns for individuals with gate impairments.
The intellectual property includes a number of patent applications families. Originally filed between 2013 in 2016 of which a number of patents are issued in the U S Europe and China.
Together, the issued patents and pending applications cover aspects of systems and methods for human motion control, including use of flexible components, such as wires cables straps records.
We walk in Harper University are pursuing further related to digital and continuation of applications from the early findings to seek out further protection as well as new additional intellectual property based on ongoing research and development that further strengthens the portfolio.
We believe that this IP protects us of this innovative and unique design.
The initial systems were developed over the last three years and are presently being utilized in clinical studies with Harvard University.
The transfer for the FDA breakthrough applications completed during Q3.
In the process of expanding development and market analysis.
Ducting further clinical studies, completing the subsequent FDA and CE processes and preparing for commercialization are the next stages of focus for this innovative design.
Second strategic initiatives, we walk six paulino experience as the most utilized exoskeleton design has provided the knowledge to develop new features to improve the users' experience.
Our goal is to provide these designs to the market in 2022 with new systems and programs that can also support existing systems.
Third.
As an element of expanding our health economic science for access and coverage, we have abundant and supported analysis data examining the medical expenses and effectiveness of exoskeleton walking compared to the period prior to exoskeleton use.
The study is in the late stages of the analysis and the investigators will seek to publish these results in 2022.
We believe this will be very helpful to payers and to the industry and considering these devices as a standard of care.
To summarize this was a very good quarter. Despite the limits caused by the Covid variance.
Our key products are growing and progressing.
Coverage activities are progressing in a deliberate manner.
And our financial position allows us to consider opportunities to build the value of our franchise.
I look forward to provide us for the year and our next session.
Thank you everyone for your time and interest today I'd like to turn the call over to questions at this stage.
<unk>.
Operator. Please go ahead with the instruction.
Ladies and gentlemen, if you have any question at this time. Please press the Star then the number one key on.
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One moment.
Our first question will come from the line of.
That's one way we're marker. Please go ahead with your question.
This is RK from H C Wainwright.
Good morning.
Hi folks.
Fantastic quarter.
See the top line.
And we're also talking about a couple of initiatives that you have not heard from you folks before.
So talking about initiatives.
That would be.
With the PD one of ours.
Prominent Peking University that you were talking about.
Obviously this is.
Very interesting.
Okay.
No.
Teaching hospitals I'm, taking your motor skills, which are large programs.
What are your.
Ongoing.
They won't happen overnight. So this has been going on for a lot. So what have been your efforts so far.
What do you see this as a market segment for you folks.
I just wanted to understand what's the market potential.
Okay.
And I think already and I can both provide some guidance here.
First the recognition I think at the University level.
That this is going to become a standard of care.
Drove them to making this a part of the curriculum and it really helps us.
And our end goal of having people at centers competent and trained to recognize when this can help patients and obviously to provide the system. So this is a very important initiative has been in process for about a year.
There will be some press, we believe the university will choose to put out two approved sometime in the coming weeks.
But what stands at present, we are focused on training. They have acquired a number of systems from us that was part of these sales for the quarter.
And we have done the initial training and they are developing the curriculum now and we'll be sending those students out on internships and other things as time goes on.
Market segments.
We didn't focus on this as much as a market segment for just sales of units we viewed it as an enabler for our personal sales.
So we'd have more and more trained therapists that we're going to recommend and be involved with the product.
So the number of institutions that have.
Training centers in United States.
We'd have to actually go back and spend some time on that we have certainly made our efforts to educate our say our focus was the later part of the game that we could take care of patients. So that has really been the focus of it.
Or is there anything you'd add on this one.
Well I think that you know we also had in the past some sales to <unk>.
University.
We'd also a clinic right, there's a clinic that is supporting the.
Students, but also I believe.
We are also potentially looking to at least with this organization to try and see if they might be interested in other product again to include in there.
Yes.
Within the quarter, we dealt with within the quarterly students' learning.
How to use devices incorporate I mean, there are few that therapy.
Sure.
Okay. Thanks for that.
Then going to be.
We supply placement.
That's happening.
I believe it is in Germany.
Correctly.
So.
I'm assuming that.
Some of the Oems have been out in the market for a while now.
Do you have.
Our idea is to in general how many units are out there but thats.
So many hours on the on the systems.
That they need to be.
Just on the supply side.
We can kind of get an idea as to what that.
That's going to be not just.
In the fourth quarter, but in general over the next two.
Yes.
For both regulatory and business reasons, we know exactly wherever unit is.
And status.
So we will target them as they come due.
I think structurally when you think of the revenue side.
Well with the insurers.
They did with the wheelchairs or other medical equipment.
Put this in their policy.
In our German contracts, we actually had one in the U S and one in Germany in the quarter.
But the German contracts have a segment on how we manage resupply.
Are they just simply have already contracted that as an element for their patients assuming the patient medical condition is still there.
<unk> is developing a little more.
And I think if you.
We look back where we were five years ago. When you go through our quarterly numbers, we could start to kind of work at least the individual ones forward.
We have seen that mostly through workman's comp so far.
<unk>.
I think <unk> had greater visibility on the impact on their patients over the early workmen's comp cases is the one that we just replaced in the past quarter.
Sure.
And I think thats sort of a summary to give you.
Sort of a forward looking forecast, we haven't provided that publicly yet I think it's something we can provide some guidance on as it develops.
We can all go back and look at our quarterly numbers year over year, which is what we're doing now as routine as products reached that point Ori.
Any any additions.
Yes, I think we also had.
Not this quarter, but in the past also VA VA.
Veterans that we see.
Second viewing it or replace their older units. Some has also replaced a P 50 design.
To appear fixed but that's.
This quarter was really a.
Done quickly.
So it was a very.
Good outcome for us.
Okay.
And then.
It's interesting that this quarter happened really quickly I should say, how I'm just trying to understand the mechanics on that is that because some of these organizations have had.
Some kind of pent up demand.
Had some currency is still left on their books.
If this knows they're going to lose that and so they probably jumped on it so that they can provide better service.
Patient clients or is it is it more.
It just so happened.
It's more natural growth obviously.
Obviously with the University, we have been working with them for a while so we saw that one coming.
And all of the patients are the ones that we have looked at in our quarterly pipeline that we were able to process. The more this quarter and this was with the partial reopening.
That things became a little more predictable for us and despite the.
Slowdown.
What maybe we would've expected we're seeing the same thing in the coming quarter or current quarter users are processing. These for the same names and people that we had hoped we would have supply them to earlier. So natural growth is really where we are.
Okay very good the last part of last question for me is on the VA.
Activities.
You said.
There is some increased training going on in southern centers in certain centers, obviously are going through today.
He's a COVID-19 so.
In general what what are your comments us as far as.
Some of these training centers are they kind of processing acquisition after alpha.
Devices, as well exoskeleton as well or is it just.
Gaming and then starting training with debit.
So skeleton that they have onboard.
Well the VA is essentially were shut for the last two years. So our last sale prior to what we've got going on now with Q4 2019.
And we now have about 10 users that are currently in the pipeline with the VA.
But we have a much larger number over 40 that we'd like to see it and I think we're going to have to do some work with the VA to help this move along.
Because some centers are not active in many cases, it's harder for the patient to travel.
Still they don't like going either into the city or into places that are on our way for training.
We will increase our effort on the choice program to support that in any way that we can which the real value of that is you can do it.
Places closer to your house and that May be a way to get past some bottlenecks, where <unk> may be short on staff or are limited being still due to COVID-19. So that is our first strategic initiative is now that we have one choice going to try to get some more.
And beyond that we see them opening up.
Hope they will open up on a more national scale, because it's very regional right now.
Perfect.
Thank you thanks for taking all my questions.
<unk>.
Thank you okay. Thanks Kartik.
Once again, ladies and gentlemen that istar than a number one for any audio questions.
I am showing no further questions at this time I would now like to turn the conference back over to Larry Jasinski for any closing remarks.
Thank you Christie.
Thank you very much for everyone for joining us today, please stay tuned to our developments and we look forward to presenting to you again next quarter.
We believe this progress will continue thank you.
Ladies and gentlemen, thank you for participating you may now disconnect.
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