Q4 2021 Ekso Bionics Holdings Inc Earnings Call

Greetings and welcome to the XL Bionics fourth quarter 2021 financial results call. At this time all participants are in a listen only mode. A question and answer session will follow the final presentation.

Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Please note this conference is being recorded.

I'll now turn the conference over to your host Matt Steinberg Fendt partners. Thank you you may begin.

Thank you operator, and thank you all for participating in today's call joining.

Joining me from <unk> Bionics are Stephens, Chairman, Chairman and Chief Executive Officer, Scott Davis, President and Chief Operating Officer, Jack Glenn Chief Financial Officer, and Bill Shaw Chief Commercial Officer.

Earlier today, <unk> Bionics released financial results for the quarter and year ended December 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.

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

All forward looking statements, including statements regarding our business strategy.

<unk> financial or operating 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.

<unk> disclaims any intention or obligation, except as required by law to update or revise any financial or operational projections, our regulatory outlook or other forward looking statements, whether because of new information future events or otherwise. This conference call contains time sensitive.

The information is accurate only as of the broadcast today February 24th 2022.

I'll now turn the call over to <unk>, Chairman and CEO Stephens Chairman.

Thank you, Matt and thank you everyone for joining us today I am pleased to participate in my first conference call I think so.

<unk>, New Chief Executive Officer.

And I will be working in tandem with our experienced leadership team.

<unk> chairman.

I'm, an early investor and I have participated in follow on capital raises my reputation as one of the serial entrepreneur.

I have Detroit I have the confidence that I have the experience and the belief that we will realize the value of <unk> assets.

<unk> is a leader in early to market wearable robotic solutions for medical rehabilitation and workplace safety.

Under our leadership, we will focus on strengthening our core business now I'll turn the call over to our new President and Chief Operating Officer, Scott Davis.

Thank you Steven before I jump into an overview of our performance I'd like to first state that I am excited to assume the role of president and COO.

Lee I have served as <unk> executive Vice President of strategy corporate development and have more than two decades of worldwide leadership experience in public and private high Tech companies.

I have firsthand experience and a strong track record and optimizing business performance and managing change while also having an intimate knowledge of <unk> operations and strategy.

I look forward to working closely with Steven and the XO executive leadership team to realize the full potential of our company and ultimately maximizing shareholder value.

Now to talk about our fourth quarter results were.

We're pleased to have closed 2021 on a high note by achieving record fourth quarter revenue.

Our results reflected strength in both our medical and industrial segments.

As our customers continue to see the value of our industry leading solutions with.

We generated solid fourth quarter revenue of $4 1 million up 81% on an annual basis and 34% sequentially.

In the <unk> health segment, we sustained high customer engagement levels, enabling us to secure several multi unit orders from top network operators globally.

Our commercial teams focused on network operators combined with our flexible commercial offerings is leading to increased demand and order flow.

We recorded 30 XO in our bookings in the quarter with most being capital purchases a continuation of third quarter trends.

On the industrial side demand for the Evo continues to build as evidenced by growing revenues on both an annual and sequential basis the.

The annual market opportunity for this product exceeds $5 billion and spans across multiple industry verticals.

We are seeing momentum, particularly in the automotive industry and we look to expand this growth moving forward.

As our leadership team plans for the future, we will remain prudent managing cost to uphold our fiduciary responsibility. We continue to closely monitor our expenses and use of cash as we keep an eye toward strategic growth opportunities now.

Now I will turn the call over to Bill for an update on our medical and industrial segments as well as our global commercial strategy.

Alright. Thank you Scott we finished 2021 with a strong Q4 and our team exceeded performance expectations across the board for the fourth quarter of 2021, we delivered approximately $3 $4 million and XO health revenue, our cumulative conversion and renewal rate is 83%, we now have more than $1 2 million.

Of contracted unrecognized revenue under a subscription model.

We've made significant inroads with many of the top network providers and then the fourth quarter. We closed a 60 unit order our largest order within the network customer base.

Because of our efforts network operators comprised 69% of our new U S bookings in 2021 up from just 24% for all of 2020, we.

We are seeing a balanced mix of capital purchases and subscription commitments depending on the customer.

In the international market Europe delivered consistent performance throughout 2021 contributing to a record Q4.

We received our largest one time order from Tech Nomex, one of our largest partners out of Poland.

And our drug markets, we become more efficient in our sales process, which allows us to create more opportunities with outpatient neuro rehab centers.

Also had a strong quarter for APAC, both Europe and APAC, we made important regions, where we see significant opportunities for future growth.

Today, we wanted to share a milestone for <unk> with a customer story that demonstrates the value we bring to customers.

Earlier. This month was the 10 year anniversary of shipping our first extra device, which went to hospital in Colorado.

Craig Hospital uses XO with their inpatient outpatient and community clients and their peak center and adaptive health and Wellness center that serves individuals with neurological disabilities. One of their patients Rick you sustained a spinal cord injury. In 2018 has used XO for two years and this completed more than 100 sessions.

Like I said being upright is the way we are meant to be.

And activity that I know, it's good for my bones, My muscles, and my health risks therapists. Natalie also shared that the peak center staff have used extensively for 10 years to give patients and community clients the opportunity to stand in step over ground she's.

She said for many patients using XO to stand in a photo with their families is the first time, they can stand for a photo and yes wed.

We'd like to congratulate Craig Hospital.

Turning to an update on the progress with our industrial segment XO works.

We exceeded our plan for 2021.

In the fourth quarter represented our strongest quarter of the year.

For the full year 2021, we had an annual growth rate of 84% and we are encouraged by the high level of engagement with strategic targets and customers.

Segment focus on aerospace automotive and general manufacturing is resulting in positive order flow at the same time, we are seeing more interest within the construction logistic verticals.

Looking ahead to 2022, we are cautiously optimistic about returning to normal in person selling activities as Covid cases continue to decline.

We are still experiencing lingering COVID-19 challenges, including in our supply chain.

Nevertheless, with customer engagement levels are increasing and promising industrial trends, we are poised to sustain our commercial strength in 2022.

At this time I'd like to turn the call to our CFO , Jack Glenn to review, our fourth quarter financial results.

Thank you Bill.

<unk> generated record fourth quarter 2021 revenue of $4 1 million compared to $2 3 million for the fourth quarter of 2020 and 81% increase.

Our gross profit for the fourth quarter was $2 4 million.

Representing a gross margin of approximately 59% compared to gross margin of 60% for the same period a year ago.

The slight decline in gross margin was primarily the result of a slight increase in manufacturing costs.

As a reminder, gross margin tends to fluctuate from quarter to quarter based on channel and product mix.

Operating expenses for the fourth quarter of 2021 were $7 million.

Third to $4 4 million for the fourth quarter of 2020.

During the fourth quarter of 2021, the company incurred increased general and administrative expenses related to business development costs and increased employee compensation from higher headcount.

The rise in business development expenses took place during the fourth quarter and we expect overall opex to return to a more normalized level in 2022.

Net operating loss in the fourth quarter of 2021 was $4 6 million compared.

Compared with a net operating loss of $3 million in the prior year period.

Gain on warrant liabilities for the quarter ended December 31, 2021 was $2 million from the revaluation of warrants issued in 2019, 2020, and 2021 compared to $1 $5 million loss associated with the revaluation of warrants issued in 2015 2019 and 2002.

<unk> for the same period in 2020.

Turning to our full year results revenue for the full year ended December 31, 2021 was $11 2 million compared to $8 9 million for the same period in 2020.

The 27% increase in revenue was the result of an increase in the volume of device sales driven by business conditions normalizing from the impact of the COVID-19 pandemic.

Gross profit for the full year ended December 31, 2021 was $6 7 million an increase of 33% from gross profit of $5 1 million for the same period in 2020.

Gross margin.

For the 2021 fiscal year increased to 60% from 57% for the full year 2020.

Operating expenses for the 2021 fiscal year were $26 million compared with $18 4 million for the prior year period as a result of the increase in general and administrative expense, which was partly offset by a decrease in sales and marketing expense.

Net operating loss in the 2021 fiscal year was $13 8 million compared with $13 3 million for the comparable period of 2020.

For the full year ended December 31, 2021, we recorded a gain on warrant liabilities of $4 million associated with the revaluation of warrants issued in 2019 2020 in 2021.

Compared to a $3 $1 million loss associated with the revaluation of warrants issued in 2015 2019 and 2020 for the same period in 2020.

Cash used in operating activities in the 2021 fiscal year was $11 2 million.

As of December 31, 2021, the company had a strong cash balance of $44 million.

Please see our 10-K filed earlier today for further details regarding the quarter and full year. Operator, you may now open the line for questions.

Thank you at this time, we'll be conducting a question and answer session I would like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star <unk>.

One moment, please while we poll for questions.

Our first question is from RK of H C. Wainwright. Please proceed with your question.

Thank you good afternoon folks congratulations on a very strong fourth quarter and full year 2020 one.

So just for starters.

Hum.

Stephens Scott.

Since you have spent quite a bit of time on the board and now we are here.

Many of the operations on that day to day basis.

Should we.

I think there could be some changes in the.

The overall strategy of.

Ill.

You would want to run the company compared to Jack.

<unk> wasn't doing this.

Wow.

Jack did a good job.

We.

We came to Colby.

And that gave this company yet.

Good opportunity too.

Downsize and focus and.

Jack left the company in very good shape.

We have lots of assets here.

I am confident that the.

Branding that we have the markets do we participate in.

Beginning to open.

And I think I am fortunate to be at the right time at the right moment I hope I am confident I intend to accelerate everything that we were doing.

I am focused on shareholders equity and.

As you know a shareholder and an early one I loved this company, we're doing brilliant work.

I think it's out time, and so my job I'm going to step on the gas pedal a bit and make sure. We're all proud of the hard work that we're doing.

And this is Scott and in terms of 2022, we're going to continue the great work that we did to make this business more efficient and more focused we're going to continue to improve our organizational efficiencies. We're.

We're going to strive even more for operational excellence.

And while continuing to grow our business and we're also going to of course be evaluating strategic opportunities.

So Scott even in the initial commentary you said something about.

Trying to do some strategic.

Changes in strategic opportunities. So what do you mean by that.

Are you looking at products are you looking at markets what sort of.

Strategic opportunities are you looking for.

Well I think the answer to that is we're looking at everything.

BD work by nature is it's quite opportunistic and difficult to predict.

XO is historically and we will continue to evaluate potential business growth opportunities.

Those could be.

Run the gamut of what you'd normally see for.

This sort of activity.

In terms of two.

2022, I mean this work is difficult it's dynamic it's difficult to predict.

And at this time, we really cannot comment on possible future strategic activity.

Okay, that's fine.

Bill.

Terms of.

The XR health business.

First of all congratulations on the sexy six unit.

Yeah.

So.

And also the increase in terms of Mt.

Multiunit daughters. So so should we expect 'twenty two and beyond to have an increased number of such orders come through.

Yes first of all RK. Thank you for the compliments.

I think adding a dedicated team has really helped us align with these network stake.

Stakeholders right and our clinical team is focused on customer success is really helps so all these things are part of our strategy to grow faster and if you look at the top five network providers in our space.

They own roughly 20% of our core market and our market penetration into that group is stronger than our core market. So to us that's a predictor of future opportunities like like Youre seeing so to answer your question directly yes, we do expect to have more multi multi unit orders.

But again every every quarter is a little bit different.

Yeah.

And my last question to your approaches.

That's sort of.

Growth that we saw.

In the fourth quarter.

Suddenly.

Closer or even better than pre pandemic levels.

Does this mean.

I know you and I cannot predict equivalent but.

In terms of.

If you say the status quo as of today.

Should we expect this sort of growth.

Not only in the first quarter, but also as we go through 'twenty two and beyond.

A great question and I think Jack Glenn.

Women address that yes.

Of course, we don't give guidance. So that's first of all but I would say that.

In talking with Bill to that we made very good.

Cautiously optimistic from the Covid standpoint, as we come out of this right and so it's hard to predict the growth rates, but we arent feeling things are getting better out there for us and so I would say again, we feel good and some of those growth rates, though are coming off of COVID-19 as well right. So but again I think.

Pretty optimistic coming into 2022.

Okay. Thank you. Thank you for taking all my questions.

Okay.

Thanks, Okay.

We have reached the end of the question and answer session I will now turn the call over to Scott Davis for closing remarks.

Well, thank you operator, and thanks to everyone for joining us today.

We are pleased to have closed 2021 with record revenue up against the challenging selling environment, we successfully executed against our plan to achieve our goals for the year.

As the gradual reopening of in person meetings continues we believe we are well positioned to deepen the relationships with top inpatient rehab operators and industrial customers, which is at the core of our current commercial strategy.

We are proud that we've been able to adapt quickly to the many COVID-19 challenges and this gives us the confidence that we can still cultivate these relationships.

Even as the future remains unpredictable.

We're cautiously optimistic that we can have our salesforce more engaged in the field.

As direct sales activities normalize we.

We look forward to providing updates on our continued progress when we want to thank everyone and wish you all a great day.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.

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