Q4 2021 Rewalk Robotics Ltd Earnings Call

Thank you for joining the Q4 2021 re walk Robotics earnings Conference call. We will begin shortly we appreciate your patience. Please continue to standby.

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Welcome to the Q4 2021 we walk Robotics earnings conference call.

My name is Vanessa and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct our question and answer session to queue up with your question. You can press Star then one on your Touchtone phone and these instructions will be repeat it for you I will now turn the call over to your <unk>.

Host, Oregon.

Thank you Vanessa.

Good morning, and welcome to rework robotics fourth quarter 2021.

This is ori gon reworked chief financial Officer, and with me on today's call is Larry.

Our Chief Executive Officer.

Today, the company issued a press release detailing financial results for the three and 12 months ended December 31, 2021. These press release and a webcast of this call can be accessed through the Investor Relations section.

<unk> web site at Www Dot <unk> Dot com.

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 focus.

Patient or intent regarding future events and the company's future performance may be considered forward looking statements as defined by the private Securities Litigation Reform Act.

These forward looking statements.

Based on information available to rework management as of today and involve risks and uncertainties.

Within those noted in our recent <unk> filing with the SEC such.

Such forward looking statements are not guarantees of future performance actual results may differ materially from those projected in the forward looking statements rework, specifically disclaims any intent or obligation to update these forward looking statements except as required by law.

Our earnings press release, and this call will include discussion of certain non-GAAP information you can find our earnings press release, including relevant non-GAAP reconciliations on our corporate website at <unk> Dot com.

Telephone replay of the call will be available shortly after completion of this call.

You'll find the dial in information in today's press release, the archived webcast will be available on the company's website at <unk> Dot com for the benefit of those who may be listening to the replay all of the <unk> website.

This call was held and recorded on February 24, 2022 since that <unk> 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 Larry Jasinski.

Alright.

Thank you Laurie.

We will complete in 2021, and a positive position to achieve our vision of creating a meaningful and sustainable market for personal use of robotic technologies to change People's lives.

The key measurements for the year are progressing our progress in creating systemic reimbursement payment pathways to build the business.

Technical developments that can expand our markets and allow more effective market penetration under coverage programs achieved and a financial position that supports achieving our goals.

During the year when the pandemic.

Continued longer than expected and a significant spike in the fourth quarter with omnicom.

The company grew revenue for the year ended December 31, 2021 to $5 97 million, a 36% increase year over year.

We had $1 two 4 million in Q4 sales, which was a 2% increase over the prior year quarter.

During 2021, the COVID-19 pandemic continue to impact our sales activities.

Key factors were one reduction in incoming leads over much of 2021 as tradeshows in person demonstrations were very limited by COVID-19 restrictions to.

Our inability to train patients as many clinics remained closed which prevented the six months plus cycle moving patients through the system for Q4 conversion due to the ongoing pandemic.

And three further limitation of conversion of the training that were achieved to date due to the omnicom variant spank in Q4.

These levels of revenues are not sufficient for a sustainable business.

Significant expansion of market penetration and revenue is reliant on success with the reimbursement and in our ability to implement this in the marketplace.

I'd like to review three categories of focus that we believe will support this future.

First.

Our continued progress in establishing reimbursement payment programs second the technical developments with respect to our products that we believe will support growth third developing and putting in place structures with respect to training service reimbursement assistance and sales coverage to grow effects.

Please.

To add detail to these three categories.

Starting with reimbursement.

Our results will be driven by German definitions through the legal process and through the completion of benefit category pricing and coverage by CMS The center for Medicaid and Medicaid services.

Yes.

In Germany, the federal Social court, the highest court in the country to define social programs continues to progress on a court case that will define for all insurers with a direct compensation for our spinal cord injury is a requirement in the German system.

<unk> initiated in 2017 and has progressed to this final point of determination over the past five years.

The court does not provide specific information on the timing for ruling on an accepted case.

But in the publicly published court docket on January seven 2022, we won't get into the third case on the docket out of 24 listed.

While we have no guidance in the sequence. The court will hear our address cases, we have been advised that a Q1 determination is a reasonable expectation.

In the United States for CMS, we significantly expanded our resources and talent to support completion of coverage based on the new code, we applied for and achieved in 2020.

We are focused on expanding the evidence documentation.

Providing information and engaging with CMS regarding the decision on a benefit category and for pricing.

And in preparing our initial cases for submission to CMS.

Yes.

The current dossier is being enhanced to articulate clinical economic and humanistic value and relevant stakeholders language.

The evidence based documentation, we have expanded the materials to meet the standards for all submissions.

And they are providing new scientific support for the economic value and modeling for payers.

On December 21, 2021 cm issued CMS issued a final rule on deemed pulse, that's durable medical equipment prosthetics orthotics and supplies.

This rule provides methodologies for benefit categories and payment determinations for you items.

Directly applies to Exoskeletons and our code that was created in late 2020.

This final rule provides us a clear path forward with respect to CMS.

We anticipate our benefit category and pricing will be addressed at CMS sessions occurring midyear with conclusions on or before their fall sessions.

We intend to process, our first Medicare Medicaid cases in 2022, and expect a coverage pathway will be defined by year end or early 2023 for patients to pursue exoskeletons.

Further expect that this progress with CMS will allow our expansion to the private sector afterwards.

A reliable systematic method to identify the proper patients in supply those that meet all the requirements to achieve a way to walk once again is our angle.

Moving now to technical developments and achievements to support market growth. In 2021. We have worked on features for the spinal cord injury designs, which will expand the ability to use the system in more places in the United States and have focused our meaningful technological improvements for <unk>.

<unk> operation and expansion of the data provided to users and all stakeholders on a global basis.

We anticipate two FDA submissions in 2022 for gift for the different design improvements we have developed.

We walk into most used personal exoskeleton in the world and are proceeding to a seventh generation design.

We are also taking early research for an eighth generation that we believe will continue to make the system easier to use.

Now regarding infrastructure for the implementation of coverage we are focused on ensuring that we have the training service reimbursement assistance and sales coverage to achieve a market development and growth.

We have learned a great deal from our success in Germany, and how to expand and support our customers. This has provided a model for our U S plans as reimbursement is determined.

In addition to maintaining and expanding in the U S and German teams, we have added a contract with a company called we bought X technology in the U K, where we have transferred one of our employees and they are providing the full infrastructure needed to support expansion in the U K.

As a company our capital position is suitable to achieve these goals and allow the company to move from an establishment phase two a growth phase.

It has taken longer than it has been harder than <unk>, but the stage is set as a pivotal year, which is built on a long period of gaining an understanding of the potential of these technologies and in having systems and support from all stakeholders to move forward.

I would like to ask Orient to cover the specifics of your in financials and our overall financial position.

Yes.

Thanks Lauren.

We will keep all that total revenues for fiscal year, $2021 6 million compared to $4 3 million in 2020, which represent 36% year over year growth. Our 2021 bulk water revenues remain flat with $1 $2 million competitive prior to this quarter.

Now, let's look at the elements that drove the growth.

<unk> thousand 20 wants some more detail.

Firstly personal six points I'll say have increased by 14 systems with a higher average selling prices, resulting in total about $5 $3 million compared with $4 $1 million last year.

Leasing volume was showing both the U S, which included our Multiunit orders when academic center in the third quarter and in Germany, where we had five more units sold this year.

Selling price was positively affected by the Euro dollar exchange rate unchanged.

Nick.

Second distributed products performance has increased to $446000.

Compared to $86000 in the previous year.

This increase is primarily with our modeling.

Product line as we sold 20 personal system at night rehab system.

<unk> six and one respectively last year.

We have also placed our first two might be skewed with U two clinics in Q4 2021.

Third our restore results remained generally flat with seven units sold each year and a total of $199000 in revenue this year compared to $160000 in 2020.

Now, let's look at our insurance performance.

This quarter, we had a total of seven new issuance decision to place the Dubai Expo in Europe , or a direct purchase including one from the VA and five conversions of previously rented devices.

Our current pipeline of active rentals consist of 15 cases, representing a total revenue potential of $1 million and our overall pending insurance cases currently at 71 with 56, something in Germany, and <unk> in the U S.

Turning to our gross margin.

The fourth quarter of 2021 gross margin was 27% compared to 33% in the prior year quarter. This decrease was mainly due to a reduction in our average selling price due to change in.

This quarter compared to the last.

Our our fiscal year 2021 margin was 49% compared to 50% in the previous year.

We feel we have written off some of our inventory policy and we had lower sales than expected due to quality restrictions that have not allowed us to drive and demos will be by Portland.

<unk> also seen increased service costs.

We anticipate margins will return to similar levels for the full year 2022.

As we look at operating expenses, our 2021 fourth quarter Opex were $4 2 million compared to $3 2 million.

In the prior year quarter. This increase is mainly attributed to our SG&A as we had higher labor and related expenses as well as an offsetting piece.

<unk> alone, what's the bogey of any of the previous year.

The lower R&D that offset this increase is mainly due to lower employee related expenses as well as reduced professional ourselves.

Our full year opex blended in $15 6 million compared to $14 $2 million in the previous year.

Same as we have seen in the fourth quarter. The main contributors to that change are higher SG&A offset with reduction in R&D MTO units.

<unk> expenses.

To recap the quarterly results our net loss for the first for the fourth quarter of 2041 with $3 9 million compared to a net loss of 3 million in the fall.

What about 2020, our non-GAAP net loss for the pulp what are the top 2021 was $3 6 million.

Compared with $2 7 million in the fourth quarter of 2020, our yearly net loss in 2021.

$7 million compared to $13 million.

The 'twenty, our non-GAAP net loss was $11 $6 million in 2021 compared to $11 9 million.

This year we are.

Ended the year with $88 $3 million in cash and our cash burn was $11 5 million compared to one.

$6 million in the previous year.

I'd like to turn the call back to Larry for additional remarks alright.

Thank you Laurie.

I would like to complete the session today with three topics organizational plans a few key events that occurred in Q4 and early Q1, and then our 2022 goals.

First on the organization.

My colleague, Oregon, just completed its presentation and as a transitory one for him as he is moving to a different opportunity in the coming weeks.

He has worked in our company as our controller and later moved to the CFO role.

He has a very meaningful list of accomplishments.

All during a period of challenges, particularly the building blocks of market development operating a sufficient team to pursue our goals controlling our spending and in strengthening our financial position.

He has had a major role in advancing our company and this industry.

I think in <unk> efforts and as a result and in wishing the best for the future.

Looking forward, we have a very strong team in place through the management of our director of Finance Maga Dar was in working with us for over two years and his group in Israel, Germany, and the United States.

They are all well versed in our controls and reporting as they are the team that has led us through the past few years in all financial aspects.

During the transition period, we also have Amit craft, who is the CFO , who took us public continuing in his role as an executive Vice President who has advised the management team over more than 10 years.

He will be able to help during the period of transition.

For a new CFO , we have a very active search underway through a highly skilled recruiting company that has great depth and recruiting public company CFO with medical device experience in the United States, We will make announcements at the process concludes.

Second I wanted to provide a few events that have occurred that are meaningful to our business goals.

Within the VA.

They have been greatly limit over the last two years by the Covid restrictions, but have made recent progress with advancing our reward or through the system under the choice program, which allows trading at a local clinic under the guidelines of the BLA.

The VA has also supported some veterans for trading at local regional VA spoke centers under the guidance of the national hub locations for patients that lack reasonable geographic access to a be a hub.

This is exciting news for US we've worked very hard to support expanded local VA training.

Yes.

Just to remind everyone. This program means there are currently over 100, we will have training sites that are veterans could provide access that can provide access to a veteran it may widen use beyond 'twenty.

<unk> 24 CA upsides.

The VA co op randomized trial publications, specifically delayed with the pandemic, but in 2021, we've been able to conduct an extensive study of economic factors from use of an exoskeleton in the VA system.

We have worked with the VA and examining their database comparing cost to the health care system for into the injured individuals in the period before they walk to the period when they were walking into an exoskeleton.

We anticipate we will publish this information in 2022.

With our soft.

Excellent.

Our presentation promotion and clinical use of the restore line has been greatly limited due to the lack of access caused by the pandemic.

Where we have been able to implement the effectiveness of the soft exo suit is being measured in the UK. The initial clinical evaluation occurred within DHS and under nice got Nic's nice guidelines.

It had a successful trial conducted at two NHS Trust and the satellite site will now be assigned.

This satellite will function as the hub for other NHS sites in the process of the short implementation within NHS reimburse rehabilitation clinics.

With re bought X technology as our newly established business partner in the U K, we will be more successful in fulfilling the requirements for NHS procurement.

In the United States, one of the largest national chains has completed their committee review process.

<unk> decided to schedule clinical demonstrations of the restore soft exo suit is one of the new technologies and consideration.

Once all of the selected manufacturers complete the demos the committee will determine which technology should be clinically evaluate in 2022.

We anticipate this may be able to serve as a basis for a post call relaunch later this year.

Yes.

As we gain defined repeatable pathways for payment <unk>.

Marketing focus is now more on development of significant referral centers that we believe will generate growing.

Centers to attract and supply multiple patients as well as coverage reimbursement allows them to move past the case.

One time it a focus.

We've had one of the first chains taken on this approach in northern Germany as they are preparing to add or we walk and restore to their offering as a business building method for the centers.

Now I'd like to highlight our key objectives for 2022.

Number one.

We expect revenue growth and as Covid lessons.

The German court cases defined and allows additional supply contracts.

The VA reopens and as we move our first CMS case forward.

The timing of many of these are beyond our control and that limits our ability to provide further guidance at this time.

Number two.

We seek to add at least one additional commercial product line, which we believe can further leverage our organizational structure provide growth and help achieve the pathway to profitability.

This additional business acquisition plan has been an active M&A process.

We have been used and we have used outside expertise for strategy analysis and planning.

Number three.

Advance Medicare.

Category for determination pricing and coverage.

Number four submission of <unk> for improved rework designs to launch in 2022 and 2023.

The timing of the launch is dependent on the CE and FDA process and some supply chain considerations.

And number five.

Trolled, but increased investment of an additional $3 million to $4 million in reimbursement.

Product development.

Market development, and access Investor Relations and new business development.

We will provide updates to each via press releases quarterly earnings calls and other appropriate communications.

Most stages said this is a pivotal year for this company and this industry.

We strongly believe we are on the right path and look forward to reporting on this throughout the year.

Thank you very much for your time and interest today I'd like to turn the call over to questions. At this stage, but answer can you go ahead with the instructions. Please yes.

Yes, Sir we will now begin our question and answer session. If you have a question. Please press Star then one on your Touchtone phone.

Do you wish to be removed from the queue you can press the pound sign or the hash key.

Youre using a speakerphone please pick up the handset first before you press the number once again with your question. Please press Star then one.

And I see we have our first question from Arthur He with H C. Wainwright. Please go ahead. Your line is open.

Yes.

Hi, Larry.

Australia aimed for RK.

Firstly, congratulations on the strong finish for the year.

I just want to follow up on the German.

Federal Court case.

So cora.

During the pre remarks, you mentioned the case was the in the Q4 to 'twenty two.

Rulings.

Could you tell us what gives you the confidence.

For your estimate for reputation by the end of the first quarter.

Recall correctly.

Yes.

It is primarily based on the progress we've seen with the court.

We have steadily moved up the list.

Through the interaction we've had with our counsel.

Very important case I think for the German social.

System in the courts. So we believe that will be addressed here.

Q1.

Colby keeps the court's open that has been one of our big Limiters, but.

That is generally the guidance we've been given.

Mostly by counsel.

Thanks for that.

So.

Could you remind us how many case is pending for the German insurers.

I wondered if I could.

I can think about that Larry.

So we have a total of 50 50.

<unk> 56 spaces.

Within the insurance.

Pipeline out of them, we have 13 active rental okay currently being try and frame.

So our conversion and remember we have.

Good conversion rate over $60.

And it's a good thing.

We continue to qualify the process and the patient.

And the Red.

Basically the reimbursement pipeline about.

Half of the 56 are.

We'd be in what we call the legal stage okay.

And those would be the one who will be more affected from a positive decision.

Hum.

Oh, great Thanks for that alright.

So Larry I, just wanted to pick your brain regarding that.

<unk>.

No.

I understand correctly.

Things moving smoothly, we could expect a number for their reimbursement from CMS.

By early of 2023 is that correct.

There are sessions that are held within CMS.

That they conduct in mid year and in the fall.

And we will also begin moving some cases forward and those two events together are the cases that we will put in for payment will help them set and finalize the category and the pricing so.

They are all sort of working together, so there's multiple things moving.

But we do believe we will have.

Conclusion.

Sure.

In 2022.

I see little bit of fear of Covid still after the two years, we've just add but if we can if we can keep the business open and everybody is continuing to work we should be okay. This year.

Got you so I guess.

For the full of follow up.

Do you guys have studied.

Competition with the private insurance.

Payer or you preferred to wait for the.

Discussion after the CMS to getting more engaged.

We do have some ongoing interaction with private insurers and a lower level.

But we believe that.

Because many of these jurors also are overseen parts of Medicare advantage and things of that type.

This is a much more appropriate path. After we have completed things with CMS to engage at a coverage policy level. So.

So until then we will provide data will do case by case.

We have in the past, but we will.

So mostly on the CMS decision.

Got you thanks for the additional color and all the best for their future journey nice working with you.

For taking my question.

Thank you very much.

And thank you Sir.

Standing by for further questions as a reminder to queue up with your question you can press Star then one on your Touchtone phone.

I see no further questions at this time I will.

Now I'll turn the call over to Larry Jasinski for closing remarks.

First and as a thank you for.

Our leadership on the call here.

And for everybody here.

Appreciate the time, you've invested in the call today, I will stay tuned to the publications and announcements because.

I have outlined the goals for this year and we will continually update the progress against these goals.

So I wish everyone to have a very good day. Thank you.

And thank you ladies and gentlemen, this concludes our conference. We thank you for participating you may now disconnect.

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