Q1 2022 Ekso Bionics Holdings Inc Earnings Call

Greetings and welcome to the <unk> Bionics first quarter 2022 financial results call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If 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 call over to your host Andrew Lazar Finn partners. Thank you you may begin.

Thank you Devin and thank you all for participating in today's call. Joining me from extra bionics are Steven Sugarman, Chairman and Chief Executive Officer, Scott Davis, President and Chief operating Officer, and Jack Glenn Chief Financial Officer.

Earlier today <unk> Bionics released financial results for the first quarter ended March 31st 2022.

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 future financial or operational expectations or our expectations of the regulatory landscape governing our products and operations are based upon management's current estimates and various assumptions. These statements involve material risks and.

Certainties that could cause actual.

Okay.

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 information and is accurate only as of the broadcast today April 28.

2022.

I will now turn the call over to XO Bionics, Chairman and CEO Steven Sherman.

Thank you Andrew and thank you everyone for joining us today.

You're off to a strong start in 2022.

Revenues in the first quarter up by more than 30% year over year, and we are seeing momentum in both our XO XO.

XO works business segments.

<unk> recognized the value and benefits that wearable exoskeleton spring, both patients and essential workers.

Our balance sheet remains strong we are focused we have a cohesive team of professionals and their products continues to be leading edge and innovative.

We are executing our strategy of deepening relationship with network operators.

Expanding our presence in industrial markets and strengthening the foundation of the business to drive shareholders value.

Now I will turn the call over to our President and Chief Operating Officer, Scott Davis.

Thank you Steven.

After coming off a record fourth quarter, we begin 2022 with a strong first quarter supported by a solid focus and execution on our commercial strategy, we achieved year over year revenue growth of 34%.

During the quarter XO health delivered $1 $9 million of revenue as we continued to gain traction with network operators.

We booked several multi unit orders for our <unk> and our exoskeleton devices.

Including our largest order in company history as network operators are choosing to make X LNR their standard of care and neurological rehabilitation.

This was a noteworthy achievement for the XO health team and clearly demonstrates the value our customers see in the XO and are in rehabilitating patients from stroke spinal cord and traumatic brain injury.

We recorded 23 XO in our bookings in the quarter with most being capital purchases 10 of which are included in our second quarter backlog.

This in combination with our existing XO health orders is estimated to contribute to revenues over the next several months.

Our cumulative conversion and renewal rate is 82% and we now have more than $1 $5 million of contracted unrecognized revenue under our subscription model.

We're seeing a strong rebound in post Covid capital purchases. In addition customers continue to utilize our flexible commercial offerings. For example, another top tier network, operator adopted a new subscription program, which opens up opportunities for the placement of additional units in the future.

In the international market Europe continues to perform well increased proficiencies in our sales process are driving more opportunities.

Pack, we are building a healthy pipeline that should contribute to future revenue growth. We are optimistic about both Europe , and APAC, which we expect to be important growth drivers throughout the year.

The global supply chain remains a challenge impacting product delivery times, and adding cost pressure.

Our operations team continues to navigate these obstacles to ensure consistent product shipments.

We experienced delays in the first quarter and as a result, some orders were pushed to the second quarter.

Today, we'd like to share a story of one of our newest customers. The first facility to bring XO and onto the island of Maui.

Venture physical therapy is renowned in the medical community of Maui for its expertise in complex cases, including severe stroke and acquired brain injury.

That's your PT was gifted XO and all are from the local patient Sharon Lewis.

First able to use extra with Craig Hospital in Colorado, and Q ally in Nebraska after sustaining a traumatic brain injury related to an accident.

After seeing success with XO and inpatient rehab. She wanted to continue using the technology in outpatient care in our home state of Hawaii now, Thanks, Sharon and her family more patients and now we will have access to our life changing technology.

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

Increasing numbers of employers are realizing the workplace productivity and safety benefits of Evo our upper body exoskeleton.

Extra works delivered approximately $700000 of revenue during the quarter. This included a number of new and repeat orders primarily in the automotive and aerospace verticals.

In addition to this positive momentum we are encouraged by increasing interest from both construction and general manufacturing markets.

All told our target industrial verticals represent a vast opportunity we are working to deepen adoption within the still nascent 5 billion dollar addressable market.

As we look ahead, we remain cautiously optimistic but are monitoring global events has pockets of increases in Covid cases had been reported recently, particularly in areas of Europe and Asia.

Nevertheless, we're making great progress with customer engagement, thanks to our excellent commercial team.

We look forward to additional successes in the coming months.

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

Thank you Scott XO generated first quarter 2022 revenue of $2 $6 million compared to $1 9 million for the first quarter of 2021 of 34% increase the increase in revenue was primarily driven by higher Evo sales and recognition of prepaid royalties associated with a license and dish.

Tribunal agreement.

Our gross profit for the first quarter was $1 2 million, representing a gross margin of approximately 47% compared to gross margin of 65% for the same period a year ago.

Overall decrease in gross margin was primarily due to an increase in XO health service costs changes in product mix and an increase in material costs due to supply chain pressure.

Partially offset by the aforementioned recognition of prepaid royalties.

As we've noted on previous calls gross margin tends to fluctuate from quarter to quarter based on channel and product mix as was the case this quarter.

Operating expenses for the first quarter of 2022 were $5 $4 million compared to $4 4 million for the first quarter of 2021.

During the first quarter of 2022, the company incurred increased general and administrative expenses related to higher cash and noncash compensation expenses and severance expense.

Search and development expenses increased in the first quarter due to an increase in product development activities.

Net operating loss in the first quarter of 2022 with $4 $2 million compared with a net operating loss of $3 1 million in the prior year period.

Loss on warrant liabilities for the quarter ended March 31, 2022 was $100000 from the revaluation of warrants issued in 2019, 2020, and 2021 compared to a de minimis gain associated with the revaluation of warrants issued in 2019 2020 and 2012.

One for the same period in 2021.

Cash used in operating activities in the first quarter of 2022 was $4 2 million.

As of March 31, 2022, the company had a strong cash balance of $36 2 million.

Please see our 10-Q filed earlier today for further details regarding the quarter.

Operator, you May now open the line for questions.

Thank you we will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad.

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One moment, please while we poll for questions.

Our first question comes from the line of RK with H C. Wainwright. Please proceed with your question.

Thank you and good afternoon folks.

Thanks for.

During the call and.

I'm glad to see the continued growth.

In both segments of the business.

That's right.

My two questions today ours, especially on day X So Hal.

Business.

So far the first quarter, you recorded a $1 $9 million, which is.

Quite close to the numbers that you saw in the second quarter of 'twenty one.

Ken can you help us understand your own.

He hasn't for this segment.

Also.

Potential growth that you're seeing.

Because you made some <unk>.

Commentary regarding how your strategy is working so I'm just wondering I understand.

If you can expand and help us understand what teams.

You mean by that statement.

Okay. Thank you this is Scott Davis.

We appreciate the question and you joining today.

With our global health business, we are continuing to see growth as.

More and more large network operators are adopting.

So as part of their.

Programs.

Using this and we're seeing many multi unit orders.

That are coming in as they.

Are using this as a more of a standard of care program.

<unk> of our commercial team.

As well as our clinical team and offerings.

The training and support to these organizations is really causing a significant growth.

Additionally, we are seeing some of the capital budgets open up that has been pre.

Previously restricted by Covid.

No.

We are definitely seeing a.

A strong increase in the demand both for our capital purchases as well as in the uptake of our subscription program.

Okay, and then you stated 23 in ours.

Being booked.

Being booked during the first quarter.

What.

What went into the mix for that $1 $9 million of that 23, and also you stated that one point I believe that's the right, but please correct me if I'm wrong, one 3 million potential sales.

Out there based on the number of units, which are subscription at this point.

What period are.

How are you thinking about.

In terms of recognition of this one time payment of important show.

Are these the recent subscriptions are the recent units that came on to subscription.

Let's say, it's in the last three months or six months I'm, just trying to figure out how I would I think about this 1.3 million potential.

Yes, so the.

I think your question maybe relates to the mix between capital and subscription and then further the revenue recognition on those on those.

Placed orders.

So we have especially okay.

Okay. So with respect to that we are.

The mix on the on the 23 orders was really a good blend.

We were.

We will close close to a balance between them close to a 50 50.

Match between subscription and capital purchases.

In Q1.

Again, this is driven backlog for us and we expect to be.

Shipping on those on those units throughout Q2.

And.

As we continue to sell we expect also.

Continue.

Small backlog as we move into Q3.

Okay.

Hum.

And then what was the number of units that are really placed during the Q1.

Number I'm, sorry, a number of units that were.

Clearly that didn't sort of assumption to model out a capital purchases yeah.

Total shipments was nine units for the quarter.

Okay.

Okay.

We haven't.

Scott mentioned, we have a significant based off of that again fairly significant backlog as we've talked about going forward for Q2 as well.

Okay. Okay. Okay, I got it right. It's nine units placed and 14 units yet to be placed.

Everything from network.

That's right that were carried over and we also came into Q1 with with an existing backlog.

As well so.

As we as we continue to work through the.

These supply chain challenges.

We expect.

The significant increase in the number of units that we will be shipping going through Q2 and into Q3.

Perfect.

Thank you very much for that.

Thank you.

Thank you we have no further questions at this time I'd like to turn the floor back over to management for closing comments.

Thank you Devin and thanks to everyone for joining us today.

Our first quarter revenue performance reflects the positive strides we've made to increase customer engagement for our innovative products.

We're excited about the progress we are making an extra bionics as our commercial strategy continues to reward in the form of increased bookings, resulting in strong revenue growth.

We are successfully meeting and selling.

Meeting at the supply chain challenges of our current environment.

By delivering to our customers and patients looking ahead, we will continue to execute on our strategy of strengthening relationships with our top network operators, increasing order flow through a strong pipeline and expanding <unk> sales by capturing new customers across the variety of industry verticals.

We are grateful for the continued contributions of the entire XO team and we look forward to providing additional updates throughout the year.

Thank you and have a great day.

Yeah.

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

Okay.

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