Q1 2022 Rewalk Robotics Ltd Earnings Call
Okay.
Good day and thank you for standing by welcome to the Q1 2022 re walk Robotics LTV earnings Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that this call is being recorded.
If you require any further assistance. Please press star zero I would now like to hand, the conference over to your host today, almost a DARR director of finance may begin.
Thank you Justin good afternoon, and welcome to revoke robotics fourth quarter earnings call. This is a little bit we.
We woke director and with me on today's call is leveraging <unk> Chief Executive Officer today. The company issued a press release detailing financial results for the three months ended.
31 2022.
This press release.
This call can be accessed through the Investor Relations section of the <unk>.
Website at Www <unk>.
Cool.
Before we get started I would like to remind everyone that any statements made in today's conference call that express belief expectation projection forecast anticipation we take.
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 are based on information available to retail clinics when it looks today.
And it will involve risks and uncertainties, including those noted in our press release and <unk> filing.
<unk> filing with the SEC.
Such forward looking statements are not guarantees.
Future performance actual results may differ materially from those projected in the forward looking statements.
Let me walk.
So to speak.
We look 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 pre conciliation when you're in our on our corporate website.
Dot com.
Telephone replay of the call will be available shortly after completion of this call you will find the dial information in todays press release, the archived webcast will be available on the company website Www Dot <unk> dot com further benefit of those who.
May be listening to the replay of the archived webcast. This call was and recorded on May 13, 2022. Since then <unk> may have been 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 just in skin.
Thank you Omar.
Good day everyone.
While Q1 was a disappointing quarter in terms of closed sales. It was also a quarter, where we made meaningful progress on key long term initiatives, including positive developments with CMS, the VA and in Germany.
The closed sales in Q1 were limited to $876000. We were about 75% of what we expected in Germany, and only 35% of what was expected in the United States.
The coverage contracts in Germany make processing more predictable while the U S will not have some similar predictability until Medicare or private coverage is more clearly decided.
The limitations in the quarter were driven by slow insurance processing.
Facilities that remain closed much of the quarter, the COVID-19 surge with Alma Cohen limited trading in clinics into late February and Covid infections within 40% of our field team during the quarter.
While we had a sufficient pipeline to meet our targeted sales level, we simply could not force and final insurance processing within the limitations of COVID-19 restrictions within a timely manner to meet our sales goals.
Importantly, we did not lose these potential patients during the quarter and expect recovery of most of these placements as the year progresses.
Our objective of establishing a predictable coverage process within the U S with Medicare and private payers has progressed, we're working closely with individual patients and CMS to establish more efficient claims processing.
I'd like to cover our status on the three categories of focus identified at the start of the year.
First progress with CMS and the status of the German Court case second movement on our technical developments to improve our real personal system third continuing development of processing infrastructures respect to training service reimbursement assistance and sales coverage to grow effectively.
To add detail to these three categories first starting with reimbursement.
Our success will be aligned with guidance from CMS on benefit category.
Determination of the category subsequent pricing methodology and the.
Local and national coverage process by CMS.
<unk> is actively collaborating with CMS for scientific innovation and technology Unquote. This initiative directly impacts we work, which is defined as a novel breakthrough technology.
To this end we work as one of the first companies to be participated in the new process for benefit category determinations reimbursement and payment is a priority of the medical device industry and CMS and reward.
Our active participants in these statutory and legislative initiatives.
Yes.
Medicare benefit category and reimbursement, we determined through the process from the final rule on depots, which is durable medical equipment prosthetics orthotics and supplies issued by CMS in December of 2021.
For background, we've had a formal meeting with CMS and continued communications, we have submitted some more supporting materials on what we believe to be an appropriate Medicare benefit category and have had a follow up discussion regarding the process.
CMS published the healthcare common procedure coding system known as apex public meeting announcement for June the Ace.
Our benefit category request for the re work has been assigned to this agenda.
We will provide extensive documentation CMS support benefit category assignment include.
Including information from broader medical device industry patients and practitioners.
We have progressed sufficiently to begin or to submit our initial cases.
We will be proactively engaging with cms's Medicare contractors to help facilitate a smooth process in all cases, our end goal remains having a reliable and systematic method to identify and cover the appropriate patients.
In Germany, the federal Social court has not yet process, depending exoskeleton cases expected in Q1.
<unk> remains on the docket and we expect the case to be heard in the coming weeks or months. Although it is one of the longest pending cases and is listed near the top of the docket.
<unk> does not provide specific information on the timing for Molina and accepted case. When this occurs it will be a signal for all insurers on the standards to provide exoskeleton systems.
The second category identify to focus technical developments to support market growth.
We anticipate an FDA submission in midyear 2022 for new features with reward.
These new features have been awarded a breakthrough designation by the FDA as of May 14th 2021.
We are currently completing final validation testing prior to submission once cleared by the FDA. The new features will increase physical access for users.
Allow them to travel to more locations and engage in more activities of everyday life.
Our next generation design is occurring in parallel and will make the system easier to use improved performance provide more data and increased the choices of walking parameters.
In April we announced that <unk> has joined and gained funding within the magnet consortium program based out of Israel, which had the goal is to develop quote.
Develop advanced technologies aimed at providing robots with social capabilities, enabling them to carry out various test and effective interactions with different users and diverse operational environments.
We are hopeful this research will support an eighth generation system that can further expand adoption and a range of applicable users.
The third area of focus is processing infrastructure.
Infrastructure development started with defined in each step of the patients' journey and determining resource requirements to achieve each element of the Medicare coverage and reimbursement process from identification to supply and maintenance of the system over the lifecycle of the product.
We are also setting up the process for private payers, which we expect to follow Medicare or.
Our model is building on the positive experiences in Germany, and blending internal and external resources we.
We will start testing this within our initial CMO submissions in mid 2022, and two expanded among other payors as contracts are established subsequent.
Yes.
As a company our capital position is suitable to achieve these goals in 2022 remains a pivotal year for the company and defining this industry and in building long term market leadership for the reward personal systems.
Look forward to continuing to expand access to our life changing technologies for the benefit of patients and all of our stakeholders.
I'll now ask Mark to cover the specifics of our financials and our overall financial position.
Thanks, Larry.
As mentioned, our first quarter revenue for 2020 to close at $876000 compared to $1 $3 million in Q1, 2021, and $1 2 billion in the previous quarter.
The decrease compared to last year was due to decreased number where <unk> personal six <unk>.
You will need.
The U S and with distributors and our agent in the U K, we had less case five completed from training to allow delivery. It's cleaning training was delayed by the Covid condition.
Overall.
We did not have any increased incoming cases as our demand pool has been the Gannett due to limited tradeshow in the legal reimbursement.
As we look at our insurance progresses. During this quarter, we had a total of five new rework insurance decisions to place the device for a new rental.
Direct purchase.
To the agency <unk> to place a device for a new rental our current pipeline of active rentals consists. Both 19 cases, we presented a total of one 9 million.
Our overall insurance cases are currently at 73 with 56 in Germany and 17 in the U S.
With our other primary on based system, we sold 16 myelin on units for the $180000, which marks our highest quarter to date for this product line.
This occurred as this is an effective designed for utilization at home and LTE improvement.
Since this product is primarily for XL cycle and because it is not limited.
Significant equally screening we are able to place more readily and expected to extend in the quarters Ed.
We have a place to restore system in Poland, and Hungary to expand demonstration into initial trial.
Turning into our gross margin in the first quarter of 2022, our gross margin was 30% compared to 54 in the prior year quarter.
This decrease is due to reduced revenue generated this quarter to spread over.
From our we look personal six points.
Right.
Regarding the operating expenses, our Q1 2022 operating expenses landed at $4 6 million compared to $3 7 million in the prior year quarter. This increase is mainly attributed to sales and marketing as we had highlighted higher labor.
In sales related expenses invest invested in our first serious of Tradeshow.
Segment began to open late in the quarter, it's higher consulting expenses related to CMS pro risk and increase our efforts to support the <unk> within the VA.
General and administrative.
What's the growth as we had higher personnel and personnel related expenses along with personal.
Along with professional services expenses.
To recap the quarterly results our net loss for the first quarter of 2022 was $4 4 million compared to a net loss of $3 1 million in the fourth quarter of 2021 due to decreased revenue and increased spend our non-GAAP net loss for the first.
Quarter of 2022 was $4 1 million.
<unk> to $2 $8 million in the first quarter of 2021.
We ended the quarter with $82 $6 million in case with that I would like to turn the call back to Larry for some final remarks.
Thanks, Amit.
I would like to complete the session today by covering a few key topics that have occurred in Q1 and early Q2, and then to cover the status of each of our 2021 goals as laid out at the start of the year.
Key event number one.
The VA co op study finished enrolling approximately 160 patients in early 2020 and completed follow up on about 140 before it was completely shut down due to COVID-19 from.
From 2020 until a few weeks ago access to the database for analysis was frozen to the uncompleted follow up and then by a government server that was not available for multiple studies throughout the pandemic.
We were recently informed that access to the database has now been reopened and analysis has started well.
We do not have visibility to the data or the timing of any conclusions, but are encouraged that this is restarting after a two year holding pattern.
Given that number too.
During this two year period rework sponsored the Va's research teams independent analysis of all Exoskeletons placed by the VA outside of the clinical study.
This large database compares cost to the health care system for injured individuals in the period before they walked to the period they were walking in exoskeleton.
A manuscript of this data is in progress and we anticipate the VA was submitted for publication in 2022.
Do you have that number three.
Returning to Tradeshows.
Had five trade shows in 2022 after a two year period with none due to COVID-19.
These shows are a meaningful lead source is hands on demonstrations and peer discussions among community have a significant impact on technology buying decisions.
And can you give that number four.
We want continuous to increase its overall presence and resources within the U S Department of Veterans Affairs, VA by focusing on large flagship medical centers specializing in poly trauma and spinal cord injury.
In addition, the company will be placing attention on the community care outpatient clinic networks used by the VA with that when their medical centers lack the capacity to train eligible candidates.
This will increase the number of available training sites, which in many instance will be more geographically convenient for veterans to access and likely contribute to a higher overall success rate associated with the completion of the re work training protocols now that the <unk> are reopening.
Here is a follow up on each of the objectives as we defined in Q1.
We'll start with revenue.
We expect to continue year over year growth. Despite the slow start and movement of pending cases in Q1.
The drivers will be the German court case conclusion and.
And subsequent additional supply contracts.
In Germany <unk>.
After processing of workmen's compensation claims than we saw in Q1 and as we move our first CMS cases cohort.
The timing of many of these are beyond our control and that limits our ability to provide further guidance at this time.
Second objective new products.
We seek to add at least one additional commercial product line, which we believe can allow further leveraging of our organizational structure.
Provide growth and help achieve the pathway to profitability.
As a secondary focus to our reimbursement activities. We have also defined and limited the scope to ensure we have sufficient size and capital to complete the adoption phase of payer coverage on our core product lines.
Third to advance the Medicare benefit category for a CMS determination regarding coverage and reimbursement.
This is entirely on track as we established in 2021 CMS has engaged at a proper level a request for a benefit category has been the size of our discussions at CMS is June eight experts meeting and we continue to anticipate a final benefit category decision from CMS by year's end or early 2023.
Fourth objective technology submission of two device applications for improved we work designed to launch in 2022 and in 2023.
Timing to launch is dependent on the CE, marking and FDA 500, 10-K processes and some supply chain considerations. These.
These technical developments remain on track for the submission cycles as we had planned.
And last investment controls that increased investment of an additional $3 million to $4 million in reimbursement product development market development in excess investor relations and new business development we.
We have followed through on reimbursement support in a precise manner.
<unk> been able to restart market development and access programs post COVID-19.
And a resource the process for identifying and pursuing new business development.
We have proceeded a little slower on the increased Resourcing of Investor Relations that are now in the process of engaging a team to express our vision and progress at a higher level for all investors.
We will provide updates each via press releases quarterly, earning calls and other appropriate mutations.
This remains a pivotal year for this company and for this industry.
Other than the slower than desired start for sales all other business building objectives are progressing in a positive direction.
Thank you very much for your time and interest today I'd like to turn the call over for questions at this stage.
Thank you.
Thank you as a reminder, ask a question you will need to press star one on your telephone to withdraw your question press the pound key please.
Please standby, we compile the Q&A roster and once again that is star one if you would like to ask a question.
And again, if you'd like to ask a question that is star one.
And we ask that you limit yourself to two questions. Our first question comes from Marty Pollack from K MTR holding your line is now open.
Okay.
Good afternoon, it's nice to see a call coming at a time, where I'm not sleep fastest sleep in the morning.
And that in the West coast.
<unk>.
Just with regard to the confidence level about revenues.
Ill exceeding last years.
Is there any of that visible to you beginning to the second quarter.
So that one you are saying, we can expect a higher revenue.
Then last year.
Do you feel confident that you're already seeing some massive section of that and that.
Second quarter coming up that's the first question.
And Marty this is Larry.
We try to work more for the West coast on our timing in the future.
But to be specific on the.
The revenue side, we do see specific activity that really started in March as Covid shutdowns.
That's why we are confident we will see year over year growth I will provide a specific example is.
We went almost two years with no VA patients and frustrating line of patients who really wanted the system.
We have already had more trainings and.
Systems ready in the first few weeks of second quarter than we had all of the last two years and we have a decent number of people in line.
So that is the one factor that we believe is a very immediate one because we have real patients of the <unk>.
Two factors do rely on the success with the reimbursement process both in Germany.
That court case will finally get over the goal line.
We just can't get the date.
But it will affect the number of patients and we're confident that will happen. This year, we think it will happen soon and the third one and CMS.
We are putting in some patients in CMS, we believe some of these works.
We literally on a patient by patient basis have a basis for supporting our expectation for year over year growth.
Larry.
Second question clearly the runway into 2023 and beyond looks.
Quite good and in fact, everything Youre doing now seems to be on track. So in some respects while short term results don't really tell you much.
About what the future looks like but the confidence you've expressed.
As indicated that.
Things are really going to open up.
By 2023.
With regard to investors, who now understand.
This is the short term period. This is a time, where you just kind of in a famine portion of things.
Where the stock currently at $1 33, net cash and clearly it's going to come that presumably the next few quarters.
How do you feel that.
How do you believe in terms of investment opportunities.
Things that you could be investing obviously.
Another company, but it seems to me the most obvious thing you can do for current remaining shareholders. If you were to do more meaningful share repurchase.
Is the value enhancement not only of.
Improved valuation for those remaining shareholders simply because.
Net cash considerably higher the stock price there is one benefit but even more so when you go into $2024 25.
The incremental earnings power.
Those existing shares of the boat goes down 15% to 20% is enormous.
The only thing that I think investors have to ask themselves do you really believe.
And your story and not to really take some of that big cash number $83 million.
And even if you buy 20% of your stock back.
That's $12 million to $13 million.
Is that the best investment you can make.
I recognize you may have other plants, eventually, making an acquisition but.
Clearly I cannot imagine a better investment than this one, especially with the outlooks that youre describing.
I'm kind of really surprised I think we've talked about.
About this before that the board and yourself have not pushed for this more meaningfully is there a price that you just might.
<unk>.
If the stock stays where it is I don't know what.
Weather.
Current vessels will reap the benefits of the company ends up being taken over by someone else.
Essentially leaving to the upside for all future investors.
So I am concerned.
What I see here is the lack of.
Resolved by the company to recognize that shareholders in this company.
<unk> should be considered in a more meaningful way than sitting on your hands and looking for the future I understand operationally you are doing all the right things.
But I don't think investors are reaping any of the reward so far of that.
Alright, let me first we do believe and where we're going very much. So that's why we're here.
Second and equally important to that it's important that we listen to our shareholders.
Your comments do matter.
And the board bust and we must consider them.
I would say we have active discussions within our board.
Guarding.
What we should do in this area.
I can't report more than that at this time.
But it is will be considered as one of the pathways I believe the two you pointed out perhaps there are some technologies that may become available that fit well with our company and could get us to a better position both in terms of revenue and expense.
There are some pressures in the market, which could make some things attractive for us, but also our shares themselves. We believe are attractive and they will both be examined.
Thank you.
Thank you Mary and thank you and if you have a question.
And that is star one.
One moment for questions.
And I am showing no further questions I would now like to turn the call back to Larry does it does it Keane for closing remarks.
Thank you first for everybody, who attended today and everybody who listened in on this.
Appreciate your support of our company.
We would encourage you to reach to us.
Any other questions you have we will respond we will provide as much information.
And I'd ask you to stay tuned to our publications CMS is.
Meeting is coming up soon.
Better than we thought it would be in terms of timing.
We believe the German court case of work and we will look at other ways, we could properly use what we have to invest.
For a successful outcome for all of our stakeholders and specifically our shareholders.
So with that I'd like to thank you again and have a great day will keep in touch.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Great.
Okay.
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