Q2 2022 Nano-X Imaging Ltd Earnings Call
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Okay.
Good day and thank you.
What was it in their Nox imaging second quarter 2022 earnings call.
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After the speakers.
Be a question and answer session.
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Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today, Mike Cavanaugh, managing director of Investor Relations. Please go ahead.
Good morning, and thank you for joining us today earlier today Nasdaq's imaging limited released its financial results for the quarter ended June 32022 of the release is currently available on the investors section of the company's website.
Erez Meltzer, Chief Executive Officer, and Ron Danielle Chief Financial Officer will host this morning's call.
Before we get started I would like to remind everyone that management will be making statements. During this call that include forward looking statements regarding the company's financial results.
Research and development manufacturing and commercialization activities regulatory process operations and other matters.
These statements are subject to risks uncertainties and assumptions that are based on management's current expectations as of today and may not be updated in the future there.
And therefore these statements should not be relied upon as representing the companys views as of any subsequent date.
Factors that may cause such a difference include but are not limited to those described in the company's filings with the Securities and Exchange Commission. We will also refer to certain non-GAAP financial measures to provide additional information to investors a reconciliation of the non-GAAP to GAAP measures is provided with our press.
Release with the primary differences being goodwill impairment change an obligation in connection with the merger and acquisitions stock based compensation amortization of intangible assets and class action litigation and SEC inquiry related expenses.
I would now like to turn the call over to Erez Melter.
Thank you Mike and thank you all for joining us the call today.
As always we appreciate your continued support.
Yes.
As in our last call I will give an overview of our recent achievements and share our outlook on the coming months before turning the call over to ran Daniel our Chief Financial Officer to review our financial results.
We will then open the call up to questions.
We've continued to make progress during the past quarter to advance dynamics our system towards commercialization and we've continued to proceed full force ahead to make headway in the FDA clearance process.
On the call today I will discuss the advances we have made since our last earnings call by breaking my comments into three distinct segments.
Regulatory commercialization.
And finally AI until every geology.
I will discuss what we have done in each of your segments.
And how we have moved closer to our goal of system deployment at scale before I do that I'll touch on our financial results at a high level, but we will leave most of the details to Randy commentary later in the call.
Okay.
Not a generated topline revenue of $2 $2 million in the second quarter of 2022 compared to one $8 million in Q1 2022.
As in the previous quarter, all revenue was generated by non accelerate geology services business unit and dynamics AI, our deep learning machine analytics company.
As most of you know these business units began generating revenues since their acquisition in November 2021.
And it's gratifying to see our Teleradiology services growing quarter over quarter.
These revenues while relatively small at this time are important for two reasons first.
Help us to improve our cash flow and its management and second we believe they demonstrate that customers and other stakeholders, such as hospitals and integrated health systems.
These services.
Which in turn strength our belief.
That these applications and services will add value within our multi source system when integrated with our proprietary imaging technology.
I am happy to report that during the second quarter of 2022, we signed 14, new client agreements for Teleradiology services.
Our clients in the <unk> segment include hospitals outpatient imaging centers urgent cares, it's multi specialty physician group research facility and mental health facilities.
We continue to see accelerated revenue growth in our Teleradiology services, driven by new client additions as well as organic growth from existing clients.
The AI solution business continued to gain traction both in the U S and abroad.
For example, Lennox had their first go lives at five north well al.
Outpatient centers on July 26.
Followed by South Shore Hospital on August eight.
Additional hospitals and outpatient sites throughout the systems are anticipated to go live through the remainder of August and into September .
In addition, we previously reported a large strategic agreement with one of the leading Ibm's and the lowest west of the U S to use our AI population health solution.
We can now share that this customer spectrum health, an integrated healthcare network based in Michigan, with a 15 hospitals and health facilities.
I would now like to discuss our progress on the regulatory front.
Beyond that then beneficial revenue streams I just mentioned we made further progress in our efforts to gain FDA clearance for dynamics are multi source system.
Recently, we received feedback from the SBA on our Q submission supplement that we previously submitted to the agency.
The feedback we have received has been valuable and it's helping us to optimize our five 10-K submission.
Subsequently, we are now preparing our five 10-K submission to the FDA for a multi source Nymex arc, which we expect will have the full power levels and indications that we believe will result in a successful deployment of the <unk> arc in parallel we are preparing for global dip.
<unk> of our multi source non arc.
According to local regulations and substance subject to requisite approvals in each market.
Regarding the regulatory efforts to obtain the CE Mark for Nellix arc, we have submitted all the necessary documentation to begin the process for CE marking.
We look forward to providing additional updates as this process advances.
Moving onto commercialization.
We have continued to progress toward commercialization of the multi source Nymex Ark in several areas.
I'm happy to announce that we have taken steps to advance deployment of the multi source Knox art in Nigeria in.
In April we send that preliminary deployment team to be on the ground there and are preparing to send our first commercial unit for demonstration and training purposes. Our shipment plan to Nigeria is progressing hand in hand with the local regulation process. I also have the pleasure to announce another new agreement.
That we have signed recently with a distributor in Ghana.
Under which we agreed to deploy 350 units subject to local regulatory requirements.
Which raised our total contracted units to 6800 50 worldwide.
This is a great milestone for the company and we are pushing forward on the development and the deployable system to fulfill these orders.
We believe that once we begin to deploy the multi sourced <unk> in Nigeria and other early adoption area health systems hospitals, and distributors, who will see the service the debt.
<unk> provides and that we will then begin to fulfill the backlog of orders with fluke buildup.
In addition, we have an agreement in place with a nongovernmental organization Bioventures for global Health.
Known as <unk> for developing and implementing a medical imaging training initiative in Nigeria.
BV GH is a Seattle based nonprofit organization that strategically develops in managed programs across the for profit and nonprofit sectors to accelerate accelerate research and development for poverty related diseases builds.
<unk> biomedical RMB capacity in low and middle income countries and improved cancer patient care in Africa.
Some newbuild collaborations and developments finally.
I'd also like to take a minute to announce another milestone on the path to commercialization that we are excited about.
We are in the process of establishing a technology development center based in Israel to develop the chiefs and the tubes that will meet or the non XR in the years to come.
This center will be complement our facilities in Korea and Japan.
To close my remark.
I wanted to thank the networks team for all their hard work and progress achieved in this quarter.
But most of all I want to thank all our investors for their continued support.
Our mission to democratize health care by making imaging affordable and available anywhere in the world.
We look forward to reporting more progress on our next earnings call with that I would like to turn the call over to Ron Daniel Chief Financial Officer to review our financial results.
Thank you Eric first I am delighted to announce that we were added to the Russell 2000, and Russell 3000 industries effective after the U S market opened on June 27, as part of the 2022 Rockwood indicated annual reconstitution.
Great development for our company.
As for our financial results, we reported a GAAP net loss for the second quarter of 2022 of $19 6 million.
Compared to a net loss of $13 6 million in the second quarter 2021, largely due to expenses related to the acquisition of the nominal market platform in November 2021.
<unk> nano and <unk> with the company the fourth quarter of 2021, an increase in our research and development expenses goodwill impairment and increase in our general and administrative expenses, which was mitigated by decreasing our sales and marketing expenses and a decrease in obligations in connection November of <unk>.
Just an expedition.
Our revenues for the second quarter of 2022 were $2 $2 million in gross loss was one $8 million revenue from Teleradiology services for the period was $2 $1 billion with a gross profit of viewpoints.
On a GAAP basis, and a gross profit of <unk> 9 million on a non-GAAP basis, which represents.
Gross profit margins of approximately 43% on the non-GAAP .
Revenue from licensing.
I'd solutions for the period.
0.1.
With a gross loss of 2.1.
$1 million on the company.
And as 0.1 million on a non-GAAP basis.
Research and development expenses for the second quarter of 2022 were $6 5 million compared.
Compared to a $4 $3 million for the comparable period in 2021, the increase in our research and development expenses was mainly due to consolidation of the non opioid with a company November 2021 increase in our share based compensation and the balance due to the development of the multi source.
Fix them and dynamics cloud.
Sales and marketing expenses for the second quarter of 2022 were $1 1 million compared to one 8 million darts for the comparable periods. In 2021. The decrease was mainly due to a decrease of zero point $6 million in our share.
Patient.
General and administrative expenses for the second quarter of 2022 11.
And $1 million compared to seven $4 million for the comparable period in 2021 the increase of $3 $7 million a month.
Mainly due to the acquisitions over the normal market platform in November 2021.
Validation of non OPI in U S market with the company since the fourth quarter of 2021, an increase in the company's headcount and overall organization infrastructure and a nuc and.
An increase in the company's legal fees due to the U S Securities Exchange Commission equally and the class action litigation.
<unk> in the company's form 20-F for the year ended December 31st 2021 filed on May the second.
Okay.
Changing obligation in connection of merger and acquisitions for the second quarter of 2022 was $2 6 million compared to none for the second quarter of 2021.
Mainly due to the changing the companys contingent liability.
Liability.
Goodwill impairment for the three months ended June 32022 was $14 3 million due.
Due to the goodwill impairment in connection to that of the acquisition of nano.
Our non-GAAP net loss for the second quarter of 2020 to $8 $2 million compared to.
non-GAAP net loss of $8 $6 million for the same period in 2021.
A reconciliation between GAAP net loss and a non-GAAP net loss for the second quarter of 2022 and 2022.
In 2021 is provided in the financial results that are part of the press release.
We issued this morning, the difference between GAAP and non-GAAP net loss is mainly due to goodwill impairment changing obligation in connection of merger and acquisition amortization of intangible assets share based compensation expenses legal fees in connection with the class action litigation and that it's equal.
And the secondary offering.
Operating expenses.
Turning to our balance sheet as of June 32022, with cash cash equivalence and marketable securities of approximately $126 $7 million.
We ended the quarter with a property and equipment net of $42 9 million compared to 37 4 million as of December .
31, 2021, the net decrease of $5 $5 million during the first half of 'twenty two is mainly.
Mainly due to the completion of the construction of the company's fabrication facility in South Korea, and the purchase of matured machinery and equipment.
As of June 32022, with intangible assets of $145 million as compared to $161 million as of December 31, 2021.
The decrease is mainly due to the.
The periodic amortization of intangible assets and impairment.
As of June 32022, the company had approximately.
52, 2 million shares outstanding compared to 51 8 million shares outstanding as of December 31, 2021.
Increased mainly due to the exercise of 120.
Two 927% borrowing and the exercise of 141 67 option the company generated approximately zero point $5 million in Brussels.
Proceeds from the exercise of stock options and lowering <unk>.
In addition, during the first half of 2022, the company issued 89 286 shares to the former equity holders of nonaccrual.
Due to the achievement of milestones pursuant to the terms of the agreement and plan a merger dated August nine 2021, as the amendment among the company not the nano and.
<unk> LCD.
Hey people demonstrate equity holders with that we'll end the call back over to Eric.
Thank you Ron for the financial update and once again, thank you all for joining us today.
I feel very good about <unk> results in the second quarter as CEO .
But all of US recognize there is more to do.
We hope to provide additional updates in the coming weeks and months.
I would also like to share with you all the Nellix management team will have a non deal roadshow with investors in late September .
I would like to schedule a meeting please contact our Investor Relations partners at ICR.
With that I'd like now to open the call for questions.
Operator, please begin the Q&A session.
Thank you Sir.
You will need to press star, one one or your telephone.
Please standby, while we compile the Q&A roster.
Okay.
Sure.
Our first question comes from Jeff Cohen with Ladenburg. Your line is now open.
Hi, Eric and Ron how are you.
Great.
Yourself.
Just from a couple of questions from Aaron So could you talk about the <unk>.
Alex You said you are planning on opening in Israel, and the capabilities that you anticipate zero versus the current anticipated capabilities.
Facilities in Korea, and Japan.
First of all the.
It's going to be very similar but we're going to strength.
The fact that we.
Willing to base our future on further advanced technologies right now we have both.
Center is in Japan, and in Korea for the chips and the cubes, we thought that it would be appropriate.
The core technology and knowledge.
It will be developed very close to where we do the.
The R&D.
The product designed the roadmaps, our future products et cetera, and.
That.
In.
Korea will will be cut.
More manufacturing and supply for the for the chips and further development that will be on the engineering side.
Okay got it could you talk about.
Arc manufacturing a number of arcs, which had been manufactured and maybe anticipated number of Rx manufactured by the end of the year.
And then tie that into.
Your anticipated timeline.
As far as your approach.
Okay. So.
First of all the we are accelerating.
The production.
As mentioned.
Obviously, we are not disconnected from the reality of the.
Or what's going on at the market in terms of the supply chain in terms of the.
The various components, which are part of the.
This essay Assembly, so we have actually.
Part of the systems will be.
It will be pushed to 2023.
Hopefully the beginning.
<unk>.
And this is with respect to the production.
We are even before at the end of the year, we're going to.
Go even to the next step to further explore the discussion with the mass production and I mean beyond the 1000.
Units in <unk>.
One or two locations, which are not in Israel.
We mentioned that the first day or 1000 units will be.
We will be assembled in Israel.
And the.
And we hope that either Q4 or Q1 next year, we will have.
The arrangement for the assembly of the.
Of all the systems following after the first 1000 units.
With respect to the question that you asked about the SBA.
First of all I was very happy with the meeting.
<unk> was held last week, which was actually the last.
The larger local aspect.
The last meeting before the.
The final preparation for the submission.
I would say that.
The fact that we received from the.
From the FDA was very helpful and meaningful for us so.
We say we are in the final preparation for the.
For the formal submission.
And.
And it's going to be aligned with our path moving forward.
Now I would say that the idea to go to the.
So the pre subject to the <unk> submission and to take the advantage for you for I would say about <unk>.
Almost eight months dialog continuous dialogue with the FDA.
Prudent self to be.
The right decision and I think that all the feedback that we got and the cooperation that we are that we had with FDA and we continue to have with FDA.
We will make it much easier for us.
To do it so.
Okay.
Got it and then finally talk about Ghana as far as manufacturing and delivering arc units terminated when do you expect to be delivered there in the coming quarter or two.
Right now.
I would say that the.
And.
We explained in the past that basically not all the countries that we're working in.
Required.
FDA regulation like we mentioned, Nigeria, one of them in <unk>.
Then it will be another one we have another two that are not really related to the.
To the submission of the two.
<unk>.
Formal approval of the FDA guidance.
<unk> has a special.
<unk> that we are going through.
They give us indications, but I wouldn't actually.
I see it in my eyes, I wouldn't actually commit to.
We hope to we hope.
To have the.
The approval.
To send the system's.
During the fourth quarter and I would say.
Starting gun next year it will be.
Appropriately.
More system that will be sent overall, the Raymond <unk> for 360 units.
Got it and then one quick question for ran would you expect any goodwill impairment on the back half of the year.
For Q3, our careful.
As we say in the PR it really depends on the market car maker, but interest rates there will be an increased total will be changing now.
Okay.
Palmetto.
We may have to do.
And at Paramount.
Again.
Thats it.
And it all.
It depends on our demo management estimate.
Okay perfect grow closer cross thanks for taking the questions.
Thank you Jeff.
Thank you Jeff.
Thank you.
Our next question comes from the line of Suraj Kalia with Oppenheimer. Your line is now open.
Good morning, Eric This Ron can you hear me alright.
Loud and clear perfect perfect hope, everyone is safe and healthy.
So erez just following up on magnox arc, the multi source submission.
<unk> was a full power level.
Doubt maybe.
Maybe I'm misreading from your comments.
The feedback from the FDA.
If I remember correctly last quarter I think you all had mentioned that from 40 to 120 QEP.
It would cover the entire gamut. So maybe if you could kindly shed some additional light on it.
Your specific comments at the full power level feedback.
First of all I hope that I understand the question, but it wouldn't.
We have never been adults.
Okay.
Fair enough.
So Ron.
When are you at.
Can you give us a timeframe.
To win the multi source 500, 10-K will actually be filed and when you're expecting clearance.
As you already know I'm actually.
I can I can say our indicate are willing to commit.
Only things, which are 100% sure that.
There will be on the time to time actually committing so.
Right now I think that they gave.
Enough background information about the timeline, we are in the final preparation to the submission and it will be.
Shortly.
And I think that the.
This is I would say positively saying.
The feedback that we got.
From the from the FDA gave us the.
The advantage to add a few things in the submission that we will be done in the next.
In the next few weeks that will be added to the system. So I hope that this submission will be.
We'll get to shortly.
<unk>.
Once it's submitted I am sure that bill.
You will know about it.
So you will file.
And then likely in Q4.
You said so.
Okay.
Yes.
Basically I'm always trying to.
To do things earlier on all level in all fronts.
Erez.
Hey, Mark.
And really speaking companies have expert.
Voiced a lot of concern just the MTR processes becomes very cumbersome CE processes overall become very cumbersome.
Yes.
Maybe I missed it in your prepared remarks on the updated timelines for CE, Mark Fernando Sarak multi source.
First of all we have already.
Submitted all the necessary documentation for the registration with the notified body. We have selected the notified body, we gave them all the all the information.
You know the.
When I was young I learned that.
That.
You have to do whenever you Ken.
When you can control things.
You have to be patient when you cannot but you hope that you will have the wisdom to differentiate between them.
This is basically right for the CDN for the SBA, we can control what we are doing okay.
We're not managing the CEO or the FDA and we hope that the fact that they have a lot of overload in their systems and processes will not hurt us it will give us the privilege.
That.
The perforations that.
That we have done during the last few months, we will give the results.
Sooner rather than later.
Got it.
There is two final question I'll hop back in queue. So.
In terms of Ghana.
Validation testing has been done.
Before Youll start shipping these units.
And the second.
Question from my side areas to 68 50 units that you reference in terms of contractual.
Contractual amounts.
If memory serves me right a substantial portion of these are more than three or four contracts I remember seeing these in 2019, maybe if you could just talk to us about.
Visit they are still valid or has there been any amendments any additional color there would be greatly appreciate it gentlemen, thank you for taking my questions.
Okay. So first of all Im not sure about the the first question about the validation.
What exactly are you referring to with respect to the.
To the systems that.
We check the answer is.
The answer is yes, so I would say positive to the second question with respect to.
With respect to the.
Clearance in the region are you referring to what's kind of.
Validation in terms of technology or in terms of regulation.
Got it.
No areas, what I meant was before you launch any product commercially.
Have to go through a slew of testing performance testing character, Yeah of course, yeah.
The answer is that basically now.
Basically the answer is yes.
Okay. Thank you.
Thank you.
Our next question comes from the line of ROE rocket with Lifesize capital. Your line is now open.
Hey, guys. Thanks for taking the questions.
So you mentioned that there are two other countries that don't necessarily require FDA clearance for deployment, maybe could you talk about where you are in conversations in those geographies and provide any indication on timing there.
The answer is no because since we have not announced it to the public as.
As soon as we are going to insist that the public will actually share my preference would be that.
That.
Only when we sign agreements we.
We let the market know that they were signed.
In the past you know that in the past you know that in the 20-F, there are a few countries which did.
Not necessarily meet the SBA.
Right right, Okay that makes sense.
And then.
Really excited to hear about.
AI Arena for you guys.
Now maybe you could you help us think about the broader revenue potential there obviously, a big health system, what is integration right.
What are the integration look like there and ultimately what is the broader revenue opportunity.
So first of all with respect to the integration.
I think we mentioned this in the.
In the in the script.
And the 6K.
That.
That these are we have already implemented in a few and install a system over there and we are.
And there is a timeline right now in the next.
New months I think the last one is going to be October November I think November November will be the last ones that were going to install the system and the Ob hospitals.
That specifically.
Specifically in north well gave us too as part of the plan.
In terms of IBM in general our business model is basically that it can go and this is by the way unlike what used to be in the past in the old.
What used to be zebra medical.
Right now it's everywhere between.
A few hundred thousand dollars to a few million dollars in scale.
Got it okay.
That and then.
Just based on the.
The Q&A so far it sounds like your conversations with the FDA.
Paul I know you don't want to lock in on a specific timing for the submission, but maybe can you help us understand.
What the impact can be conversations in the Q submission has had.
The timing of medication.
Once you do submit.
Five K filing how long do you expect it to take to to actually obtain FDA clearance from there.
So basically.
The one thing I would say ideally.
Reasonable.
Logical mark.
<unk>.
And.
And the timeline I would say.
The Q submission would.
Would be perfectly in what for us fleets very helpful. In the process.
To accelerate the process, but right now we know that the FDA and based on the dialog we know that.
Since we are working with and cooperating with them.
We know what the overload that they have.
And I hope that it will not.
It will give us the.
I would say the benefit or the.
I wouldn't say that privilege, but I would say the benefit of the process that we have done to make it sooner rather than later and Thats. What I was mentioned overall I think the process.
And a positive impact on the on the process and I hope it will be the same.
On the on the clearance process.
Got it makes sense appreciate it.
Thank you.
All the time, we have for questions today, I'd now like to turn the call back over to Erez Smeltzer for closing remarks.
So.
Okay.
Sorry so.
Once again I'd like to thank you all for a big part of this call today, we'll see you shortly.
For those of you who are in the U S.
Sometimes in September at the end of September and we're always.
With ICR.
We're willing to address any questions that may come from investors or from any audience.
That question that are related to what we're doing and what.
We were doing so far thank you so much.
Good day.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Okay.
Yes.
Yes.