Q3 2022 Ekso Bionics Holdings Inc Earnings Call

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Greetings and welcome to XO Bionics third quarter 2022 financial results call. At this time all participants are in a listen only mode. A brief 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.

As a reminder, this conference is being recorded it is now my pleasure to introduce your host Steinberg with certain partners. Thank you Sir you may begin.

Thank you operator, and thank you all for participating in today's call. Joining me from <unk> Bionics are Stephens, Chairman, Chairman and Chief Executive Officer, Scott Davis, President and Chief operating Officer, and Jerome <unk> Chief Financial Officer.

Earlier today <unk>.

<unk> released financial results for the third quarter of 2022.

A copy of the press release is available on the company's website before.

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 Law, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

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

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 of obligation except as required by law to update or revise any financial or operating projections, a regulatory outlook or other forward looking statements or is it because of new information future events or otherwise, which speak only as of today November 3rd 2022, I will now.

Now turn the call over to Exobiologist, Chairman and CEO Steven Sherman.

Thank you, Matt and thank you to everyone for joining us today.

We get strong execution this quarter and all that segments, we achieved a record number of quarterly X O N. R bookings generated several multi unit capital purchase orders for network operators and both knew what his internationally in both Europe and in Asia.

With the recent expansion that X O N R. A M S. We addressing patients needs across a larger population overall, the growing backlog of of XO health business gives us a solid momentum heading into the fourth quarter and into 2023 now.

Now I'll turn the call over to Scott Davis.

Thank you Steven and thanks for everyone for joining our call today.

Is Steven mentioned, we had a solid execution in the third quarter as evidenced by a 21% increase and XO health revenue compared to the prior year period.

We are encouraged with the progress of the business primarily due to the robust demand, we're seeing for X ONR exoskeleton.

This is evident as we exited the third quarter with a stronger backlog driven by our record 33 X ONR unit bookings the majority of which were capital purchases.

Predominantly comprising our best booking quarter ever where six multi unit customer orders a testament to the inroads we've made with our commercial strategy.

Large network operators or Ibms are continuing to make X ONR their standard of care in neurological rehabilitation as they realized the patient value and benefits that it brings.

Underscoring the success of our commercial strategy is the increased volume of multi unit IGN customer orders.

Establishing trusted relationships with the leading network operators enabled us to secure large orders from respected hospitals, such as kindred healthcare and fiber healthcare.

Are cumulative conversion and renewal rate remains strong and 81% with approximately $2.5 million.

Contracted unrecognized revenue under our subscription model.

While we are primarily focused on the domestic market Ah revenue in bookings growth in the quarter was driven by success achieved on the international front and.

And one of the strongest quarters ever we generated robust order demand in both the EMEA in APAC regions, notably, we booked multi unit capital purchase orders with three existing distribution partners in Europe .

Additionally, we booked a six unit capital purchase order in Indonesia.

This success internationally as a positive reflection of the investments that XO is made to support growth in these regions as well as continued validation that the X ONR is providing positive patient outcomes.

As we mentioned on last quarter's call receiving the FDA clearance for the multiple sclerosis indication makes X ONR. The first exoskeleton device to carry this designation for rehabilitation Houston patients suffering from a M S.

We're proud to see that some <unk> patients have already started to benefit from the X ONR.

Also we continue to educate Ms physicians and patients and the use of our XO in our technology, including a webinar that we hosted last Friday by Ashley Christopher a physical therapist currently working in outpatient neurologic physical therapy at the Cleveland Clinic Mellon Center for multiple sclerosis.

And this session. She reviewed the Cleveland clinic feasibility study completed for use of X ONR in individuals with MS and review to short case study highlighting one individuals improvement.

With use of exoskeleton gay training, we look forward to hosting more of these educational series moving forward.

While our commercial team performed well in our backlog grew deliveries were tempered in the quarter by a combination of component shortages early in the quarter.

Delays and contracted manufactured services and a planned shutdown of our production during our relocation.

Supply chain remains challenging for certain mechanical and electrical components.

We continued to order parts well in advance of when we would typically do so but are still navigating through these various disruptions.

At the end of August we completed our relocation to our new headquarters and manufacturing facility in San Rafael California.

Our new headquarters gives us the bandwidth needed to achieve our immediate and future administrative and manufacturing needs. However.

However, as a result of this move we experienced some production constraints that affected our top line and resulted in higher than normal operating expenses in the third quarter.

Said, we're back on track from a production standpoint, and very excited to be here in beautiful Marine County, California.

To expand on our early successes with the Mf's population I wanted to share a patient story from the Cleveland Clinic Mellon Center.

The patient named Jane was diagnosed with MS. In 2008 and has been completing physical therapy at Mellon since 2013.

He was first introduced to <unk> in 2019, and after more than 30 X ONR sessions, Jane drastically improved for posture strength and endurance with standing and walking.

At home she can do significantly more and is continuing to see improvements.

We hope to hear more stories like Jane's as our customers begin using X ONR for the EMS patient population.

Turning to an update on the progress with our industrial product line <unk> works during.

During the quarter, we continued to transition our focus toward large customers that have the needs and capacity to execute volume purchases.

While we are gaining excellent traction in the sales cycle is longer than with our previous go to market approach with.

With these larger customers there was requirement for more detailed technical evaluations, including the administration of pilot programs and more internally complex decision processes.

Our team is confident that we have a successful strategy in place, we're seeing strong interest from marquee customers across the construction general manufacturing Green energy automotive and aerospace verticals.

Are strong interest pipeline gives us conviction that we can increase sales, giving us a better path to taking share from the large addressable market opportunities.

An additional volume will give us better economies of scale to support larger sales volumes.

Now looking ahead to the fourth quarter and beyond our commercial team is excelling at racing customer awareness of X ONR illustrated by strong demand, particularly with the robust growth of multi unit orders from network operators and the new orders, we are generating internationally with.

We continue to CRX. So work segment as a long term growth opportunity as we are making inroads with several large customers across multiple industry verticals.

It's an exciting time for the team at exit bionics.

And we're looking forward to helping patients and supporting workers alike.

Before turning the call over to drum long, who discuss our third quarter of 2022 financial results.

I would like to recognize his recent promotion is our CFO on a non interim basis effective last week.

Drums been part of the XO family for nearly seven years and most recently has done a great job as interim CFO is experience drive and financial expertise will be invaluable as we continue to execute on our growth plan.

Over to you drone thanks.

Thanks Scott.

XO generated third quarter of 2022 revenue of $3.3 million compared to $3 million for the third quarter of 2021, an increase of 9% increase in revenue was primarily driven by an increase in the volume of XO NR device sales are.

Gross profit for the third quarter was $1.7 million, representing a gross margin of approximately 51% compared to our gross margin of 59% for the same period of 2021. The overall decrease in gross margin was primarily due to the increase in XO health service and supply chain costs, partially offset by higher per.

Proportion of revenues Bye XO health.

As we've noticed 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 third quarter of 2022, where $5.3 million compared to $4.6 million for the third quarter of 2021.

During the third quarter of 2022, the company incurred increased general and administrative expenses associated with our move to our new headquarters and manufacturing facility in San Raphael, California.

The company also report an increase in research and development expenses related to sustaining engineering activity for the X ONR and the development of next generation products.

Net operating loss in the third quarter of 2022 was $3.7 million compared with a net operating loss of $2.8 million in the prior year period.

<unk> on the warrant liabilities for the quarter ended September 30th 2022 associated with the revaluation of warrants issued in 2019, 2020, and 2021 was $1 million compared with a gain of $1.1 million due to the revaluation of the same warrants for the same period in 2021.

Turning to our 2022 results through September 30th 2022 revenue increased $2.2 million or 31% to nine $4 million for the nine months ended September 30th 2022, compared to a $7.2 million in the same period of 2021 the increase in revenue was <unk>.

I'm merely driven by an increase in the volume of X R and R device L.

Gross profit for the nine months ended September 30th 2022 was approximately $4.5 million, representing a gross margin of approximately 48% compared to a gross profit of $4.3 million for the same period of 2021, representing a gross margin of 60%.

Operating expenses for the first nine months of 2022 or $15.7 million compared to $13 $6 million for the same period in 2021. During the first nine months of 2022, the company incurred increased general and administrative expenses, primarily due to an increase in non-cash stock based compensation.

Asian expense severance expense and costs related to the company's headquarters in manufacturing facility move.

The company also encouraged higher research and development expenses due to an increase in product development activities.

Net operating loss in the first nine months of 2022 was $11.1 million compared with $9.3 million for the comparable period of 2021.

Gain on warrant liabilities was $1 million for the nine months and then September 30th 2022 and was associated with the revaluation of the warrants issued in 2019, 2000, 2002 thousand 21, compared with a gain of $2 million due to the reevaluation of the same warrants for the same period in 2021.

Cash used in opera and activities in the first nine months of 2022 was $11.1 million.

As of September 30th 2022, the company had a strong cash balance of $29 $2 million. Please see our 10-Q filed earlier today for further details regarding the quarter. Operator, you may know open the line for questions.

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One moment, please lollipop for questions.

It appears there are no further questions at this time.

I would now like to top 10 cops far back over to Scott data.

Cleaning comments.

Alright, Thank you Maria and thanks to everyone joining us today.

Date, 2022 has been very productive ear for exit bionics.

Wishing record orders for X O N are increasing patient access after receiving five 10-K clearance from the F. D. A to market our X O and R for use in patients with M. S.

And building momentum internationally with a strong third quarter.

Finally against the challenging market environment due to supply chain constraints and inflationary headwinds we remain prudent in managing our finances and will continue to do so moving forward.

In closing I'd like to thank our XO team, who continues to do great work as well as our valued shareholders. We look forward to providing additional updates in the coming months.

Thank you all and have a great day.

The conference has now ended.

Yeah. Thank you for your participation you may disconnect your lines at this time.

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