Q3 2022 Nano-X Imaging Ltd Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Ladies and gentlemen, thank you for standing by.
I'll come to Netflix third quarter 2022 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
During this session you will need to press star one on your telephone keypad.
Please be advised that today's conference maybe recorded.
I'll, let you speak of House My 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 September 32022.
Our release is currently available on the investors section of the company's website.
Erez Melter, Chief Executive Officer, and Ron Daniel 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.
Other matters.
These statements are subject to risks uncertainties and assumptions that are based on management's current expectations as of today.
Not be updated in the future.
Therefore, these statements should not be relied upon as representing the company's 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.
Okay.
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 amortization of intangible assets share based compensation.
Secondary offering expenses.
Goodwill impairment change an obligation in connection of acquisitions in legal fees in connection with class action litigation and the SEC inquiry.
I'd now like to turn the call over to Erez Melter.
Thank you Mike and thank you all for joining the call today.
Reporting on our third quarter of 2022 I'm proud of the results. Our team has been able to deliver as we continue to advance the commercialization of the nominal arc system.
It's in our last call I will give an overview of our recent achievements and will share our outlook for the rest of 2022 before turning the call over to ran Daniela our CFO to review our financial results in detail.
We will then open the call up to questions.
I am pleased with the progress our team made during the quarter, which as most of you know include our five 10-K submission to the FDA for our multi source nellix our system at the end of September and which is now under FDA review.
I'm very proud of the hard work behind the scenes by our regulatory product and other teams to absorb the continuous feedback from our Q submission process and incorporate it into the recent submission.
We do not have any insights into the timing of the FDA is the response.
In other regulatory news, we continue to pursue CE Mark approval in the European Union and I am happy to report that we are engaged with BSI the notified body with whom we will work during this process.
We look forward to providing updates to you as the process advances in the coming months.
I'd like to take a few minutes now to discuss our progress toward commercialization of the multi sourced out of stocks.
It remains our goal to begin to deploy the multi sourced <unk> system in 2022, and we'll continue to push toward the goal.
We continued to advance the process toward the products of the multi source non arc in Nigeria subject to regulatory approval as we recently received an import license.
We intend to ship the first system and begin trading soon.
As we aim to secure regulatory approval.
Globally, we have a total of 6800 50 preordered units, we believe that once we begin to deploy the multi sourced products argue Nigeria and in other early adopting countries health systems hospitals and distributors will see the service.
Alex Art provides.
Clinical update we have received the Helsinki permits to conduct clinical trials in Israel, using our multi source knowledge throughout the system.
We anticipate that the result of these trials will generate clinical sample images of multiple body, Oregon during the fourth quarter of 2022.
Now turning to our AI and Teleradiology business segments, we continue to see revenue from these important business segments.
I'm happy to report that during the third quarter of 2022, we signed nine new clients agreements for Teleradiology services, and we'll continue to see revenue growth in these services driven by new client additions as well as the organic growth from existing clients.
These businesses generated topline revenue of $2 4 million in the third quarter of 2022 compared to $2 2 million in the second quarter of 2022.
Brian will review the financials in more detail, but these revenues continue to demonstrate the viability and utility of these additional services to the healthcare system.
Which services are intended to be part of the fully integrated multi sourced <unk> arc system upon deployment and an integral part of our ecosystem and end to end solution.
Before I turn the call over to Ron I'd like to remind everyone that we will be hosting a multi source.
Our demonstration broadcast with a live audience.
Very land on Wednesday November 16 at 930, a M eastern time.
Due to the capacity limitation, we invite you to attend virtually.
You can find the link core administration on our websites.
I want to thank our investors for their continued support of our vision to help made medical imaging.
Testable throughout the world.
I am very happy with the progress we made this quarter and we look forward to meeting additional milestones as we move toward large scale commercialization.
With that I'd like to turn the call over to Ryan Daniels, Chief Financial Officer to review our financial results.
Thank you Eric.
Reported a GAAP net loss for the third quarter of 2022 of $19 1 million.
<unk> with the net local 13 $5 million in the third quarter 2021, which increase was largely due to the consolidation of magnox AI and use throughout the company in the fourth quarter of 2021.
An increase in our research and development with an increase in our general and administrative expenses, which was mitigated by a decrease in our sales and marketing expenses and at one point, we will mainly on expense due to a change in our obligation in connection of acquisition.
Revenues for the first quarter 2022.
$2 4 million and gross loss was $1 4 million Rev.
Revenue from Teleradiology services for the same pure one $3 billion with a gross profit of zero point.
On a GAAP basis, and a gross profit of $1 2 million on a non-GAAP basis, which represents a gross profit margins of approximately 49, 4%.
The increase in the company's revenue and gross profit margin in the third quarter of 2022.
Youtube revenues form of data monetization project with a total revenue of the zero point $3 million.
Revenue from licensing of AI applications for the same period was 0.1 million with a gross loss of $2 1 billion on a GAAP basis, and 0.0 million on a non-GAAP basis.
Research and development expenses for the third quarter of 2022 were $6 1 million as compared to $3 7 million for the comparable period in 2021.
Within our research and development expenses was mainly due to the consolidation of the company as well as due to the development of the multiple novel Zhong and dynamics cloud and share based compensation.
Sales and marketing expenses for the third quarter of 2022 were <unk> 7 million as compared to $1 5 million for the comparable period in 2021. The decrease was mainly due to a decrease in cost of labor and share based compensation.
General and administrative expenses for the third quarter of 2022 were $10 6 million compared to $8 2 million for the comparable period in 2021 increase was due largely to the consolidation of <unk> and <unk>.
Along with the company since the fourth quarter of 2021.
The company's headcount and the overall organization infrastructure and increase the company's legal use of the U S Securities and Exchange Commission equal rates and class action litigation.
Jason as described in the company's form fixed K filed today on form 20-F from the year ended December 31 2021.
While the second 2022.
Thanks.
Changing obligation in connection of acquisitions, while 1.0 million as compared to none in the comparable period due to the increase in the company contingent earn out liability.
The non-GAAP net loss for the third quarter of 2022 was $8 1 million compared to a non-GAAP net loss of $8 4 million for the same period in 2021, a reconciliation between GAAP net loss and non-GAAP net loss for the third quarter of 2022 and 2021.
Widen into financial result, the top part of the press release, we issued this morning.
Turning to our balance sheet as of <unk>.
October 30, <unk>, we had cash cash equivalents and marketable securities of approximately $117 1 million and we had $3 5 billion.
In Longhorn bank.
We ended the quarter with property and equipment net of $44 1 million daus.
Baird.
Seven 4 million.
As of December 31st 2021, the increase was largely due to the purchasing long lead items, while multiple victim.
Machinery and equipment for our fabrication facility in South Korea.
As of September 30th 2022 we had approximately.
$52 3 million share outstanding as opposed to 51 8 million shares outstanding as of December 31, 2021, the increase was mainly due to the exercise of stock options.
With that I will end the call back over to Eric.
Thank you Rob for the financial update and once again, thank you all for joining us today.
I feel very good about <unk> results in the third 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.
With that I'd like to now open the call for questions. Operator, please begin the Q&A session.
Thank you, ladies and gentlemen to ask a question you will need to press star one one on your telephone keypad. Please standby, while we compile the Q&A roster.
And our first question coming from the line of Jeffrey Cohen with Ladenburg. Your line is now open.
Hello errors and Ron how are you.
Great and you Jeff.
Just fine so a few questions for you.
I guess firstly.
As far as our urea units.
Units.
To be available for placement could you give us a sense of manufactured in spark units or assisted in just a moment.
In terms of manufacturing we are as we say in the process, we have all the materials, which is available.
We are making actually we work with end to end.
The regulatory approvals so once.
We get all the paper work, we can start to ship the units.
And it goes the same with.
Other countries.
When we get the.
Eregulation approvals.
Yes.
Just to complete.
The answer about Nigeria.
The next step is.
Send the first unit for a demonstration the demo center is ready already.
Or are there.
And then to engage with.
With those customers, who are expecting to get the machines to do the training as well.
We've indicated that.
The work that we do with BV GH.
For the deployment and the training and the Trs So thats.
That's the process that we.
Adam.
Could you give us a sense of the size of the order with the coming year specific trigger jurors.
We don't.
As you know and I am going to stick to it until.
Further or later or future other indications, we havent given numbers so far.
The main reason of course with the relation but.
But we havent given numbers so far.
We made changes in the future.
Got it okay.
Jumping over to the.
The Teleradiology could you give us a sense of.
Number of accounts and account growth or utilization trends and utilization growth.
Okay, Ron would you like to address this.
Question.
Yes.
Yeah.
Jeffrey.
We had additional nine accounts this quarter.
Total lockdown.
Before Greg as of now.
So you can you can calculate yourself the growth rates will be.
Basically you can see the numbers in terms of the revenues or the growth rates, we are still waiting for all the <unk>.
Proven and license says that.
And Craig station that.
We are waiting always when we signed the reason.
GAAP between the time that we can start.
Do the readings.
Right now.
In terms of the customers as always we have the sort of I would say 60, 40 or 70 30.
We're a.
A few customers are generating pretty much of the.
I would say majority of at least 60% of the revenues and.
And right now what we see at a lot of growth in those.
That.
Has been with us for quite some time and we see the future as well.
Okay got it and then could you talk about.
A couple of million dollars goodwill impairment for the quarter is your Morgan Parra contributor goodwill number, but where do you anticipate anymore right.
Breakdowns or Victor is a low number for the balance of your it gives you a sense of what was shutting down for the third quarter.
Yes, and just to complete my answer before it too.
Accounts, there, but a geologist accounts it takes us.
And it takes us two to three months to go through the Credentialing process once we get the new client.
Just to complete my other answer but that's for the goodwill the goodwill is really.
The goodwill impairment comes from a few factor the two main ones are.
Changing the discount rate that way.
And.
As long as the Federal reserve continued to increase the rates.
We should expect to at least to be.
To be required to.
If we are impairment as needed and Thats, what we are doing quarterly basis.
This specific quarter there was no impairment.
As an indication that the impairment is needed. So we had to go through a process.
So that's where your question is for the third quarter.
Impairment.
Impairment expense, but we had to go through a build process and for the fourth quarter and you can also consider the fact that we'll have to consider our east can make for them.
For 2023 and going forward.
Coupled with any change that will be the discount rate right.
That will be done by the federal reserve.
You can imagine by the way that when we started the deployment of the art.
Obviously, all the Teleradiology services will be.
We will be expanded in growth.
Got it and then finally first just for you where things stand at the at the FDA as far as the permutations here, we should expect going forward, we're doing an anticipated.
All right.
Obviously.
Clearance would be.
One option the second would be that they would be back with.
Two questions what are the few permutations that we could see.
Okay. The one thing that I don't bet or indicate.
Timing of the process from the.
From the FDA and we saw it in the last three years and I think.
World.
<unk> business World, but we see it as.
As we see it right now.
We are saying that we have done the utmost or everything that we could.
Order to increase the likelihood of the clearance from the FDA, having said that.
As I.
I think that.
We felt we spoke about it and we have emphasized this year nonetheless.
Nellix has changed a little bit its regulatory strategy from the single step.
Submission process to a stepwise approach using Q submission Beth for.
A question and answer with the SBA team.
<unk> to the.
Five 10-K submission.
And frankly speaking we intend to continue to use this dialogue with the FDA as we develop the next generation of dynamics are exist, then as well as the future products that nellix.
<unk> will generate.
Perfect. Okay. We look forward to next week. Thanks for taking our questions here is around thank you. Thank you.
Thank you one moment please for our next question.
And our next question in queue.
From the line of Ross <unk> with Cantor. Your line is now open.
I hope everyone's doing well congrats on the progress.
Hey, how are you.
Well, yes.
Ill.
So starting off.
Any update on the China contract.
I know you loaded a special attributable process on last quarter's call.
If you could provide a little bit more color just on what the regulatory environment.
Kind of where you stand.
You asked about the Ghana.
Deployment.
Yes, that's correct.
We did it up until now and we will get it we'll do it in the future.
Soon as we have information which is.
Needed to be.
Sure the way with the <unk>.
Public will do we signed.
We signed the agreement that we're waiting for the regulatory.
Processes.
And.
And.
Once we get the clearance as we did now with Nigeria or the approval then we will release it.
By the way in the meantime of course, as we do with any other countries.
Then.
We do all the periphery <unk>, so we'll be meeting with our customers doing a show trainings checking all the.
The availability of <unk>.
Internet and <unk>.
Telecommunication.
That's correct here.
Tried to see what is what is needed in terms of the.
Of the training itself et cetera et cetera.
<unk>.
Since we have already said that we expect that the initial deployment of dynamics arc.
At scale as we say to be done in outside of the US Then basically that's where we're doing both as stand alone <unk> Digital's tomo synthesis units.
Our approach is right now to do the deployment in.
In the U S only.
And the next step and will inform.
When we actually get the dialog with the FDA and as soon as we can get it.
We are making all the perforation.
Even in the countries that.
We required the FDA.
Namely meeting meetings distributors.
Getting to know better the customers do have the FERC accretion of their regulatory processes et cetera, et cetera, and so once we get the clearance then we can actually move fast forward.
Okay sounds great.
One more on Macdonough contract I know you disclosed 350 units.
But are you able to provide us what the minimum annual fee.
There is a lot of credit associate with the contractor.
There is always defer.
The difference between April and will.
And the answer is that.
And as we have something to say, we will say.
Okay.
Fair enough.
And then I guess.
Looking ahead of deployment.
Do you expect for the scan <unk> in Nigeria or would those be outsourced to net ops.
And it is a ladder.
Do you have radiologists in place and are those radiologists financial motivated team.
Michelle.
Right now right now based on everything that we know right now which may change in the future, but based on the studies and the underground work that within in Nigeria will be both.
Okay great.
Thank you for taking my questions.
Thank you Ross.
One moment please for our next question.
And our next question in queue coming from the line of Suraj Kalia with Oppenheimer. Your line is open.
Good morning, Erez, Ron how are you.
Good how are you suraj.
I'm doing well.
So.
Aaron's bunch of questions.
Eric can you give us.
As you look for commercialization, let's say typically enough in Nigeria.
How would the workflow for these products look I E.
It happens in Israel, what happens in Korea, especially your manufacturing facility.
And Japan ceramic Alaska, just kind of walk us through how the workflow is expected to happen.
It's interesting and it's funny, but actually what you are asking for is a promo on next week.
On VR today on the <unk>, you will see the whole.
Also as we have explained in the in the in the past.
And the chips are being manufacturer in Korea.
The tubes are being installed in Korea, and we are planning to.
Do more of it in the future in other.
From other suppliers.
All of the integration and the assembly is being done currently in Israel and will in the future as we said in the.
Respecters under the 20-F will be done part of it will be done outside of Israel. So the system is fully installed and assembled in Israel and when it shifts it shifts to actually.
A few on the box and.
A shift to the place that they are going to be deployed in Nigeria.
<unk> you asked specifically about next year, but it will be the same in other countries.
We are doing the installation the connection to the to their network to assist them.
Sometimes even two tax system in the future we do all the training of the operators, we do all the training of the.
And of the maintenance.
On on site, we do the.
The training of the radiologist.
And on premise.
We have a demo center, we will have a demo center in every country that.
Fifth we're going to deploy them right now in Nigeria, we have already.
The demo center ready to be.
To install the first unit and.
What else and then of course be the maintenance afterwards.
And the initial.
Operating of the units will be on the ground.
We work with.
Partners.
In Nigeria, we're going to explore.
The work that we're planning to do with other partners as well so it's not only one but it will be a few of them.
We have already.
Engaged ourself in a dialogue with the customers on hospitals in Nigeria by the way in other countries as well so that's actually I hope I addressed.
In detail the answer to your question.
Fair enough.
And there is I presume the Nigeria configuration is the same as the U S configuration.
Uh huh.
It's a good question.
Hopefully yes.
But we don't know what will be we.
We hope that the FDA will be will approve the.
The same is that we have.
<unk>.
To us and I hope that no changes will take place.
The answer so basically that's the answer.
Got it and Aaron's finally, the 6800 or so confirmed preorders that you talked about.
How confident are you with the with these contracts.
And their ability to fulfill your ability to enforce.
Because a lot of them are.
Our recollection is.
They are at least a few years old and have.
Not gone through validation testing so any additional color would be greatly appreciated gentlemen, thank you for taking my questions.
Okay. So.
I am.
More than I think there are more than 40 years in business for zero and more than 35 years as the CEO and the one thing I've learned in business that basically you are confident in the deal and the transaction once the money is in your bank.
This set specific.
Place when the money from each one of them will be in my.
In our bank account. So this is in terms of confidence, but having said that it all depends on the clearance clearance processes.
Approvals in regulations in any one of the place we are.
Are in continuous dialogue with.
With the.
With these.
Business entities that we signed the agreement.
A few of them by the way are coming from time to time to Israel to see the progress and to see.
To do some training to get to know better the system the product can be.
And the intended use so.
That's basically the answer.
Thank you.
Thank you one moment please for our next question in queue.
And our next question in queue coming from the line of Rommel Rockies with lifestyle capital. Your line is now open.
Hey, guys. Thanks for taking the questions.
I was just wondering if you could touch a little bit on the initial utilization levels at north well and spectrum health maybe help us.
But arent.
Think about the revenue generation from these IBM moving forward.
First of all the.
We have not indicated specifically from each one of the IBM.
I will add or I will say couple of things that discussion with one of the IBM.
That we have already installed and receive the money last year.
The.
The agreement or the extension of the agreement for next year.
With much higher revenues coming from the IBM in terms of the north well.
This is a continuous dialogue.
We have.
Over the I think a few hospitals that were already installed as part of the project.
North well I would say is more than just an IBM.
They are kind of strategic.
IBM that we work with that.
Jointly develop some.
Applications are.
We jointly develop some.
Business models and intended use of the AI applications, we are planning to adapt and install all the applications that we have we are as you know we have two in place and a few others are coming soon.
And lastly.
Last but not least we are in the final process of it.
Developing.
The business the future business model that will help us to indicate what is the value that we bring to the IBM to the insurance company. So there is a pharmaceutical company and to tailor made to each one of them like what would be the best model in order for our benefit to <unk>.
So the business, but also that they will enjoy from the added value of our services.
Got it okay. Thank you Rick.
Andrew.
And just one more sentence, we have not deemed as Eric said, we have not indicated the amount of revenue that we generate it or going to generate from those two projects.
Nevertheless, we have to bear in mind, both of the two projects that we have.
Ill population.
Got it no I appreciate that thank you.
More than one of our making can you talk a little bit more about the clinical trials that you intend to conduct in Israel and can you provide any color on trial design or what images cyclically Youll you guys are focusing on initially and what you did and how you intend to leverage that data moving forward now.
And the questions.
Well, we'll update as soon as we complete the.
To getting the samples and.
The one thing that we have indicated that we have received the Helsinki pyramid to conduct the clinical trials.
Ed.
The.
In one of the leading hospitals.
The system has already installed there the X Ray room is already installed there and we anticipate that the results of these trials will for us will generate simple of images multiple body Oregon's.
During this quarter the fourth quarter of 2022.
I do hope believe and anticipate that.
In the next earnings call, we'll be we'll have more to share about it.
Thank you and I'm showing no further questions at this time I would now like to turn the call back over to Mr will answer for any closing remarks.
So thank you all for taking the time to be with us.
For those of you who have actually more interest in that.
And what we have to show and.
And indicate.
Hope that next week will be.
And it will be good for those for.
For these people.
We'd like to see I think Q, all the investors for being with us and we.
We hope to fulfill our promises that.
Promises that we made to make everything happen and to really change the world and what we're doing.
Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect good day.
Okay.
The conference will begin shortly to raise Johan during Q&A, you can dial star one one.
[music].
Okay.
Okay.
[music].
Yes.
Yes.
[music].