Q3 2022 Hyperfine Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Good afternoon, and welcome to hyper funds third quarter 2022 earnings conference call. At this time, all participants are in listen only mode.
We will be facilitating a question answer session towards the end of today's call as.
I was reminded this call is being recorded for replay purposes.
I'd now like to turn the call over to the rest of the base and that's what relations for a few introductory comments.
Thank you for joining today's call.
Earlier Tonight Hyperfine released financial results for the fiscal quarter ended September 32020 to copy.
A copy of the press release is available on the company's website as well as E C Dot Gov.
Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.
Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.
All forward looking statements, including without limitation those relating to our operating trends and future financial performance expense management expectations for hiring physician training and adoption growth and our organization market opportunity commercial and international expansion regulatory approvals and product development are based.
Upon our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our 10-Q filed with the Securities and Exchange Commission on August 11 2022.
This conference call contains time sensitive information and is accurate only as of the live broadcast today November 10 2022.
Hyperfine disclaims any intention or obligation except as required by law.
Theta revise any financial projections or forward looking statements, whether because of new information future events or otherwise and with that I will turn the call over to Maria <unk>, President and Chief Executive Officer.
Good afternoon, and thank you all for joining us I am honored to lead today's call as the new President and Chief Executive Officer of hyper planes on the call with me is our Chief Financial Officer, along with Scott on our executive Chairman Scott Pumpkin.
I will start my remarks by sharing the good news we placed 10.
In the third quarter, driving all time quarterly revenue of $2.3 million and we drove great discipline in spending successes, which had credit too Scott who stepped in as interim CEO . Shortly after Dave's departure and has enabled a very smooth transition.
In my first two weeks in the role.
To a broader hyperfine team we.
We will discuss with quarterly results in greater detail shortly.
We do that I would like to briefly share. The reasons are compelled me to take this position with Piper fine and lead the company into our next phase of growth.
I have spent the better part of the last 30 years, introducing disruptive on pioneering technology to address large markets with significant unmet patient needs from the early days metal thin.
And thrombectomy devices to cardiac boosting condensation therapy for heart failure, and I I'm no stranger to hyperfine, having served on the board of directors is late 2021.
I believe our addressable market is very large.
Our initial clinical use focus in neuro critical care anthro are very substantial global opportunities.
Im confident our business is poised for expanding adoption with the right team in place and a strong foundation of independent clinical research as well as a growing base of positive provider and patient experiences and testimonials, we the two systems.
Our vision is to transform healthcare by accelerating and broadening access to clinically valuable diagnostics and actionable data of the patient bedside today bring diagnostics, our coffee oftentimes not readily available and require planning and scheduling.
Michigan is to expand imaging and diagnostic capacity with our soup portable that site MRI system by providing a point of care tool, especially in critical care situations.
Circumstances in which magnetic residence is superior to noncontract computed tomography or <unk> scanning and in environments, where patients do not have access to imaging.
Although it remains early in our core of our commercial trajectory I am confident we are taking the right steps to do so.
As we have noted in the past, we see our greatest near term opportunity to improve patient care in neuro critical care followed by truck.
Patients in the ICU for neurological conditions experienced a variety of challenges when it comes to getting an MRI.
Patients are typically too unstable to transport transport to the MRI suite for imaging at the time it takes to get the imaging completed can be prohibitively long on the process can consume valuable resources, especially in the current staff constrained health care environment.
Simply not an effective way to perform MRI imaging for Bureau, ICU patients to date.
We have been working with our clinical partners to build strong clinical validation to support the neuro ICU you escape.
We also remain focused on building our base of clinical data in stroke.
Rather demonstrates that MRI scans and better detect ischemic stroke damage compared to see discounts.
And we are continuing to leverage research to build awareness of the value of soup is the detection and evaluation of these devastating events in patients' lives.
It's basically search includes the independent publication by our partners at Yale and Harvard Mass General in Science advances earlier, this year, which concluded that soup enable highly accessible and dynamic that site evaluation premixed stroke by obtaining actionable threat side neuro imaging in <unk>.
<unk> patients.
The authors highlighted the safety and convenience affordable low field MRI as a team to expedite the stroke treatment pathway and concluded that results validated the use of low field portable MRI to obtain clinically useful imaging stroke setting the stage for broader use.
We are continuing to engage multiple U S hospitals to collect data demonstrating the clinical value of soup in stroke patients as we gather.
Later clinical data that we will increase our focus on driving awareness and education in the field about soup utilization for the stroke use case.
We are excited to share that we will soon be commencing a stroke study three leading U S institutions, and we look forward to sharing our progress overcoming quarters in.
In addition to this effort we are advancing important technology initiatives, including refining our software programs and enhancing our AI capabilities to optimize our sequences.
For our use cases.
Our R&D team has been hard at work toward improvements already and we expect this to remain an area of focus into the year ahead.
Turning to our recent commercial progress as I've mentioned earlier, we stopped 10 commercial systems in the third quarter of 2022, driving record quarterly revenue of $2 $3 million.
We are pleased that we have continued to develop and enhance our customer relationships working closely with critical care clinicians intervention, all neural radiologist and neurosurgeon alongside radiology and hospital executives all influential stakeholders to rollout a successful new programs.
Replacement.
It is worth mentioning that the introduction of two creates an initial change in workflow and protocols for our customers something that takes time and effort across stakeholders.
Entering 2023 with a clear roadmap of technology iterations enhancements from the experience of our initial users as well as ways to optimize our go to market strategy. Our team is aligned and ready to execute and we will continue to learn from our market experience and further refine our plans.
To improve our execution and drive continued success.
To this end we remain focused on our initial clinical use cases, and as we grow and expand we also learned we are committed to being very responsive to market feedback to drive adoption and use of soup across multiple applications in clinical settings.
Although the time to close sales as proven longer in the current operating environment, we continue to expand our commercial footprint to cultivate opportunities in our pipeline for quarters ahead.
For example in August we announced that we had received a signed letter of intent for seven commercial units from BJ see health care income fluid one of the leading hospital systems in the U S.
We are pleased to share that we have now begun delivering the system.
We also shared that we have received a letter of intent from Kings College, London to order 20 commercial system in association with the Bill and Melinda Gates Foundation. We have now received the final purchase order for two systems and expect to begin shipping some of these units.
Upcoming months.
Before I turn the call over to a long I would like to reiterate our Sam Bruce since months, which has seen that keep in market conditions and the elongated sales cycle. We are focused on investing in our business thoughtfully with a focus on driving near term and intermediate term growth while.
Indeed, our cash runway.
Feel good about the momentum we are building for sales growth in 2023, and 24, and we're continuing to prioritize our R&D clinical and commercialization spending in that order.
We will be diligent in our Opex planning, while investing where we see potential for the greatest growth.
And as part of the prioritization of all projects and expenditures as we have previously communicated we are actively assessing strategic options preliminary our brain sensing platform, which is the early stages of development.
With a view towards maximizing shareholder value creation across all of Hypersound.
In summary, we are pleased with our progress toward achieving our long term goals.
I will now turn the call over to <unk> to review, our third quarter performance and financial outlook in greater detail.
Thank you Maria.
Turning to our financial results for the third quarter of 2022.
Revenue for the quarter ended on September 32022 was $2 $3 million.
Compared to <unk> 7 million in the third quarter of 2021.
Gross profit for the third quarter of 2022 was <unk> six $9 million, reflecting the gross margin of 29, 3%.
This compares to negative three 4 million of gross loss in the third quarter of 2021.
R&D expense for the third quarter of 2022 was $7 3 million compared to $6 4 million in the third quarter of 2021.
Sales general and administrative expenses for the third quarter of 2022 was $6 6 million.
Appeared to $9 6 million in the third quarter of 2021.
Net loss for the third quarter was $13 2 million.
Equated to a net loss of <unk> 19 per share.
As compared to a net loss of $16 4 million or a net loss of $8 70 per share for the same period of the prior year.
Our cash burn in the third quarter was $12 6 million and we ended the third quarter of 2022 with $132 $5 million in cash and cash equivalents.
We expect our go forward quarterly cash burn rate to be slightly higher.
We take strategic steps to expand our base of clinical evidence and stroke and optimize about technology as Mario described.
While the wildfires in the organization and managing the business to maintain our cash run rate through year end 2024.
Turning to our 2022 outlooks.
Our progress and current trends in the business, we continue to anticipate installing between 35% and 45 commercial systems in 2022.
In conjunction with our system placement expectations, we are maintaining our full year revenue expectation for revenue in the range of $7 million to $8 million.
We now anticipate total net cash burn of $70 million to $75 million for the full year relative to $70 million to $80 million expectations. We had previously provided.
We are pleased to continue prioritizing fiscal discipline as we focus on investments in our business, which offer the greatest growth return potential.
At this point I would like to turn the call back to Murray for closing comments.
Thank you <unk>.
As I look out for quarters and years ahead, I want to reiterate my confidence in the immense value of hyper clients differentiate the technology and the compelling feature of our business.
We believe in enabling better patient care through our portable soup point of care imaging tool and we are determined to continue delivering high quality imaging across multiple use cases.
Starting with the neuro critical care and stroke.
With our early success marked by a total global installed base of 102 systems to date, we are setting the stage for affordable point of care imaging to transform life and enhanced patient care around the world.
With that I want to thank you all for your time today and opening it up to any questions.
If you'd like to ask a question. Please press star one one.
Our first question comes from Larry Nicholson with Wells Fargo. Your line is open.
Good afternoon. Thanks for taking the question can you hear me okay.
Yes, we can.
Great Marie.
Welcome and congratulations on the new role and.
And on a strong start here.
Thank you.
So I guess if this is your first call I'll ask you.
High level question.
Are your priorities over the next call it 12 months or so and what changes are you making.
To hear a little bit more color on the.
On the operating expense savings, which were came.
Came in meaningfully.
Meaningfully below where you were last quarter, and then I had a couple of follow ups.
Sure.
So.
We're clearly narrowing down on our clinical use cases that our highest priority brands have the team focused on making sure that we have the right programs anywhere from the RMB two clinical to commercial to really take full advantage of that neuro critical care opportunity followed by stroke.
So we are really prioritizing everything we're doing in the company are on those two clinical use cases really market opportunities.
I'm also trying to scrutinize everything we're doing to make sure that we don't have unnecessary complexity that some of the other projects that in the past may have been.
Supported that may be a little deemphasize, they just need to be agreed the prioritize so that we cannot allocate our resources and drive the discipline around our focused execution and the discipline around spending so that we really can extend our cash runway to be able to do is all the great things we can do.
<unk> been in the market in the in the quarters ahead.
That's very helpful.
And the status I wanted to ask about the seven orders.
From.
From a barge from Barnes Jewish in 'twenty from King's College Whats the timing of those 27 units should we expect something in the fourth quarter.
First in 2023.
You add some color on the pipeline of deals in general the press release talked about.
<unk> pipeline and I still have one follow up if that's okay.
Sure. So I don't think we're going to be very very granular with really the makeup of.
Our shipments on our revenue, but those two units are meaningful to us and they are going to be executed here over the next several quarters, so sort of willing to all of 2023.
An appropriate sort of pretty steady cadence of shipments.
That's helpful and just lastly, just on the guidance here I'm sure.
You anticipated the question, but the guidance at the midpoint.
Implies flat sequential system in revenue sales in the fourth quarter, which is typically the strongest capital quarter of the year. So should we be thinking about the high end of.
The guidance ranges here. Thanks, so much for taking the questions.
Sure.
I'll, let you comment on that if you if you want.
Yes.
Larry that is correct that this is a high point in the capital cycle, but but in our case.
Still the team is still <unk>.
Turning a lot of from the customer request customer needs and the clinical use cases and given the two holiday time.
With the Thanksgiving and Christmas is coming up.
We still think that it will be it will be more like flat and not on the high end.
For this particular fourth quarter.
Alright, thanks, so much I'll, let some others jump in here.
Sure.
Our next question comes from Vijay Kumar with Evercore ISI. Your line is open.
Hi, This is Kevin on for Vijay from Evercore.
I wanted to follow up a little bit on the implied <unk> guidance. So.
You're still expecting mid point of guidance is there any conservatism baked in there.
Or are you seeing any changes in the market, especially given the 10 system placements in the quarter and the gross revenues.
No Kevin.
As I mentioned on the previous question. It is we are not seeing any changes in the market. It's just that the cycle.
The sales cycle for us continues to be a little bit elongated.
It's not a conservative number this is what we think is more realistic.
For two quarters back to back.
The midpoint shows midpoint implies that we will have another 10 units in Q4, and which will show a sequentially 10 years for this quarter in 10 years for Q4.
Makes us much more.
Much more comfortable given the holiday schedules and the long elongated sales cycles.
Got it and to follow up on your sales pipeline.
We.
To hear a financial pressures on hospitals and hospital budgets are you hearing anything new from customers and as we are.
Approach, the new year or any changes in their purchasing some priorities.
So I mean, you're hearing that from everyone. Because it is the reality of their living with.
Probably the biggest challenge for us.
Around just the staffing constraints on the ability to get access to the accounts go through evaluation and missed the cycle along quickly so it's not about that.
I need to take more of a win.
If I can if I can phrase it that way.
Im very confident in our pipeline. It is still early in our trajectory to be highly confident win every deal calls we also have a relatively.
Young team. So we're trying to get our arms around how they also forecast on how they plan, but it is really staffing and really the axis on the time, they can give to some of the new technology evaluations and then also when when we when we deploy a system implementation side, so not the east.
But more of the win in terms of capacity and attention.
Got it thank you.
Sure.
Our next question comes from Neil Chatterji with B Riley Your line is open.
Yes.
Hi.
Welcome Maria and thanks for taking the questions.
I guess first off can we.
I was just curious in terms of the sales funnel all the.
Elongated sales cycle I was just curious.
Yes, just the complexity around the kind of changing the workflows.
How that impacts the cycle.
So.
Let me make sure I understood. Your question correctly, how the elongated sales cycle.
Affects our ability to change the workflow is that your question kind of the other way around.
Okay in terms of just the planning for the change workflows.
So if it comes on the back end up getting the PEO and shipping the unit and get into unit in place. We are right now have a system.
We go through something we call the hyper week remember, we have a dedicated team, which we call the customer success team, which follows behind the sales team to really be all about deploying and working with our staff in training them and slowly.
Getting them to change their work orders of their workflow.
Let's say that that is probably the area, where we are placing most focus commercially speaking now we.
We are hiring additional people, we're also hiring people with more <unk>.
Background to be more effective in that implementation of the system. So that we can get from deployment of the system to routine utilization faster does that address the question.
Yes, that's helpful color.
And then I guess.
Separately, just a follow up.
Just curious about the <unk>.
Any update just kind of.
Regarding next steps.
AI partnership.
You heard kind of a combined solution there and I'm just trying to get the volatile development applications for stroke.
So at this point, we're still working through sort of the technical work to do.
Integration of the two systems to be able to have some things that we can start presenting to customers.
We are going to be sort of.
On somewhat of a partner display at the upcoming RSA conference, where our system is going to be referred to on this AI and boost and vice versa, and we're working towards hopefully having somewhat of a working prototype of how the two systems.
Talk to each other here relatively soon.
Great that's it for me.
Thank you.
Our next question is a follow up from Larry Nicholson with Wells Fargo. Your line is open.
Hey, guys. Thanks for taking the follow up just two for me one.
Asps and gross margin were relatively high in Q3.
Much higher than Q2.
Why were Asps, so high this quarter and how do we think about.
Those two.
<unk> going forward and I had one on.
Additional questions.
Yes.
Thanks for that question, Yes, Youre right. Our Asps. If you if you recall in Q1 were 108000 in Q2, it went up to 130, but when we changed the pricing.
The beginning of the year, we were consistently messaging that all of the ft transition will happen in Q3, and our average asps will be closer to $200000 start in Q3, which is where we are close to it I mean, the ASP for Q3 is 194 and if you recall from our last call I talked about the legacy.
System works in new pricing systems.
Most of the legacy systems are out of.
Alibaba system at this point there is no more legacy systems, which we are.
Working through with our customers. So you will see continued improvement on our ESP on first hitting the 200000 milestone and then continue to go higher from there.
And gross margin also areas we had projected.
Going into the year that our gross margins will turn positive in the second half of the year and this quarter proves that.
That's helpful.
And the just the standard 2023 question here, obviously, I know youre, not giving guidance, but is there any maria or look any.
Any framing questions or color commentary you can provide on.
How to think about next year.
Growth top line growth or margins any any reaction to consensus.
So much.
So as you as you have this.
Debated at this point, we're not ready to talk about 2020, you can expect obviously.
As our teams deliver on Q3 and already delivered in Q3 as we deliver on Q4 we.
We do anticipate continued growth in 2023 as well.
And continue to improve the gross margins, Joe Hey, Larry Scott here, just kind of building on that.
Comments from last quarter.
The kind of the baton off to Maria here and that is that we.
We see we see ourselves growing.
At nice rates next year at the same time, we're working in the early adoption phase of the market.
<unk> basically ICU.
Not yet really stroke and so there are key product enhancements and approval.
<unk> software upgrades that will happen and you'll you'll see announcements over the next six to nine months there'll be new clinical studies, starting in clinical data that will come out.
Six 912 months all of those things in combination with <unk>.
Continued maturity of the sales force I think means.
It means that 2023.
As a transition year in our growth of product clinical sales force maturity Theres still growth for the company.
After that that we see really an inflection more toward business as we go forward as I talked about and in that period of time really managing expense very very tightly to push.
Our burn and our cash lease out.
To the end of 'twenty four if not 25, and we will have more of an update of that with our guidance that we gave after the first of the year. The other thing that was mentioned was pricing.
Yes.
Capital markets and hospitals are tight, but I don't I don't see that as our as our biggest issue is not really much of an issue. It's more about we're in the early adopter phase of the market people really see the need we just completed a big a market research study with third party validates the size of these first two markets or sub.
And so you can build $1 billion company.
Around those two markets alone and we have other applications beyond that.
The researchers come back.
There is room for pricing.
Expansion as well people are getting hung up on our pricing.
Think theres, an opportunity, which will look at to increase price, which along with our cost position, but expansion of gross margin.
Sure.
Into disposable kind of like gross margins of medical device companies as we move forward.
Got it.
Ridiculous volumes, so thats, a little bit of color on.
<unk> 23, and as you go into 'twenty four.
That's helpful.
Lord and kind of the.
Prior acting CEO , there for three or four months.
Let me just thanks for that Scott, Let me just ask one follow up on your enhancements and approvals for the next six to nine months commentary what are what are the kind of two or three.
Enhancements and approvals that are most significant that we should be paying attention to.
Sure so.
The last approval that we got was a hardware approval, which is what we've called our one nine system.
Two pretty significant software improvements to that which are right now in testing with some pay downs site.
They are all about really getting us much readier to where we need to be on our images for detection of stroke. So after we go through this sort of fast efficient preference testing or better run would be able to give you better visibility, but expect dosing in the first half of next year.
There is a setup.
Deep learning and AI tools that continue to make further improvements to our.
Really it's about the image quality image consistency and image reliability, but primarily towards the stroke use case. So those will just continue at a pretty good cadence all throughout 2023, and that's part of the you asked me I think first question might focus on my priority is making sure that all of those projects are appropriately <unk>.
Source and prioritize.
So.
That's what so it's less on the hardware side, it's more around the software and AI, which have the merit of being relatively rapid enhancement.
We have a good set of data size. So we get very quickly direct feedback on clinical use and clinical utility and compete that right back to engineers and keep moving the ball along we also have a really strong track record with the FDA on the quality of our submissions and the predictability of our submission.
So I really feel very good about our capability. There is just making sure that all the right people are working on just the right thing.
The good thing here is these are not our projects. These are getting projects, there's a high degree of confidence.
From our engineering teams on it.
These improvements the other good thing is it's not linear like you do as that trial or a valid trial.
I come up with a new valves now I got to go.
Due to this trial no you just take the data from images you already have and you run it through any kind of a before and after and you can do the assessments and show the improvements in sensitivity and specificity of diagnosis. So things can move much faster.
With these software upgrades.
Alright, thanks for all the color and taking all the questions.
Sure.
Thank you.
There are no further questions I'd like to turn the call back over to Maria <unk> for any closing remarks.
Thank you. Thank you for joining us today and look forward to speaking with you all next quarter.
Thank you for participating in today's program you may now disconnect everyone have a great day.
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