Q4 2022 Hyperfine Inc Earnings Call
Speaker 1: You
Speaker 2: Thank you for standing by and welcome to Hyperfine's fourth quarter and full year 2022 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question at that time, please press star 11 on your telephone.
Speaker 2: As Ramona, today's call is being recorded. I will now turn the conference to the host, Marissa Bysh, of the Gilmartin Group. Please go ahead.
Speaker 3: Great, thank you for joining today's call. Earlier today, Hyperfine Inc. released financial results for the quarter and year ended December 31, 2022. A copy of the press release is available on the company's website as well as sec.gov.
Speaker 3: 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.
Speaker 3: 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, training and adoption, growth in our organization, market opportunity, commercial and international expansion.
Speaker 3: regulatory approvals, and product development are based upon our current estimates and various assumptions.
Speaker 3: These statements involve material risks and uncertainties that could cause actual results or events to materially differ.
Speaker 3: 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 latest periodic filing with the Securities and Exchange Commission.
Speaker 3: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 21, 2023. Hyperfine Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.
Speaker 3: And with that, I will turn the call over to Maria Saines, President and Chief Executive Officer.
Speaker 4: Good afternoon, and thank you all for joining us. On the call with me is our Chief Administrative Officer and incoming Chief Financial Officer, Brett Hale.
Speaker 4: 2022 was a year of significant technological, clinical, and commercial progress for Hyperfine.
Speaker 4: I am pleased to share that we recognize $6.8 million in revenue for the full year, driven by the sale of 35 commercial soup systems. We also received multiple clearances for next-generation hardware and software upgrades, so our technology highlighted in dear
Speaker 4: publications and 50 peer-reviewed presentations at neurology and imaging meetings, and strengthens our existing partnerships while establishing new relationships with several sites and hospital systems.
Speaker 4: In addition to these initiatives, we have right-sized our business and implemented spending discipline to extend our cash runway through 2025, including the cessation of the liminal brain sensing program and associated positions.
Speaker 4: I am very proud of what the Hyperfine team has accomplished in its first full year as a public company, a year of dynamic change internally and in the marketplace.
Speaker 4: Before turning to our 2023 priorities, I would like to provide greater detail on a few of these recent achievements.
Speaker 4: First, on the R&D side, we continue to advance the field of ultra-low field MRI and have strengthened image quality through multiple FDA-cleared, AI-powered software upgrades.
Speaker 4: These software upgrades enable improved image quality, greater consistency, and robustness to motion across key brain imaging sequences for neurocritical care applications.
Speaker 4: In mid-2022, we also launched a partnership with this AI, a leading AI-powered disease detection and intelligent care coordination platform to continue enhancing our diagnostic imaging capabilities as we advance our mission to provide transformational...
Speaker 4: accessible and clinically relevant diagnostic imaging.
Speaker 4: This partnership will take us to pilot evaluations in a small number of key sites in 2023.
Speaker 4: Turning to our recent commercial progress, in 2022 we strengthened several key partnerships and customer relationships, yielding new multi-unit contracts.
Speaker 4: For example, as we shared in the fall, we received a purchase order from King's College London for 20 commercial systems in association with the Bill and Melinda Gates Foundation.
Speaker 4: We began delivering these units in the second half of 2022 and expect to ship the remainder of the units over the next 1-2 years.
Speaker 4: We also announced a signed letter of intent for seven commercial units from BJC Healthcare in St. Louis, one of the leading hospital systems in the United States.
Speaker 4: We began placing these units in 2022 and expect to ship the remainder over the course of 2023.
Speaker 4: I am also pleased to share that we have completed a restructuring of our U.S. sales team while re-engineering our sales and clinical support processes. We have appointed new leaders in both the sales and the clinical support groups who are focused on instituting a seamless workflow from pitch to purchase order and from purchase order to routine use.
Speaker 4: We are blazing new trails with the introduction of our soup point-of-care MRI system, and we now understand the need for buy-in across multiple stakeholders with complex properties. Our fourth quarter results of $1.4 million in revenue and five commercial soup systems...
Speaker 4: reflect learning and addressing these processes, as well as some distractions due to the restructuring and right-sizing of the team, and recruiting and onboarding of new talent.
Speaker 4: Our team is now substantially in place and the strongest it has ever been. Mean and hungry with the right experience and determined focus on execution.
Speaker 4: This team is coming up on the learning curve, continuing to build relationships and driving new contracts. We remain optimistic in our commercial pipeline for the future.
Speaker 4: Additionally, as part of our commitment to meeting the highest standards for data protection and information security, we are pleased to announce that our key platforms have achieved the rigorous high-trust risk-based two-year certification.
Speaker 4: We believe this will streamline the information security reviews associated with contracting and hospital implementation. This brings me to our priorities for the year ahead.
Speaker 4: As we progress into 2023, we are focused on three strategic pillars, innovation, clinical evidence, and commercial expansion with a strong focus in the United States.
Speaker 4: On innovation, we are entering the year with a clear roadmap of technology iterations and enhancements to continue improving image quality as well as the provider and patient experience with truth.
Speaker 4: For example, we recently announced the receipt of two FDA 510K clearances for AI-powered software updates to the soup system. This upgrade significantly enhanced efficient weighted imaging or DWI quality and increased the signal-to-noise ratio, further advancing image quality standards in this new ultra-low field point of care.
Speaker 4: Over the course of the year ahead, we expect to receive additional clearances to further advance both image quality and usability of the soup system.
Speaker 4: On clinical evidence, we continue to focus on supporting the adoption of soup in the neuro critical care setting with plans to expand into stroke imaging later in 2023. The company is also exploring other areas of both adult and pediatric brain imaging.
Speaker 4: through research collaborations with leading institutions. The volume and breadth of presentations and publications covering SEWP's clinical utility and cost-effectiveness data is encouraging, and we're excited to continue building on this momentum.
Speaker 4: In the field of stroke, we have been seeing independent data and presentations that support stroke value proposition.
Speaker 4: At the International Stroke Conference in February , we were pleased to see new data showing the potential for soup to provide critical brain imaging following thrombectomy in rotation.
Speaker 4: The presentation concluded that soup could be used to facilitate a post-treatment baseline for post-proteomectomy stroke patients to evaluate the impact of potential changes in blood pressure and heart rate that may impact ongoing brain injury.
Speaker 4: This validation of the value of soup in providing imaging where conventional methods may not be available is promising.
Speaker 4: The major clinical initiative for Hyperfine in 2023 will be the Action PMR project.
Speaker 4: ActionPMR is a global, multi-center evaluation that will assess the use of the soup system in the acute stomach stroke use case.
Speaker 4: And we are fortunate to be working with prominent, experienced, and passionate clinical teams in the field of stroke as they set up the foundation for this study.
Speaker 4: Enrollment is expected to begin in mid-2023, and we are excited to take this important step towards advancing the use of soup in-stroke imaging.
Speaker 4: Tipping to commercial expansion, as I described earlier, we have made several changes within our commercial organization in recent months to optimize our focus towards the greatest growth opportunities for our business.
Speaker 4: First, we have refocused our team on the core U.S. market opportunity, building relationships and executing contracts with U.S. hospital systems with a specific focus on multi-system placement opportunities.
Speaker 4: We have also made changes within our sales and clinical support teams, bringing in high-performing experienced capital equipment salespeople and placing greater accountability at the sales leadership level. These teams are coming up the learning curve, working in strong collaboration to ensure increased adoption.
Speaker 4: successful implementations, and to drive routine use at all of our sites.
Speaker 4: and they are now aligned and ready to execute. I look forward to seeing the progress that we will drive with existing and new customers this year and beyond.
Speaker 4: We will maintain our international footprint, which is currently small, through distributors in Canada, Australia, New Zealand and Pakistan, in addition to our global partnership with the Bill and Melinda Gates Foundation. We also see several compelling opportunities to grow our international presence long term.
Speaker 4: Related to this, we're excited to have recently received CE marking, which provides with the opportunity to expand our presence into the European economic area. That said, we're making the choice to launch in Europe later in our commercial life, beyond 2023, as we remain focused on the US as our number one commercial priority.
Speaker 4: in the near to intermediate term. Alongside these initiatives, we remain laser focused on spending discipline. We continue to operate lean and implement initiatives in support of cash runway extension while investing in our three key pillars of innovation, clinical evidence and commercial expansion.
Speaker 4: We currently see a TASH runway for the business through 2025.
Speaker 4: Now, turning to our 2023 Revenue Outlook, we are initiating revenue guidance for the full year in the range of $10 to $14 million.
Speaker 4: In line with our disciplined approach to spending, we are also initiating guidance for cash burn of $40 to $45 million in the full year 2023. I want to reiterate that our fundamentals of soup are access and affordability.
Speaker 4: Through our commercial progress over the past two years, we know that our value proposition with customers is strong and that pricing is not a key barrier to soup adoption. As a result, we are continuing to increase pricing for the soup system. Our guidance reflects the continued gradual increase in the soup average selling price in 2023 relative to 2020.
Speaker 4: to 2022.
Speaker 4: I will now turn the call over to Brett Hale, our Chief Administrative Officer and Incoming Chief Financial Officer, to review our fourth quarter and full year performance and discuss the financial outlook in greater detail.
Speaker 5: Thank you, Maria. Turning to our financial results for the fourth quarter of 2022, revenue for the quarter ended December 31, 2022, was $1.4 million, compared to $0.4 million in the fourth quarter of 2021.
Speaker 5: Gross margin for the fourth quarter of 2022 was 0.3 million compared to negative 0.5 million in the fourth quarter of 2021.
Speaker 5: R&D expenses for the fourth quarter of 2022 were $5.2 million compared to $8.9 million in the fourth quarter of 2021. Sales, general, and administrative expenses for the fourth quarter of 2022 were $8.7 million compared to $16.7 million in the fourth quarter of 2021.
Speaker 5: Net loss for the fourth quarter was $13.1 million, equating to a net loss of 19 cents per share as compared to a net loss of $26.1 million or a net loss of $13.79 per share for the same period the prior year.
Speaker 5: Now turning to the results for the full year 2022. Revenue for the full year 2022 was $6.8 million compared to $1.5 million in 2021.
Speaker 5: Gross margin for the full year 2022 was 0.9 million compared to negative 1.2 million in 2021.
Speaker 5: R&D expenses for the full year 2022 were $28.2 million compared to $25.8 million in 2021.
Speaker 5: Kales, General and Administrative Accesses for the full year 2022 were $46.6 million compared to $37.9 million in 2021.
Speaker 5: Net loss for the full year was $73.2 million, equating to a net loss of $1.04 per share, as compared to a net loss of $64.9 million, or a net loss of $17.57 per share for the prior year. Net loss for the full year was $13.4 million, equating to a net loss of $12.9 million, equating
Speaker 5: Cash-to-cash equivalents pulled $117.5 million as of December 31, 2022.
Speaker 5: Turning to our 2023 outlook, based on our progress and current trends in the business, we are initiating full year expectations for revenue to be in the range of $10 to $14 million.
Speaker 5: As Maria mentioned, the swoop value proposition with customers is strong, and increased pricing, as the company announced in 2022, has not been a main barrier to adoption.
Speaker 5: Going forward, we will not be providing an exact average selling price or unit volume expectation, but our guidance is predicated on the assumption that SWIFT's system pricing will continue increasing in 2023 relative to 2022.
Speaker 5: To help you with modeling, please note that we currently expect our second half of revenue to be stronger than our first half as our new sales team continues to drive the pipeline. For the year, we expect gross margins to be approximately 40%.
Speaker 5: And lastly, we anticipate total cash burn of 40 to 45 million for the full year 2023. This incorporates some expectations for continued investment in R&D and substantially streamlined investments in SG&A while maintaining customer-facing resources to continue to drive adoption and growth. In line with this, we are allocating a greater relative portion of off-ex spending.
Speaker 5: to R&D in 2023 versus prior years at approximately 40 to 50 percent of total OPEX dollars.
Speaker 5: We will continue to focus on our three strategic pillars and maintain spending discipline as we realize the benefits of our current rightsizing and reorganization.
Speaker 5: As Maria mentioned, we are later focused on U.S. commercial expansion.
Speaker 5: As I've come on board, it is clear we are completing a substantial reset of how we operate, including the team that we have in place.
Speaker 5: which has caused a near-term disruption but presents a worthwhile trade-off for laying the right long-term foundation. I would like to reiterate that we are excited about the momentum we are building for the remainder of the year and beyond and that we are pleased to have the cash and flexibility to invest in the right areas and afford the business the right runway to execute post reset.
Speaker 5: At this point, I would like to turn the call back to Maria for closing comments.
Speaker 4: Thank you, Brett. I am immensely excited to be leading Hyperfine into the year ahead. Before wrapping up, I would like to highlight the positive feedback received from one of our customers during the recent educational webinar hosted for our commercial Titan Prospect.
Speaker 4: This customer noted increased operational efficiency and improved workflow with SEWP as the system is alleviating the challenge of limited MR capacity and reducing turnaround times at their hospital. He also noted an expectation for the hospital to recognize a positive return on investment in SEWP in a short period of time. The company also noted increased operational efficiency and improved workflow with SEWP as the system is alleviating the challenge of limited MR capacity and reducing turnaround times at their hospital. He also noted an expectation for the system to recognize a positive return on investment
Speaker 4: and expanding access to diagnostics for hospital systems by complementing their conventional MRI workflow.
Speaker 4: With our early success marked by a total global install base of over 100 systems to date, we are setting the stage for accessible and affordable point-of-care imaging to transform care delivery and continue enhancing healthcare around the world.
Speaker 2: With that, I want to thank you for your time and open it up to any questions. Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star 11 on your phone. Again, to ask a question, please press star 11. One moment, please, for our first question. Our first question comes from Larry Beigleson of Wells Fargo. Your line is open.
Speaker 6: Good afternoon. Thanks for taking the question. Maria and Brad, can you hear me okay?
Speaker 6: Yes, we can. Hi, Larry. Oh, good. Hi. So let's start with Q4. It's usually the strongest quarter for capital businesses, but you came in a little bit below, at least on the revenue side, the low end of your guidance range. I think you're at the low end.
Speaker 6: of the capital, the placement guidance. So you talked a little bit about disruption, Maria, from the Salesforce organization changes. Could you just talk a little bit more about the trends you saw in Q4 and why we saw you come in a little bit below the revenue guidance?
Speaker 4: Sure. So, as I said, I think there was a little bit of distraction because we made a very significant number of changes in our sales leadership and really our sales team overall. We have about two-thirds of all sales and quota-bearing people now that have been
Speaker 4: the deal closed in the fourth quarter and things have continued to play out over the course of the subsequent weeks. I also would say, Larry, that although it is true that there is a strong push for capital to wrap up the year strong, I'm not sure that I would put us in the same bucket as all other big capital.
Speaker 4: Purchases in that we are a brand new category to most of the administrators and the budget. So we're not a budget line per se. So I think we follow a little bit of our own. Rhythm in a way, and I didn't see that that need to really get things into into the finish line from the.
Speaker 4: the hospital perspective before the end of the year. But I would say organically, I think we, not purposefully, but we created some transition and some disruption to make sure that we were starting the year with the right people in the right seat and the right seat on the bus. That's helpful. That's it, transitioning to 2023 and the guidance.
Speaker 6: Tell us why you're confident in the 10 to 14 million, given that the Q4 run rate is below that. What needs to happen for you to hit the guidance? What are you assuming for the two large orders that you announced that you talked about on this call?
Speaker 6: And just lastly on the guidance, if by math, Brett Wright, that OPEX is going to be about $50 million for 2023 to get to that burn rate, which would be a pretty steep decline from 2022. Next, guys. Sure. So let me take the confident part of the question.
Speaker 4: the quality of our pipeline of deals, the breadth of our pipeline of deals, and then the scrutiny around the deals as they progress through the different gates any of these deals progresses through is very strong. We do have all positions filled now with what I believe is the right profile of people, and I'm starting to see the green shoots of really the amount of deals that are in the pipeline, the distribution of those deals across all of the geographies.
Speaker 4: the discipline around the execution on the deals. So that gives me the right confidence around how I see this year panning out. It is also true that it does take about six months or so for any one of our brand new people to come up on the learning curve and to hit their stride.
Speaker 4: So that is why we expect the second half to be stronger than the first half. But I have a lot of confidence with the leadership we've put in place, both at the national level, at the regional level, the quality of the individuals we're hired and what I'm seeing in terms of the quality, the breadth and the depth of the pipeline that is progressing here as the weeks go on. And I'm going to let Brett comment on the outbreaks. I'm going to let Brett comment on the outbreaks.
Speaker 5: Hi, Larry, this is Brett. So in regards to the guidance we're giving, we gave guidance regarding the cash burn, which will have 40 to 45. We're going to be managing to our cash burn. Obviously, there's some elements of variable spending, depending on the range of revenue, but you are correct. The object is going to step down significantly from our Q3 2022 basis into 2023.
Speaker 5: And that's a direct reduction from the reorganization that we've done, as well as our prioritized spending.
Speaker 4: I was going to just comment that that prioritized spending is an important commentary because I believe we have been able to reduce spending without compromising the must-have spending. So the critical projects around innovation, the critical projects like the action PMR.
Speaker 4: clinical evaluation and customer facing and quota bearing headcount that are really critical to feed those three pillars that I feel strongly are the right balance of priorities for our business this year.
Speaker 6: And Brad, any color, I know you're not giving placement guidance, any color on device versus service split in that 10 to 14 million?
Speaker 5: We're not providing specific guidance, but there is obviously components of our revenue that's split between the device and service portion. We do have different ASPs for different geographies, so we're not breaking that out into detail at this point in time. We're no longer providing specific guidance or Log-On data for our Lyons daughter, she's
Speaker 2: All right, thanks for taking the questions. I'll let others jump in. Thank you. Thank you. One moment, please. Our next question comes from the line of Kevin Jalkwin of Evercore ISI. Your line is open.
Speaker 7: Hi, this is Kevin on floor just 1st on. Your gross margin guidance for the year, and just generally your long term targets of those margin improvement. Can you provide more color there? How much of. This improvement will be driven by.
Speaker 5: cost-saving initiatives versus increase in ASP? I think I want to let Brett take that. Yeah, so as reflected in our earnings call, we are going to see a gradual increase in pricing throughout 2023. We are going to get...
Speaker 5: a lift in benefit from the pricing benefit that we're seeing. Cost is obviously a laser focus for the organization, including the manufacturing costs of our product. I would say the third piece that's going to be a variable is just the increase in volumes over time. Obviously, we get efficiency as we scale the business. So those are the three levers, but we don't have an exact breakdown of the contribution of that. But those are the three things.
Speaker 5: So we've commented on our optics that we are actually continuing to invest significantly in our R&D. Maria mentioned the clinical evidence, the innovation that continues to be a priority focus. Most of our cost savings has been about running an organization that's very efficient and lean.
Speaker 5: And that cuts across the whole organization, but a majority of the savings probably come disproportionately from the SG&A side versus R&D given the increased investment we're making in terms of our percentage of OPEX to R&D.
Speaker 5: that cuts across the whole organization, but a majority of the savings probably come disproportionately from the SG&A side versus R&D given the increased investment we're making in terms of our percentage of objects to R&D. Got it. Thank you.
Speaker 2: Thank you. One moment, please. Our next question comes from the line of Neil Chaudry of B-Reilly. Your line is open. Fiance says, I'm evidencing a
Speaker 8: Just curious, in terms of the sequential drop here on the installs, just curious on how much of that was related to the higher ASP being a potential barrier. Just curious how much of a role that played and also if there's...
Speaker 4: potentially any sort of a bolus from potential installs in 4Q into the first quarter. Sure. Hi, Leo. So, pricing is not a barrier to adoption. I think we've said it a number of times, and I realize that I've been in the job now five months, and I'm still convinced.
Speaker 4: that is fully baked into our actual ASP. But that was not the reason for the softer Q4. I really think that part of the reason was that destruction that we created by the significant reorganization that we crammed into Q4 so that we could get...
Speaker 4: So it didn't really even factor in that much into Q4, although of course internally the team knew that that was the direction we were heading as we were looking into implementing it.
Speaker 4: And then as we go forward, so in terms of the bolus, I mean, things continue to progress. And I think I said it, we don't really – we have not lost fields. Fields get more complicated or just a little bit longer with different – you will see there we go.
Speaker 4: I can give you some examples where we had a contract in place and all of a sudden the buying group wanted to be the acquiring organization and that had a total restart on a contract at an institution where we're going to ultimately create multiple placements as well. So on the other two deals that we have that we have.
Speaker 4: associated with that either.
Speaker 8: Thank you for that. I might have misheard on the pricing aspect. Maybe just on the FDA clearances you've had recently, I'm curious if you've had any initial feedback on those updates and the enhanced capabilities on SWMP. Let me know in the comments below. Oh,
Speaker 4: what other updates we could expect kind of through the balance of 23. Sure, so yes, we have had feedback. I don't know if you know, but usually we do a beta release and get about two or three dozen cases done before we actually submit our pricing case.
Speaker 4: in the last two years on that level of imaging. As you think forward, continue to improve our DWI also because we have that appetite to get into stroke and that's gonna be critical. There's some other things that we can do.
Speaker 4: to continue to strengthen the robustness to motion, the correction for noise through more DL, and then some other features around usability. We're looking at software helping with the patient position, which is also important and other things like that.
Speaker 4: What I would say is that these improvements are getting us closer and closer to feeling really ready to take on the ischemic stroke setting and as such it's probably going to be after the next software release, probably when we feel ready to start that the action PMR study that we have discussed.
Speaker 2: Great. Thanks. That's it for me. Thank you. I'm showing no further questions at this time. I'll turn the call back over to Maria Saines, Chief Executive Officer, for any closing remarks. Thank you.
Speaker 4: We remain very bullish about the Hyperfine opportunity, and we feel we have taken the measures necessary to establish a strong foundation to deliver on the three pillars that I have outlined. I want to thank you for your interest in Hyperfine and look forward to updating all of you again in May. Thank you. Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.
Speaker 1: The public.
Speaker 1: I.
Speaker 1: Thanks for watching!
Speaker 2: mode. After the speakers presentation, there'll be a question and answer session. To ask the question at that time, please press star 11 on your telephone. As Ramona, today's call is being recorded. I will now turn the conference to the host, Marissa Bysh of the Gilmartin Group. Please go ahead. Great. Thank you for joining today.
Speaker 3: 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.
Speaker 3: Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.
Speaker 3: All forward-looking statements, including without limitation, those relating to our operating trends and future financial performance, expense management, expectations for hiring, training and adoption, growth and organization, market opportunity, commercial and international expansion, and more.
Speaker 3: 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.
Speaker 3: 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 latest periodic filing with the Securities and Exchange Commission.
Speaker 3: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 21, 2023. Hyperfine Inc. disclaims any intention or obligation, except as required by law, to update or 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 Saines, President and Chief Executive Officer.
Speaker 4: that we recognize $6.8 million in revenue for the full year, driven by the sale of 35 commercial soup systems.
Speaker 4: We also received multiple clearances for next-generation hardware and software upgrades, so our technology highlighted existing clinical publications and 50 peer-reviewed presentations at neurology and imaging meetings, and strengthened our existing partnerships while establishing new relationships with several sites and hospital systems.
Speaker 4: In addition to these initiatives, we have right-sized our business and implemented spending discipline to extend our cash runway through 2025, including the cessation of the liminal brain sensing program and associated positions.
Speaker 4: I am very proud of what the Hyperfine team has accomplished in its first full year as a public company, a year of dynamic change internally and in the marketplace.
Speaker 4: Before turning to our 2023 priorities, I would like to provide greater detail on a few of these recent achievements.
Speaker 4: First, on the R&D side, we continue to advance the field of ultra-low field MRI and have strengthened image quality through multiple FDA-cleared, AI-powered software upgrades. These software upgrades enable improved image quality, greater consistency, and more.
Speaker 4: and robustness to motion across key brain imaging sequences for neurocritical care applications. In mid-2022, we also launched a partnership with this AI, a leading AI-powered disease detection and intelligent care coordination platform.
Speaker 4: to continue enhancing our diagnostic imaging capabilities as we advance our mission to provide transformational, accessible and clinically relevant diagnostic imaging.
Speaker 4: This partnership will take us to pilot evaluations in a small number of key sites in 2023.
Speaker 4: Turning to our recent commercial progress, in 2022 we strengthened several key partnerships and customer relationships, yielding new multi-unit contracts.
Speaker 4: For example, as we shared in the fall, we received a purchase order from King's College London for 20 commercial systems in association with the Bill and Melinda Gates Foundation.
Speaker 4: We began delivering these units in the second half of 2022 and expect to ship the remainder of the units over the next one to two years. We also announced a signed letter of intent for seven commercial units from BJC Healthcare in St. Louis, one of the leading hospital systems in the United States.
Speaker 4: We began placing these units in 2022 and expect to shift the remainder over the course of 2023. I am also pleased to share that we have completed a restructuring of our U.S. sales team while re-engineering our sales and clinical support processes.
Speaker 4: We have appointed new leaders in both the sales and the clinical support groups who are focused on instituting a seamless workflow from pitch to purchase order and from purchase order to routine use.
Speaker 4: We are blazing new trails with the introduction of our SEWP point of care MRI system, and we now understand the need for buy-in across multiple stakeholders with complex properties.
Speaker 4: Our fourth quarter results of $1.4 million in revenue and five commercial systems reflect learning and addressing these processes, as well as some distractions due to the restructuring and right sizing of the team and recruiting and onboarding of new talent.
Speaker 4: Our team is now substantially in place and the strongest it has ever been. Lean and hungry, with the right experience and determined focus on execution. This team is coming up on the learning curve, continuing to build relationships and driving new contracts.
Speaker 4: We remain optimistic in our commercial pipeline for the future. Additionally, as part of our commitment to meeting the highest standards for data protection and information security, we're pleased to announce that our key platforms have achieved the rigorous, high-trust, risk-based, two-year certification. We believe these will streamline the information security reviews associated with contracting and cost-development.
Speaker 4: iterations and enhancements to continue improving image quality as well as the provider and patient experience with TUP.
Speaker 4: For example, we recently announced the receipt of two FDA 510K clearances for AI-powered software updates to the soup system. This upgrade significantly enhanced efficient weighted imaging or DWI quality and increased the signal-to-noise ratio, further advancing image quality standards in this new...
Speaker 4: software and AI development program.
Speaker 4: Over the course of the year ahead, we expect to receive additional appearances to further advance both image quality and usability of the SUT system.
Speaker 4: On clinical evidence, we continue to focus on supporting the adoption of SEWP in the neurocritical care setting with plans to expand into stroke imaging later in 2023. The company is also exploring other areas of both adult and pediatric brain imaging through research collaborations with leading institutions.
Speaker 4: The volume and breadth of presentations and publications covering SEWP's clinical utility and cost-effectiveness data is encouraging, and we're excited to continue building on this momentum. Thank you.
Speaker 4: In the field of stroke, we have been seeing independent data and presentations that support SEWP value proposition. At the International Stroke Conference in February , we were pleased to see new data showing the potential for SEWP to provide critical brain imaging following thrombectomy in stroke patients. In the field of stroke, we have been seeing independent data showing the potential for SEWP to provide critical brain imaging following thrombectomy in stroke patients.
Speaker 4: The presentation concluded that soup could be used to facilitate a post-treatment baseline for post-proteomectomy stroke patients to evaluate the impact of potential changes in blood pressure and heart rate that may impact ongoing brain injury.
The validation of the value of soup in providing imaging where conventional methods may not be available is promising. The major clinical initiative for hyperfine in 2023 will be the action PMR project. Action PMR is a global...
multi-center evaluation that will assess the use of the soup system in the acute stomach stroke use case.
And we are fortunate to be working with prominent, experienced, and passionate clinical teams in the field of stroke as they set up the foundation for this study.
Enrollment is expected to begin in mid-2023 and we are excited to take this important step towards advancing the use of soup in-stroke imaging. Shifting to commercial expansion, as I described earlier, we have made several changes within our commercial organization in recent months to optimize our focus towards
the greatest growth opportunities for our business. First, we have refocused our team on the core U.S. market opportunity, building relationships and executing contracts with U.S. hospital systems with a specific focus on multi-system placement opportunities.
We have also made changes within our sales and clinical support teams, bringing in high-performing experienced capital equipment salespeople and placing greater accountability at the sales leadership level. These teams are coming up the learning curve.
working in strong collaboration to ensure increased adoption, successful implementations, and to drive routine use at all of our sites. And they are now aligned and ready to execute. I look forward to seeing the progress that we will drive with existing and new customers this year and beyond.
We will maintain our international footprint, which is currently small, through distributors in Canada, Australia, New Zealand and Pakistan, in addition to our global partnership with the Bill and Melinda Gates Foundation. We also see several compelling opportunities toBur facing a global pandemic is taking a
to grow our international presence long term. Related to this, we're excited to have recently received CE Martin, which provides with the opportunity to expand our presence into the European economic area. That said, we're making the choice to launch in Europe later in our commercial life beyond 2023.
extension while investing in our three key pillars of innovation, clinical evidence and commercial expansion.
We currently see a past runway for the business through 2025.
Now, turning to our 2023 Revenue Outlook, we are initiating revenue guidance for the full year in the range of $10 to $14 million.
In line with our disciplined approach to spending, we are also initiating guidance for cash burn of $40 to $45 million in the full year 2023.
and that pricing is not a key barrier to soup adoption. As the results were continuing to increase pricing for the soup system, our guidance reflects the continued gradual increase in the soup average selling price in 2023 relative to 2022.
I will now turn the call over to Brett Hale, our Chief Administrative Officer and incoming Chief Financial Officer, to review our fourth quarter and full year performance and discuss the financial outlook in greater detail. Thank you, Maria. Turning to our financial results for the fourth quarter of 2022.
Revenue for the quarter ended December 31, 2022, was $1.4 million, compared to $0.4 million in the fourth quarter of 2021.
Gross margin for the fourth quarter of 2022 was 0.3 million compared to negative 0.5 million in the fourth quarter of 2021.
R&D expenses for the fourth quarter of 2022 were $5.2 million compared to $8.9 million in the fourth quarter of 2021. Sales, general, and administrative expenses for the fourth quarter of 2022 were $8.7 million compared to $16.7 million in the fourth quarter of 2021. Net loss for the fourth quarter was $13.1 million.
equating to a net loss of 19 cents per share as compared to a net loss of $26.1 million or a net loss of $13.79 per share for the same period the prior year. Now turning to the results for the full year 2022. Revenue for the full year 2022 was $6.8 million compared to $1.5 million in 2021.
Gross margin for the full year 2022 was 0.9 million compared to negative 1.2 million in 2021. R&D expenses for the full year 2022 were 28.2 million compared to 25.8 million in 2021.
Kales General and Administrative Accesses for the full year 2022 were $46.6 million compared to $37.9 million in 2021.
Net loss for the full year was $73.2 million, equating to a net loss of $1.04 per share, as compared to a net loss of $64.9 million, or a net loss of $17.57 per share for the prior year.
Cash and cash equivalents pulled 117.5 million as of December 31, 2022. Turning to our 2023 outlook, based on our progress and current trends in the business, we are initiating full year expectations for revenue to be in the range of $10 to $14 million.
As Maria mentioned, the swoop value proposition with customers is strong, and increased pricing, as the company announced in 2022, has not been a main barrier to adoption. Going forward, we will not be providing an exact average selling price or unit volume expectation.
but our guidance is predicated on the assumption that SWOOP's system pricing will continue increasing in 2023 relative to 2022. To help you with modeling, please note that we currently expect our second half of revenue to be stronger than our first half as our new sales scheme continues to drive the pipeline. For the year, we expect gross margins to be approximately 40%.
And lastly, we anticipate total cash burn of 40 to 45 million for this full year 2023. This incorporates an expectation for continued investment in R&D and substantially streamlined investments in SG&A while maintaining customer-facing resources to continue to drive adoption and growth. In line with this, we are allocating a greater relative portion of OFEX spending to the Hornet users. Thank you for joining the fairsprings in Zone 2B and? tunnel comments,
to R&D in 2023 versus prior years at approximately 40 to 50 percent of total OPEX dollars. We will continue to focus on our three strategic pillars and maintain spending discipline as we realize the benefits of our current rightsizing and reorganization.
As Maria mentioned, we are laser focused on US commercial expansion. As I've come on board, it is clear we are completing a substantial reset of how we operate, including the team that we have in place, which has caused a near-term disruption, and that's a worthwhile trade-off for laying the right long-term foundation.
I would like to reiterate that we are excited about the momentum we are building for the remainder of the year and beyond, and that we are pleased to have the cash and flexibility to invest in the right areas and afford the business the right runway to execute post reset.
At this point, I would like to turn the call back to Maria for closing comments. Thank you, Brett. I am immensely excited to be leading Hyperfine into the year ahead. Before wrapping up, I would like to highlight the positive feedback received from one of our customers during the recent educational webinar hosted for our commercial, Sipes & Prospects.
This customer noted increased operational efficiency and improved workflow with SEWP as the system is alleviating the challenge of limited MR capacity and reducing turnaround times at their hospital. He also noted an expectation for the hospital to recognize a positive return on investment in SEWP in a shorter time period than they had anticipated up to the end of the year.
implementing their conventional MRI workflow. With our early success marked by a total global install base of over 100 subsystems to date, we are setting the stage for accessible and affordable point-of-care imaging to transform care delivery and continue enhancing healthcare around the world. With that, I want to thank you for your time and open it up to any questions.
Thanks for taking the question. Maria and Brett can hear me OK.
Yes, we can. Hi, Larry. Oh, good. Hi. So let's start with Q4. It's usually the strongest quarter for capital businesses, but you came in a little bit below, at least on the revenue side, the low end of your guidance range. I think you're at the low end of the capital.
the placement guidance. So you talked a little bit about disruption, Maria, from the Salesforce organization changes. Could you just talk a little bit more about the trends you saw in Q4 and why we saw you come in a little bit below the revenue guidance?
Sure. So, as I said, I think there was a little bit of distraction because we made a very significant number of changes in our sales leadership and really our sales team overall. We have about two-thirds of all sales and quota-bearing people now that have either a new role or are brand new to the company.
over the course of the subsequent weeks. I also would say, Larry, that although it is true that there is a strong push for capital to wrap up the year strong, I'm not sure that I would put us in the same bucket as all other big capital purchases in that we are a brand new category to most of the administrators and the...
But I would say organically, I think we not purposefully, but we created some transition and some disruption to make sure that we were starting the year with the right people in the right seats and the right seats on the bus. That's helpful. And then transitioning to 2023 and the guidance. Help us, you know, give us, you know, tell us why you're confident in the 10 to 14 million.
going to be about $50 million for 2023 to get to that burn rate, which would be a pretty steep decline from 2022. Thanks, guys.
So, let me take the confident part of the question. I'll turn it over to Brett for the OPEX commentary.
As I said, it started with making sure that we had the right sales structure with the right people in place. Those people very quickly put in the right processes to make sure that the quality of our pipeline of deals, the breadth of our pipeline of deals, and then the scrutiny around the deals as they progress through the different gates any of these deals progresses through is very strong.
We do have all positions filled now with what I believe is the right profile of people, and I'm starting to see the green shoots of really the amount of deals that are in the pipeline, the distribution of those deals across all of the geographies, the discipline around the execution on the deals. So that gives me the right confidence around how I see this year panning out. It is also true that it does take about six months or so for any one of our branding...
I think here as the weeks go on. And I'm going to let Brett comment on the outbreaks. Hi, Larry. This is Brett. So in regards to the Guidance for Giving, we've made guidance regarding the cash burn, which will have 40 to 45. We're going to be managing to our cash burn. Obviously, there's some element.
of variable spending depending on the range of revenue. But you are correct. The object is going to step down significantly from our 2022 basis into 2023. And that's a direct reduction from the reorganization that we've done as well as our prioritized spending. Just lastly, I'm sorry. No, I was going to just comment that that prioritized spending is an important commentary because I believe we have been able to reduce.
spending without compromising the must-have spending. So the critical projects around innovation, the critical projects like the Action PMR clinical evaluation and the customer-facing and quota-bearing headcount that are really critical to feed those three pillars that I feel strongly are the right balance of priorities for our business this year. And, Brad, any color? I know you're not giving placement guidance. I'm just going to put the city color on.
Thank you. Thank you. One moment, please.
Our next question comes from the line of Kevin Jalkwin of Evercore ISI. Your line is open. Your line is open.
Hi, this is Kevin on floor. Just 1st on. Your gross margin guidance for the year, and just generally your long term targets, gross margin improvement. Can you provide more color there? How much of. This improvement will be driven by.
cost-saving initiatives versus increase in ASP? I think I want to let Brett take that. Yeah, so as reflected in our earnings call, we are going to see a gradual increase in pricing throughout 2023. So we are going to get a decrease in pricing throughout 2023.
a lift in benefit from the pricing benefit that we're seeing. Cost is obviously a laser focus for the organization, including the manufacturing costs of our products. I would say the third piece that's going to be a variable is just the increase in volumes over time. Obviously, we get efficiency as we scale the business. So those are the three levers.
But we don't have an exact breakdown of the contribution of that, but those are the three things that will lead to the 40% gross margin guidance. And then as we continue to grow the business thereafter. Got it and on your cash burn for the year. Are the savings primarily on the R&D fund or SG&A?
So we've commented on our optics that we are actually continuing to invest significantly in our R&D. Maria mentioned the clinical evidence, the innovation that continues to be a priority and focus. Most of our cost savings has been about running an organization that's very efficient and lean and that cuts across the whole organization.
A majority of the savings probably come disproportionately from the SG&A side versus R&D given the increased investment. We're making in terms of our percentage of objects to R&D.
of the savings probably come disproportionately from the SG&A side versus R&D given the increased investment we're making in terms of our percentage of op-ex to R&D. Got it. Thank you.
Thank you. One moment, please. Our next question comes from the line of Neil Chaudhry. B. Raleigh, your line is open. Hi, guys. Good afternoon. Thanks for taking the questions. Just curious, just in terms of the sequential drop here on the installs, just curious on how much of that was potentially related to, you mentioned, the high-res P being a potential barrier. I'm curious.
at all by now. That is the reason why we decided to start moving pricing up and have started to do that, although of course the deals do take a long time, so it will take some transition time until that is fully baked into our actual ASC.
But that was not the reason for the softer Q4. I really think that part of the reason was that destruction that we created by the significant reorganization that we crammed into Q4 so that we could get it all done and start the year.
with the right team in place, the right processes, and the right leadership. So I feel it was definitely not pricing. The new pricing is something that we have started to roll out actually at the beginning of this year, so it didn't really even factor in that much into Q4, although of course internally the teams knew that that was the direction we were heading as we were looking into implementing it.
some examples where we had a contract in place and all of a sudden the buying group wanted to be the acquiring organization and that had a total restart on a contract at an institution where we're going to ultimately create multiple placements as well. So on the other two deals that we have spoken about, the order from KCL, the King's College London, as well as the DJC, we continue to expect a fairly steady
deployment and shipment of those devices over the quarters ahead. So there is no bolus associated with that either. Thank you for that. I might have misheard on the pricing aspect. Maybe just on the FDA clearances you've had recently, I'm curious if you've had any initial feedback on those updates and the enhanced...
runs and then we have now a little bit of runtime. Clearly a lot of positives as to where we've taken DWI. There is a general feel of immense progress in the last two years on that level of imaging. As you think forward, continue to do to improve our DWI also because we have that appetite.
with the patient position, which is also important and other things like that. What I would say is that these improvements are getting us closer and closer to feeling really ready to take on the Skimic Stroke setting. And as such, it's probably gonna be after the next software release, probably when we feel ready to start that the action PMR study that we have discussed.
Thanks. That's it for me. Thank you. I'm showing no further questions at this time. I'll turn the call back over to Maria Saines, Chief Executive Officer, for any closing remarks.
Thank you. We remain very bullish about the Hyperfine opportunity, and we feel we have taken the measures necessary to establish a strong foundation to deliver on the three pillars that I have outlined. I want to thank you for your interest in Hyperfine and look forward to updating all of you again in May. Thank you.
Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.