Ekso Bionics Holdings Inc. Q1 2023 Earnings Call

Greetings and welcome to ESCO Biotics first quarter 2023 financials results call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

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

Thank you operator, and thank you all for participating in today's call. Joining me from <unk> Bionics are Scott Davis, Chief Executive Officer, Jerome Wong Chief Financial Officer, and Jason Jones, Chief Operating Officer.

Today, <unk> Bionics released financial results for the quarter ended March 31st 2023.

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

Before we begin I would like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 eight.

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

All forward looking statements, including statements regarding our business strategy and future financial and operating expectations or our expectations of the regulatory landscape governing our products and operations are based upon management's 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 businesses. Please see our filings with the Securities and Exchange Commission.

So disclaims any obligation except as required by law to update or revise any financial or operational projections, it's regulatory outlook or other forward looking statements.

Because of new information future events or otherwise.

This conference call contains time sensitive information and is.

Accurate only as of the broadcast today April 27 2023.

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

We're off to an excellent start in 2023.

In the first quarter, we achieved record quarterly revenues of $4 $1 million up 61% compared to this time last year.

We believe we have built a solid foundation to bring our game changing exoskeleton devices to rehabilitation patients in need for post acute care centers to outpatient facilities and into home and community settings.

Our team is excited by our expanded focus that enables us to bring our advanced treatment solutions to more patients across the continuum of care.

We look forward to building on this momentum.

Now I will share updates on our business performance, starting with XO health.

During the first quarter XO helped delivered $4 million of revenue as we continued to gain traction with network operators or <unk>.

As part of our strategy, we secured several multi unit orders with large network operators in total we booked 23, XO health devices in the quarter, including the second largest multiunit XO and our order ever with a large network operator.

As illustrated by our record quarterly revenues, we are generating strong demand and healthy order flow, which is also adding to our growing pipeline.

Our cumulative conversion and renewal rate remains strong at 81% with approximately $1.4 million of contracted unrecognized revenue under our subscription model.

Overall this was a strong quarter for bookings and a testament to the inroads we have made with our commercial strategy.

Internationally, EMEA and APAC have been important growth regions with EMEA up 67% compared to the first quarter last year.

Increased proficiencies in our sales process are driving more opportunities and the success. We've seen internationally is a positive reflection of the investments <unk> made to support growth in these regions throughout prior quarters.

We are also pleased to have booked our first XO indigo personal device in Europe during the quarter.

Moving forward, we will remain diligent in our strategy to expand our distributor network and generate robust demand pipelines in both the domestic and international fronts.

Turning to an update on our recently acquired human motion and control or H M. C business unit the.

The integration continues to progress smoothly.

And with early contributions to our topline in the first quarter, we anticipate that XO indigo personal and therapy will be key to our growth moving forward.

Importantly, this acquisition expanded our product offerings across the continuum of care to home and community use markets.

Whereby we can now reach more patients in need across the larger market opportunity.

Furthermore, we expanded our product development pipeline to be orthotic, and prosthetic R. O N P industry and added strategic relationships with key commercial and research partners, including Vanderbilt University.

We will provide more updates on our progress here in the coming quarters.

Earlier this month, we reestablished our partnership with soldiers strong a charitable organization, whose mission is to provide revolutionary technology and innovative advancements to better the lives of our veterans and their families.

It's our understanding that their purchase and donation of an XO indigo device to the Charlie Norwood Department of veteran Affairs Medical Center in Augusta, Georgia is the 30th robotic exoskeleton pit soldiers strong has donated to a VA medical center in the last 10 years of operations.

We are honored to be joining forces with soldiers strong.

I look forward to bringing much needed rehabilitation and support to our valued veterans.

Through our innovative devices.

Now turning to an update on the progress with our industrial product line extra works.

During the first quarter, we continued to transition our focus towards volume purchases from large customers.

We are seeing interest from marquee customers across the construction manufacturing green energy automotive and aerospace verticals and believe that this pipeline of potential customers offers a path, we're taking share from the large addressable market opportunity.

We plan on sharing updates from Exor works in the future as large orders are booked.

To recap our team is excelling at raising customer awareness and driving demand from our XO and our newly acquired XO Indigo devices as illustrated by our record revenue performance.

We're particularly pleased with the success of our commercial strategy and securing multi unit orders with large network operators, while also introducing the new indigo product line to patients in need.

Looking ahead to the rest of 2023 and beyond we remain focused on driving sustainable growth and demand for our products across the continuum of care.

At this time I'd like to turn the call to Jason to discuss our operational developments for the quarter.

Thank you Scott and good enough.

Afternoon, everyone I am pleased with the progress that was made from an operational standpoint with our focus in the first quarter on continued process improvement by driving efficiency in our operations. We believe we have the potential to significantly more volume with only modest incremental capital.

I'm also pleased with the progress achieved on integration of the agency team and products with.

But the goal of delivering lower extremities. He has them on boarding solution to patients across the continuum of care, we are evaluating how best to merge our market leading technologies.

I'm, particularly excited about the potential to combine the capabilities of our two proprietary.

This software, which encapsulates the majority of our combined core intellectual property.

I look forward to providing additional updates throughout the year.

Now I'd like to turn the call over to Jerome to review, our first quarter financial results.

Thank you Jason.

<unk> generated first quarter 2023 revenue of $4 $1 million compared to $2 $6 million for the first quarter of 2022, 61% increase the increase was comprised of a $2 1 million dollar increase in extra health revenue, partially offset by a point $6 million decrease in XL worse.

Gross profit for the first quarter was $2 million, representing a gross margin of approximately 49% compared to a gross margin of 47% for the same period a year ago, a 65% overall increase in gross profit was driven by the sharp increase in extra help to buy sales while margin expanded primarily due to lower device.

Cost.

Operating expenses for the first quarter of 2023 or $6 $4 million compared to $5 $4 million for the first quarter of 2022. The increase was primarily due to the additional costs associated with the acquisition of HFC and an increase in marketing activities, partially offset by lower service costs.

Loss from operations in the first quarter of 2023 was $4 $4 million compared with a loss from operations of $4 $2 million in the prior year period.

Cash used in operating activities in the first quarter of 2023 was $4 $2 million.

As of March 31.

2023, the company had a cash balance of $16 $3 million. Please see our 10-Q filed earlier today for further details regarding the quarter. Operator, you may now open the line for questions.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May press star two if he would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Our first question is from RK from H C. Wainwright. Please proceed with your question.

Thank you good afternoon Scott.

And congrats on the stockpile.

On a strong 23 mm.

Jess I have a few questions, but just start off.

I'm trying to focus on the latest product.

India what is the contribution from indigo itself in the first quarter of a.

23.

So thank you RK I appreciate your comments and and your question.

The the contributions we are rolling the indigo revenue is tied into our overall <unk>.

So health.

Our numbers are.

But I can say that in Q1, the contributions from indigo were relatively modest.

But we do anticipate a strong contribution to our XO health business as the year progresses.

Okay.

And then in terms of E M B a.

Said that about 67 person girl in the corner and including one and Indigo I'm being sold in Europe .

Does that mean.

Is becoming meaningful.

I mean is that EMEA revenue, becoming meaningful enough on that.

In terms of contribution that you'll need to kind of strengthen our additional sales.

Sales personnel in the U R. You know.

It's still there it's time for them.

To get to that at that stage.

Yeah, that's great.

Great Great question, and you know I think we have a very strong team in.

In EMEA and with the acquisition of.

H M. C. We ended up picking up an additional commercial resource in in Europe as well so through the acquisition we have added to.

To that team.

You know I think the way of looking at it is the team as it was being developed in EMEA. It was built to do.

Be able to support a larger scale business. So the way that we go to market. There is both direct in the dark region and then when a through a pan Europe , we use.

<unk> distribution partners the combination of H M. C has expanded our distribution partner network as well and.

And we again, we have an additional resource to manage that so we feel like we are correctly resource for this significant increase that we're seeing in EMEA.

Perfect and then in the U S. You were saying you know quite a bit of a contribution but then are they in.

I'm pleased during the first quarter was multi unit orders and then you said that.

Ken can you kind of define it a little bit more for us and also.

How do you plan to increase that number number of multi unit orders and also make it sustainable.

Yeah.

Excellent question. So this is something RK that we've been working on for four years. So the pipeline development that the U S team has been working on.

Is is not a surprise or something that's.

That's happened.

Just just recently, we have resource appropriately to build strong relationships.

With the I D ends and you know and.

It's a combination of both our commercial team as well as our clinical team.

Supporting these neuro rehab programs that are quickly becoming more of a standard of care is inside of these inside of these ideas. So as we look at our pipeline I'm more and more and not even necessarily Justin in.

The U S. But also outside of the U S. We're seeing more multi unit.

Opportunities that are present in our strong and growing pipeline. So.

Again, this is something that was done deliberately and with years of effort.

And we continue to work at that every day and continue to grow those relationships within.

Within those within those segments and within those partners further as we've.

Expanded our.

Our products through the acquisition of H M C.

We have some new and exciting.

Products that we can offer within those same customers.

Okay and then last question from me just on the operations.

Is there potential for further margin expansion at this point.

Or do you need to complete the integration of HMC before you can actually think about sustainable margin expansion from here.

Hi, there.

You know some of we've had a little margin compression over the last couple of years and Theres. Many factors to that was the primary one is really supply chain challenges as you know everybody knows that's going on so our view on that is that there are still some of that out there, but most of it we feel like as either peaking or behind us.

So my expectation is that well, we will continue to work to drive down costs.

Through supply chain activities I don't think it's time to talk about you know.

Yes talk about integration with the indigo product line driving those cost reductions I think it's more just a more rational supply chain. The same thing for our inventory level I would expect that that we've built extra inventory to guarantee supply and I think those things are all starting to kind of stabilize so I expect some improvements from both of those going forward.

Okay.

Thanks, Scott and Jason for taking all my questions.

My pleasure. Thank you.

At this time there are no further questions I would now like to turn the floor back over to Scott Davis for closing comments.

Thank you Maria and thanks to everyone joining us today.

Our strong first quarter performance and record revenues reflect the progress we've made executing on our core strategies. We are encouraged by the demand for our innovative XO health devices, including both X O N R.

And newly acquired X I went to go products, our commercial strategy continues to support our growth as evidenced by the increased volume of multi unit orders with large network operators.

Now with the additions of <unk> therapy, and XO Indigo personal devices, we've expanded our market opportunity to reach patients in need across the continuum of care to home and community settings.

We're pleased with the strong start to 2023 and look forward to sustaining this momentum moving forward in closing I'd like to thank our employees for their invaluable contributions and shareholders for their continued support.

Thank you and have a great day.

Yeah.

This concludes today's conference you may disconnect your lines at any time.

You for your participation.

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