Q1 2023 Hyperfine Inc Earnings Call

Speaker 2: only mode. After the speaker presentation there will be a question and answer session. To ask a question during the session you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand has been raised.

Speaker 2: Please be advised that today's conference is being recorded.

Speaker 2: It is now my pleasure to introduce Marissa Baish from Investor Relations.

Speaker 3: Great, thanks for joining today's call.

Speaker 3: Earlier today, HyperFine Inc. released financial results for the quarter and in March 31, 2023. A copy of the class release is available on the company's website as well as SEC.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 security's laws.

Speaker 3: so to may pursuant to the safe harbor provisions of the Private Security's 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: Those relating to our operating trends in future financial performance, expense management, expectations for hiring, training and adoption, growth and organization, market opportunity, commercial and international expansion, 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 from those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements. For a list in the description of the risks and uncertainties associated with our business.

Speaker 3: Please refer to the Risk Factor Reception of our latest periodic filing of the Security's and Exchange Commission.

Speaker 3: time-sensitive information and is accurate only as of the live broadcast today, May 11, 2023. Paper-Find Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections of all the booking statements, whether because of new information, future events, or otherwise.

Speaker 3: With that, I have a term to call over to Maria Fane's President and Chief Executive Officer.

Speaker 3: Good afternoon and thank you all for joining us. On the call with me today is her chief administrative officer and chief financial officer, Fred Hale.

Speaker 4: We achieved measurable growth in the first quarter of 2023 with an all-time record revenue of 2.6 million driven by the sale of 10 commercial-stube systems.

Speaker 4: In addition, we have continued to execute with a financial discipline that allows our cash runways to extend through the end of 2025. I am pleased with our progress this quarter, and I am confident that we are going to execute our plan in 2023.

Speaker 4: As we mentioned in March, we are focused on three strategic pillars, innovation, clinical evidence and commercial expansion with a strong focus in the US.

Speaker 4: On innovation, we continue to lead and advance ultra-low field MRI with technology iterations and enhancements that further improve image quality as well as the provider and patient experience with Tuke.

Speaker 4: In February , we announced a receipt of two FDA-AIDS-10K clearances for AI-powered software updates to the suit system.

Speaker 4: The latest AI power software has now been installed in the unit in the field. And the feedback from existing users has been very positive, especially on the diffusion weighted imaging or DWI sequence.

Speaker 4: Our commercial team is now using images and cases with our latest software in their discussion and demos with prospective accounts and feedback have been very positive from prospective users as well.

Speaker 4: Despite our heightened open disciplines, we remain committed to investing in innovation and evidence, and we have allocated a healthy budget to R&B through the next several years. We have active development programs working on next generation hardware, additional upgrades to software and AI.

Speaker 4: for our current critical care application and future stroke, pediatric and neurodegenerative PDE use cases. Furthermore, our partnership with the Bill and Melinda Gates Foundation provides access to a network of leading experts in the field of MRI across the globe, who work in a collaborative manner with our development and clinical science team.

Speaker 4: On clinical evidence, we are pleased to see abstract papers and symposia focusing on ultra low field MRIs and the use of our sub-system at major scientific conferences like the International Schocounference, ISC and the American Society of Neuro-Radiology ASNR.

Speaker 4: At ISC in February , we were pleased to see new clinical research data from Yale showing the potential for soup to provide critical brain imaging following from Vectomy in stroke patient.

Speaker 4: At AASNR in Chicago last week, we have an interactive case review session with a panel of six leading neuro-regiologists evaluating patients based on soup images with our latest software.

Speaker 4: This interactive session brought nearly 300 attendees and there was strong booth traffic at the conference. We also have strong research partnerships with leading institutions working on other applications of the STUF system in adult and pediatric brain imaging.

Speaker 4: Our major clinical initiative in 2023 is the Action PMR project.

Speaker 4: Action PMR is a global multi-centre evaluation that we let says the use of the two system in the acute scheming-strobe use case and we're fortunate to be working with prominent experience and passion clinical teams in the field of stroke.

Speaker 4: As a reminder, this is an exciting project for us as it represents...

Speaker 4: the first step in pursuing the use of subsystems in acute stroke imaging.

Speaker 4: We look forward to beginning actions in our enrollment mid-year and sharing our progress on upcoming calls.

Speaker 4: We're pleased with the pipeline of deals driven by our commercial team for 2023 and beyond.

Speaker 4: The commercial team has also begun implementing our higher pricing and we are encouraged by the solid momentum across multiple territories in the US. As we shared in the fall of 2022, 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: To continue to execute the delivery of these commercial systems in 2023. We're very pleased with our new field leadership and commercial structure. Our sales and clinical support teams are in place and we feel this combination of an experienced capital sales team and a clinical and MR expert clinical support team is the right approach to drive adoption. The team remains focused on the core US market opportunity building relationships and executing contacts with US possible systems with a specific focus on the long-time systems placement opportunities.

Speaker 4: Clinically, our PLP remains focused on selling subsystems within the broad critical care of opportunity for newer imaging, while our innovation and clinical evidence fees are setting the stage for much broader use in the future. Internationally, we maintain our small commercial footprint.

Speaker 4: but seek compelling opportunities for future expansion into new markets.

Speaker 4: We remain excited about CE Martin, which we received in February of this year. We also see the immense long-term opportunity in low and medium-income countries through the work that hospitals affiliated with the Bill and Melinda Gates Foundation are undertaking with SOO in Africa and Asia. And lastly,

Speaker 4: We continue to explore the potential to enter the regulatory processes China.

Speaker 4: All of that says where remains focus on the US are asked our number one commercial priority for this year.

Speaker 4: Finally, as is related to our commercial process, our commitment to meeting the highest standards for data protection and information security for our customers. We were pleased that in the first quarter of this year, our key platform to achieve the rigorous, high trust.

Speaker 4: Now, turning to our first quarter results. I am pleased for now that we achieved record revenue of 26 million and 10 commercial sub-system placements in the first quarter of 2023 driven in large-card-wise placements to new US customers. I am incredibly proud of our team and remain optimistic in our commercial pipeline for the future. Alongside our through strategic pillars, we remain laser-focused on spending discipline. We continue to operate E-EEM and implement initiative in support of cash runway extension while investing in innovation.

Speaker 4: programs over the last two years, we know that our clinical value proposition with customers is strong. As mentioned in our last early school, we have implemented a new pricing for the suit system in early 2023. Our guidance reflects a gradual continued increase in the two-fabric selling price in 2023 relative to 2022.

Speaker 4: I will now turn the call over to Brad Hale, Archie Fedman, Straitiv Officer, and Chief Financial Officer, to review our first quarter performance and discuss the financial outlook in greater detail.

Speaker 5: Thank you, Maria. Turning to our financial results for the first quarter of 2023, revenue for the quarter ended March 31, 2023 was 2.6 million compared to 1.5 million in the first quarter of 2022.

Speaker 5: Throws proper for the first quarter of 2023 was 1.2 million compared to 0.1 million in the first quarter of 2022 and reflecting a 44% gross margin. R&D expenses for the first quarter of 2023 were 5.5 million compared to 8.3 million in the first quarter of 2022.

Speaker 5: Sales, general and administrative expenses for the first quarter of 2023 were $8.7 million, compared to $15.5 million in the first quarter of 2022.

Speaker 5: Net loss for the first quarter was $12.2 million, equating to a net loss of 17 cents per share, as compared to a net loss of $23.8 million, or a net loss of 34 cents per share for the same period of the prior year.

Speaker 5: Our cash burn in the first quarter was 13.4 million, and we ended the first quarter of 2023 with 100 or million in cash and cash-equipped works.

Speaker 5: Turning to our 2023 outlook. Based on the progress and current trends of the business, we are maintaining full-year expectations for revenue to be in the range of 10 to 14 million.

Speaker 5: As Maria mentioned, the SWOOP clinical value proposition with customers is strong. The new pricing is now in effect.

Speaker 5: As we mentioned last quarter, we will not be providing an exact average selling price or unit volume expectation, but our guidance is predicated on the assumption that the SWOOP system pricing will continue increasing in 2023 relative to 2022.

Speaker 5: And based on our position in the market today, we remain confident in that steady price improvement. To help you with modeling, please note we still expect our second half to be stronger than our first half as our new sales team gains experience and continues to drive the pipeline.

Speaker 5: For the year, we now expect gross margins to be approximately 40% to 50%, as we begin recognizing scale, and average food pricing moves gradually higher.

Speaker 5: And lastly, we are maintaining expectations for total cash burn from 4D to 45 million for the full year of 2023.

Speaker 5: This incorporates the expectations for continued investment in R&D and substantially streamlined investments in SGNA while maintaining customer-facing resources to continue to drive the adoption of your company.

Speaker 5: As we shared in March, we are excited about the moments that we are building for the remainder of the year and beyond. And 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-recent. At this point, I'd like to turn the call back to Maria for closing comments. Thank you, Brett. I'm proud of the progress that HyperFine Team has made in recent months, and I am very foolish as to what these teams can deliver. . . . . . . . .

Speaker 4: Just a week ago, I attended ASNR in Chicago. I was able to witness firsthand the interest that our suit system is drawing from clinicians, as well as the patient care conversations that continue to open opportunities for suits for conventional MRIs, if not practical, or not available.

Speaker 4: The opportunity for high profile is increasingly compelling as we develop use cases for also low-key elevator out and expand your enhancements.

Speaker 4: And I am confident that we would have exciting progress to discuss with you all on call to come.

Speaker 2: With that, I want to thank you for your time and opening it up to any questions. Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. If your question has been answered or you wish to remove yourself from the queue, press star 11 again.

Speaker 2: Our first question comes from the line of Larry Beegelson with Wells Fargo. Good afternoon, Doc. Thanks for taking the question and congrats on a good start to the year. Just a few for me here. First, you beat consensus and I know there are only a few estimates by about half a million dollars. And you know, you're on a run rate now over.

Speaker 4: We have just put in place new sales leadership. We have also hired a relatively new sales team. So we're very, I am particularly, very, very pleased with the moment and I am seeing with the new reps. But I want to make sure that they have a little bit of more run time before we start feeling really...

Speaker 2: And a couple of follow-ups. One, the action PMR trial. How long do you think that'll take to enroll? You know, what's the follow-up there? You know, how long before we potentially see data? Okay. So it's a little hard to predict. We're doing this as we continue to also improve what I would call our offering on the stroke side.

Speaker 4: So our first order of business with that evaluation is to make sure that our latest software, which is going to be one more than the one that is commercially available, is able to detect as clinicians want the stroke in the acute setting. We have to do a little bit more work to shorten the time that it takes to gather those

Speaker 4: is no follow-up to the study. All of it is really in the acute settings, the ability to really detect stroke, and be able to get to a clinical decision about what is best for that patient in this evaluation. So no time to wait for follow-up data, but I want to be a little bit prudent that our involvement may take.

Speaker 4: A little longer, I want to make sure that we have the opportunity to put in the study the latest software which is now in better testing, but also faster sequences which are currently in development and available later in the year. That's fair. And just one more for me.

Speaker 2: You know, there are two Alzheimer's drugs that have shown positive data recently, and I think the reimbursement requires four MRIs per year. So I guess my question is first, are you seeing increased interest in your technology?

Speaker 2: because of that and what are you doing to capitalize on that opportunity? Do you need to do an equivalent study with standard MRI? Do you need to partner with a company? I'd love to hear your thoughts on that. Thank you.

Speaker 4: And there are even more attractive therapies coming behind them, I believe from nearly for one, and I believe it is Roch the third one. We have, Goddard also deep in their debate that is right now in the clinical community. We have some current users of our system that believe that we can play a role in that initial preaging of those patients as their monitor with multiple scans, the numbers sometimes are even higher than for a year. So we're working at the individual center level.

Speaker 4: An ultra low field scanner is going to be as effective as a 1-5 or a 3T, but we are not watching the movie from a distance. We are right in the movie. We have started to try to reach out to the companies to see if there is an opportunity to partner. And last but not least, we are at the company working to really put together what I would call an Alzheimer's package that may include two things. One may be a package of sequences, as you know, we develop sequences separately and then we also combine them into the protocols that allow people to use them for clinical conditions. So that would be one. The other one is that one of the clear trends where there is more...

Speaker 5: Months or short quarters, I hope I can give you more clarity as to the size of the opportunity and the timing of it. Okay, thank you so much. Of course. Thank you. One moment, please, for our next question. And our next question comes from the line of Vijay Kumar with Evercore ISI. Hi, this is Kevin Dunn for BHA. Just the one on social marketing. 43% in the quarter. Can you talk to the drivers behind that number? I know in the past you pointed to price, volume, and cost as the overall driver. But how about from a device versus service perspective? Is there any color you can provide there?

Speaker 4: Is the about 50% device margin and about 20% service margin a good base to follow and build upon as we move progress? Thank you. I think I'm going to let Brett address that. Your line was a little hard to understand. So I'll pass it over to Brett. Yeah, I'll walk through the.

Speaker 5: We put new pricing in place. That followed into the pricing we had in 2021. We put new pricing in place here in 2023. Really, most of the margin increase that we've seen sequentially in year-over-year is a real direct result of the pricing that we've been able to realize as a business. We do break out the margin or the device and the service component.

Speaker 5: That may vary over time, but really I think the vast majority of our revenue is coming from device. And you can think about the ASP playing a very heavy role in that.

Speaker 5: And then I think from a guy on margin, I think we've guided to the 40 to 50% range for the poll year. So we landed kind of in the middle of that here for Q1. Q1.

Speaker 6: Thank you.

Speaker 5: Thank you. One moment please for our next question.

Speaker 5: And our next question comes from the line of Neil Chatterjee with B Riley.

Speaker 5: Hey, guys, thanks for taking the question. I might have missed this, but just quickly just on the. Sales funnel and installs for the quarter. I know there was some that slipped from 4th quarter. Do we say if any of those hit in 1st quarter and what kind of expectations for those. Sorry, I'm not sure I got.

Speaker 4: longer and didn't close in Q4 and ended up actually materializing in Q1. That's a little bit of the nature of the beast, which our deal flow is strong, but the deals do take long. We estimate an average of six months, but sometimes they end up taking longer through MR safety, scrutiny, or cyber...

Speaker 4: me. I think overall the corridor will help you. We also had, as you remember, the putting in place of the full sales team. So there was a little bit of a topic quarter in a way with territories with brand new people versus other territories open for a few weeks.

Speaker 4: So I overall feel that the results in Q1 were very good. And I feel really good about the pipeline that I see. I don't see the deal taking shorter, but I do see a robust pipeline. And I'm encouraged that it is, as I said, before well distributed across all of our US territories.

Speaker 4: In some cases, very positive issues from some of the newer reps that have been to have hit the ground running, although for the most part we need to give them their six months really get totally comfortable with the sales process, the implementation process, customer knowledge, customer application, and all of the different sub functions within their new role.

Speaker 4: very positive green shoots from some of the newer reps that seem to have hit the ground running. Although for the most part, we need to give them their six months to really get totally comfortable with the sales process, the implementation process, customer knowledge, customer acquisition, and all of the different sub-functions within their new role. Got it.

Right. And again, sorry, I might have missed this, but on the gross margin guidance, the 40 to 50, just curious on the cadence, you know, how to think about that, you know, after this first quarter. Is that going to be sequentially stronger through the year or, you know, what, how to think about that.

Yeah, I'll take that. Eels, this is Brett. So we talked about, I think, in our prepared remarks about a gradual increase in pricing throughout the year. And so I think you can think about margins kind of going along with that. One with one thing that we've talked about, I think, critically is mix. And so I think you can think about a gradual increase in pricing throughout the year.

does have an impact in terms of any individual quarter. We have three different channels. We've got the US direct commercial, we've got our international distributors, and then we have the units that are part of the KCL King's College. So any individual quarter may have some variability based on mix.

But there's a general trend in pricing we talked about being potentially stronger and gradually increasing given the price increases that we've taken in the U.S. Great. And then this one laughs on for me. Just like.

It's curious if there's any update. It's not like there was maybe some of them prepared, but just on the visit, sorry, this AI partnership. If there's any progress there.

We continue to make the progress that we expected. Again, we're gearing towards starting pilot evaluations in accounts with the sort of technology development which has been around the integration of our images into the workflow and making sure that they can actually use the VCAI platform to manage their patients with the use of our images.

Thank you. I would now like to hand the call back over to Hyperfine CEO Maria Sainz for any closing remarks.

Thank you for participating and you may now disconnect.

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