Q2 2023 Ekso Bionics Holdings Inc Earnings Call

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Hello, and welcome to the extra biotic Q2, 2023 financial results conference call and webcast. If anyone should require operator assistance. Please press star zero on your telephone keypad, a question and answer session will follow the formal presentation. You May press star one at any time he placed in the question queue.

As a reminder, this conference is being recorded its now my pleasure to turn the call over to your host Matt Steinberg with certain partners. Please go ahead Matt.

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

Earlier today, <unk> Bionics released financial results for the second quarter 2023.

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

We begin I would like to remind you that management will make statements. During this call that will 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.

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

All forward looking statements, including statements regarding our business strategy future financial or operational expectations or our expectations on 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.

<unk> disclaims any intention or obligation, except as required by law to update or revise any financial or operational projections, our regulatory outlook or other forward looking statements, whether because of new information future events or otherwise where speak only as of today July 27 2020.

Three.

Now I'll turn the call over to extra Bionic CEO Scott Davis.

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

We are very pleased with our second quarter results, most notably a record number of XO help device bookings and strong revenue growth of 36% year over year.

Driven by the ongoing performance of our excellent.

Positive contributions from our <unk> products and continued solid execution of our team, we are making tremendous progress and reaching more patients across the continuum of care.

Excellent. He has taken an approach of using our technology and rehabilitative programs to follow patients from post acute to outpatient care and onto continued home and community use.

This helps differentiate us in the industry and provides our patients with more options for use of technology in their recovery process.

We believe this differentiating strategy gives us access to a sizable addressable market.

Specifically, we believe the VA alone with its programs around the XO Indigo personal provides us a market opportunity of more than $300 million.

Additionally, with the full indigo product line, our reach now expands to outpatient facilities that total almost 63000 centers domestically along with wellness centers, which is an emerging market for us that totaled approximately 31000 across the U S.

Our commercial and marketing teams are hard at work to drive greater awareness as we seek to penetrate these large markets.

In the second quarter, we booked a total of 44 XO health devices quarterly record this.

This includes devices within the XO and are an XO indigo product lines.

Among these bookings was another significant multi unit order from an integrated delivery network or <unk> for 12 of our XL in our devices.

This represents the second straight quarter.

Sizable booking number with a large IDM customer.

We believe that our customers are seeing firsthand, how our cutting edge devices elevate the standard of care for neuro rehabilitation.

Our research suggests that post acute care centers gain clear benefits with our excellent an excellent can you go devices in the form of positive patient outcomes.

Differentiated and more efficient offering and better economic value.

Furthermore, we are leveraging our current customer base to heightened awareness for individuals who can benefit from the use of XO indigo personal east.

These adoption drivers are among the reasons our commercial team is generating strong demand from new and existing network operators, putting us in a position to reach a significantly larger patient population.

Internationally, we're pleased to have reported a strong booking quarter, particularly in Europe .

One exciting deal of note is through a distributor in Hungary that resulted in a six unit X LNR deal.

The strength in Europe underscores our investment indirect partnerships in the region.

In APAC, we secured our first XO indigo a bogey.

We continue to see these regions as important growth drivers in the years to come.

Turning to an update on the progress with our industrial product line XO works.

During the second quarter as we previously mentioned, we continued focusing on a different go to market strategy.

<unk> increased emphasis on evo and its placement into large industrial settings, where we believe there is an addressable market opportunity of approximately $5 billion.

This refocus takes time with a longer sales cycle, but I'm pleased to report subsequent to quarter end, we won a competitive bid with a global automotive leader and have a number of other promising opportunities in our pipeline.

During the quarter. We also shipped our first evo from our new contract manufacturer, which brings us a better pricing structure.

Looking ahead, our extra work and commercial team is focused on targeting larger customers and increasing engagement to drive demand.

It was a success and safety of our customers workforce.

Another exciting development at the end of the quarter was the recently updated 2024 home health prospective payment system right from the centers for Medicare and Medicaid services or CMS with a newly proposed rule that is relevant for our business and our patients.

This rule would codify the longstanding Medicare definition Reis to provide clarification on the scope of the Medicare part D benefit for leg arm back and neck prices and as a result, we classify certain exoskeleton type devices as braces for Medicare payment purposes.

This is a positive step in facilitating the potential for Medicare coverage personal exoskeletons, such as our XO indigo personal for qualified patients is a lump sum reimbursement.

We fully support and codifying the proposal to further enhance potential access for Medicare beneficiaries and looks forward to providing updates around this proposed rule in coming quarters.

Overall, we are encouraged by our performance highlighted by record quarter results of revenues and bookings.

Multi unit orders with large network operators and inroads, we are making in large markets across the continuum of care.

Driven by the strength of our commercial team and newly expanded portfolio, we look forward to bringing our life changing solutions to a greater number of patients in need worldwide.

Now I will turn the call over to our Chief operating Officer, Jason Jos.

Thank you Scott within operations, we continue to execute on our mandate to reduce our cash burn and have a number of related initiatives underway.

These are improving processes inefficiencies tightening opex and cost control and optimizing inventory.

That said, our operating expenses did increase in the quarter on a year over year basis. This is in line with our expectation due to the costs associated with H M C or human motion control integration.

On the inventory of fraud since the second half of 2022 we have carried higher than optimal inventory to mitigate production risks due to pervasive supply chain disruptions.

Not completely back to normal or component lead times are much more predictable than they have been in past quarters.

In response to these improvements we are working diligently to optimize our inventory levels to free up additional working capital.

The integration of H M C continues to progress smoothly.

On a product perspective, all former H M. C products are now fully integrated into our portfolio.

Which now covers a broad portion of a continuum of care for rehabilitation and mobility.

As a result, our production and revenue potential are significantly higher.

The former H M. C. Team is also now fully utilizing our combined operational system, which we are continually working to improve in addition, the process to combine our engineering and quality systems is well underway with a target completion of mid 2024.

I look forward to providing additional updates as the year progresses I will now turn the call over to Jerome Wong, who will discuss our second quarter 2023 financial results.

Thank you Jason now onto a summary of our second quarter 2023 financial results.

<unk> generated second quarter, 2023 revenue of $4 $7 million compared to $3 $5 million for the second quarter of 2022, an increase of 36%. This increase is comprised of a $1.5 million increase in extra health revenue, partially offset by a $200000 decrease in exports.

In the quarter <unk> revenue was affected by delays from our transition to our contract manufacturer.

Gross profit for the second quarter was $2 3 million, representing a gross margin of approximately 48% compared to a gross profit of $1 $6 million and a gross margin of 447% for the same period in 2022.

The 37% overall increase in gross profit was driven by the sharp increase in excellent health device sales.

The increase in gross margin was primarily due to lower device cost.

Operating expenses for the second quarter were $6 5 million compared to $4 9 million set a second quarter of 2022 during the second quarter of 2023, the company incurred increased expenses related to the acquisition and integration of H M. C severance expense and an increase in marketing activities.

Net loss for the second quarter was $4 $2 million or <unk> 31 cents per basic and diluted share compared to net loss of $3 million or 23 cents per basic and diluted share for the same period in 2022.

Turning to our 2023 first half results revenue increased $2 8 million or 46% to $8 $8 million for the six months ended June 30 of 2023 compared to $6 million in the same period of 2022. The increase in revenue was primarily driven by an increase in ex self help.

Device sales.

Up $3 6 million.

Gross profit for the six months ended June 30 of 2023 was $4 3 million, representing a gross margin of 48% compared to gross profit of $2 $9 million for the same period in 2022.

Presenting a gross margin of 47%.

Overall increase in gross margin was primarily due to lower device cost.

Operating expenses for the first six months of 2023 were $13 million compared to $10 3 million for the same period in 2022. The increase in operating expenses was primarily related to the acquisition and integration of HFC severance expense and marketing costs.

Net loss applicable for the first six months of 2023 was $8 6 million or 64 cents per basic and diluted share compared to net loss of $7 6 million or <unk> 59 per basic and diluted share for the same period in 2022.

Cash used in operating activities in the first half of 2023 at some point $1 million down from $8 $5 million in the year ago period as of June 30 of 2023, the company had a cash balance of $13 $3 million. Please.

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'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.

Formation tone will indicate your line is in the question queue. You May press star two if he'd like turbo for a question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star one one moment. Please while we poll for questions. Our first question today is coming from Sean Lee from H C. Wainwright Your line is.

Not a lot.

Good afternoon, guys, congratulations on a great quarter and thanks for taking my questions.

My first question is on deck.

You get that product that's going.

Meanwhile, in adoption is increasing I was wondering if you can provide a bit more color on.

How much of that how much is integral contributing to the overall increase in revenue that we've seen that's pretty good.

In the last quarter, and where do you see it going.

For the rest of the year.

Okay. Thank you for your question Sean I appreciate it.

This is Scott Davis.

Yeah with the Indigo devices XO considers these devices as part of our XO help bookings.

So generally speaking we are containing those within that category.

However, within that family of products, the XO indigo therapy, and XO Indigo and are are typically used by clinics for patient rehabilitation and the XO indigo personal his used by individuals for home and community.

Health.

So in Q2.

Our home and community health.

A segment of the Indigo product line.

Represented you know in the neighborhood of 20% of our of our revenue.

Overall, and if we talk specifically about our legacy XO and.

And our product.

And strip out the indigo, we are seeing year over year.

Even within that product line alone. So you know indigo was a it was certainly a contributor to our great numbers in.

In Q2.

Oh, great that was very helpful.

Hum prepared remarks, you also mentioned that you guys won that bid with the auto manufacturer for X. All works I was wondering whether you can provide some more details on that.

Well, we're really excited about about the win with the.

Auto.

In the auto industry.

You know we are we booked an initial order from that however in our in the quarter due to some.

Some supply chain.

Challenges in in late delivery of our <unk>.

We were unable to fill those in the quarter, but we carry those as backlog.

Into Q3.

And you.

We continue to.

Additional development in that category as well with new customers coming into our forecast and pipelines.

Yes.

I see Oh my final questions on the margin side, you mentioned an increase.

The margin increase the last quarter because of the.

Lord device prices I was wondering whether we can see that trend to continue for the rest of the year.

Sure you know, we continue to work to improve operational efficiencies.

With and we are as a result seeing lower costs.

In our in our supply chain so.

It is a trend that we are constantly working toward Jason Jones would you like to maybe shed a little more light on that yeah. I was I guess I would just say that you know we are not satisfied with our current margin level and we think it should be higher I don't think we're in a position to forecast that's going to be higher but that's a focus of ours along with it.

Using our inventory so that's how we're operating but I don't I don't think we're in a position to forecast higher numbers in the future.

I see I see Oh.

Alright, Thanks again for taking my question.

Thank you very much.

Thank you we reached end of our question and answer session I'd like to turn the floor back over to Scott for any further closing comments.

Alright, Thank you Kevin and Sandra.

Everyone. We are very proud of the progress we've made so far this year highlighted by our quarterly record number of XO health bookings and revenue.

<unk> team continues to generate new demand by strengthening our relationships with top network operators.

We're generating new multi unit orders and combined with the strength of our sales team and our expanded product portfolio now reaching across the continuum of care.

We believe that we're well positioned to sustain this momentum into the second half of 2023 and beyond.

We look forward to providing additional updates throughout the year.

Thank you all and have a great day.

Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

Yes.