Q3 2023 ReWalk Robotics Ltd Earnings Call
Hello, and welcome to choose to Q3 2023 we walk Robotics Ltd earnings Conference call.
All participants will be in listen only mode.
D assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
A question you May Press Star then one on your Touchtone phone.
Your question. Please press Star then two please note today's event is being recorded.
Now I'll touch on the conference over to Michael All of US. Please go ahead Sir.
Thank you Keith good morning, and welcome to re walk Robotics third quarter 2023 earnings call I'm, Mike Lawless rebel we walk robotics, Chief Financial Officer, and with me on today's call is Larry <unk>, Our Chief Executive Officer.
Earlier. This morning, we walk issued a press release detailing financial results for the three and nine months ended September 32023.
Yes release and a webcast of this call can.
It can be accessed through the Investor Relations section of the reward website at Ri walk Dot com.
Before we get started I'd like to remind everyone that any statements made on today's conference call that express belief expectation projection forecast anticipation or intent regarding future events and the company's future performance may be considered forward looking statements within the meaning of the private Securities Litigation Reform Act. These forward looking statements are based on.
Information available to re work management as of today and involve risks and uncertainties, including those noted in our press release and reworks filings with the Securities and Exchange Commission such.
Such forward looking statements are not guarantees of future performance.
Actual results may differ materially from those projected in the forward looking statements. We work specifically disclaims any intent or obligation to update. These forward looking statements, whether as a result of new information future developments or otherwise except as required by law.
A replay will be available shortly after the completion of the call accessible from the dial in information in today's press release, the archived webcast will be available in the Investor Relations section of the company's website.
For the benefit of those who may be listening to the replay or the archived webcast. This call was held and recorded on November 14th 2023. Since that date. We walk me have made subsequent announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings for the most up to date information and with that.
I'll turn the call over to reward CEO Larry Czyzewski.
Thank you Mike.
Good day to all.
Since our last financial call a number of very important events that occurred that we believe have the potential to dramatically change our revenue trajectory and we'll put me walk on our path to profitability.
These events are.
The strategic acquisition of a growing profitable entity.
Material decisions by the center for Medicare and Medicaid services CMS on our path to ensure medical Medicare beneficiaries have access to our life changing products.
Progress with the veterans administration to make our systems available.
In FBA clearance introduction of truly breakthrough technology advancements to our system.
Let me talk through each of these in order.
Together these represent a watershed moment for the company.
Equally important.
We will be better positioned to fulfill the mission of our founder which was to empower a large segment of the spinal cord injury community with the ability to stand out right and.
And walk down the street with all of Us.
The importance of our successful integration of allergy is significant and having both the financial size and infrastructure to succeed by building on the government policy decisions.
From a financial perspective from August 11 through the end of Q3 Ultra G was profitable and we anticipate it will continue its profitability in Q4.
As you combine the rework and ultra G sales organizations on January one 2024, we will have the largest U S field organization in the exoskeleton industry.
This expanded team provides us with the infrastructure for the furthest reach and highest quality of support for the industry.
For reimbursement.
Working closely with multiple systems at the center for Medicare and Medicaid services CMS, we received a healthcare common procedure coding system Hick picks code in 2020.
Then on November <unk> 2023, we achieved an assignment to a benefit category for lump sum payments to begin in January 2024.
On November six a preliminary pricing proposal was published with a request to provide more data as a basis to finalized current market pricing by the start of Q2 2024.
During this process, we continue to aggressively enroll Medicare patients submitting about 20 cases in 2023 and a similar number being submitted in Q1 2024.
With the Veterans administration, we focused in 2023, and reestablishing strong supply pathways post COVID-19 with the core spinal cord injury centers as we progressed from three fully active centers Tonight.
Some VA centers are conducting direct patient selection of control, but then allowing contracted local training in institutions are clinics close to home in the veteran this issue the choice program, which allows funding from localized training.
On Veterans day weekend C. B S interviewed Brittany Elliot a marine who participated in the VA is randomized trial, we walk exoskeleton.
She spoke about how the real work changed your life and how she lost four years of walking while waiting for a personal system. After the VA its clinical trial.
She was in Washington, advocating on behalf of the stand Act.
That's the spinal trauma access to new devices Act.
This important bill has bipartisan support.
It was led by Representatives Bergman Dingle boast and brownlie in the U S House of Representatives.
It was also endorsed by the paralyzed veterans of America, PVA and by disabled American veterans.
This proposed legislation requires that each spinal cord injured bedroom be offered the potential supply of an exoskeleton. If they are medically qualified as determined during their annual exam.
It also adds reporting metrics for Sci centers to document their process and evaluating the disabled veterans that use their service.
From a technical perspective, our breakthrough designated FDA clearance allows us to supply Medicare beneficiaries and injured veterans with a product that allows the greatest utilization in daily life.
As they can now navigate stairs and curbs when they're out walking.
In parallel we have two new products planned for launch in 2024. The first is a new rework exoskeleton design that has many improved features and adds cloud connectivity all of which will aid utilization and make the system easier to use.
The other is a new ultra G model that will offer a model for greater penetration into an untapped segment of the independent clinic market.
Yeah.
Before we move to the financial metrics for Q3, I want to give a few business measurements that we will discuss in both the financial and operating detailed discussions for the quarter and period ahead.
Q3 sales of $4 4 million represents a nearly 400% increase over Q3 2022 that is comprised of a 65% increase in <unk> revenue and the balance of the addition of ultra G for the last six plus weeks of the quarter.
Q3, and Q4 expenses include meaningful investment in CMS NBA policy support.
Along with the integration expense.
Which are all expected to substantially decrease in 2024, but are essential now to set the stage for future patient access and for reward success.
The combined U S.
Field team will be approximately 50 individuals, including a clinical evaluation group our sales team covering the entire country, a clinical training team, our reimbursement team and our field service team.
And as per our strategic direction meaningful growth is now occurring in both the rework and <unk> product lines.
I'd now like to turn the call back over to Mike for more financial detail Mike.
Thanks, Larry.
Before I review the results of the quarter I want to first comment that our Q3 23 GAAP results reflect purchase accounting adjustments transaction expenses and integration costs from the acquisition of Walter G, which can obscure investors visibility into the underlying operational performance of we work.
In order to facilitate understanding of both the GAAP and the operational results of reward.
I'm going to discuss Q3 on both a GAAP and also on a non-GAAP basis, which excludes the purchase accounting adjustments and transaction expenses integration costs and stock compensation expense.
The reconciliation of the non-GAAP to GAAP results is provided in today's earnings release.
Okay.
Okay first the revenue walk robotics reported revenue of $4 4 million in the third quarter of 2023 compared to 0.9 million in the third quarter of 2022 up $3 $5 million.
The biggest factor in our growth in the third quarter was the acquisition of Walter G, which contributed revenue of $2 9 million.
Which was the revenue generated from the date of the acquisition on August 11th through the end of the quarter.
<unk> revenue performance was in line with our internal expectations.
For the legacy <unk> product lines Q3, 'twenty, three revenue was $1 $5 million compared to 0.9 million for Q.
Q3 dollars 22 up six.
Zero point $6 million or 65%.
The increase in legacy re walk revenue was a result of continuing sales momentum in the United States and sequential improvement in Germany.
In total exoskeleton revenue was up 70% in Q3 23 versus Q3 22, while our distributed product line. The Biocycle Ses training cycles had another strong quarter with revenue up over 50% from Q3 22.
Turning to our pipeline metrics within the current markets further we work product line, which includes individuals' covered by the veterans administration.
And workers' compensation insurance in the U S and by private insurance in Germany.
The current pipeline of active warehouse consists of 26 cases up four from last quarter, which is broken down with 'twenty, one in Germany, and five VA rentals.
As of September 30, our overall number of reward cases in process is 68 with 58 in Germany and 10 in the U S. The.
The ultra cheap business ended the quarter with orders for 83 systems in backlog, which represents a healthy start to Q Q4, 'twenty three the author G business typically carries a backlog which represents a portion of the units that are sold in the upcoming quarters with the balance of the revenue generated from subsequent orders that shipped within the quarter.
As a reminder, the pipeline figures for reward systems. I described do not include cases that would be eligible for Medicare reimbursement.
Once the Medicare claims that we have already submitted as well as new ones, which we will continue to submit begin to be processed and paid by the Medicare contractors. They will convert to revenue that is additive to the revenue from our traditional pipeline of VA in workers' comp cases.
Moving to gross profit in Q3, 'twenty three our GAAP gross profit was 0.9 million or 19, 6% of revenue compared to 0.2 million or 24, 9% of revenue in Q3 22.
This decrease of five three percentage points in gross margin was a result of purchase accounting adjustments from the Altra GE transaction.
In Q3, 'twenty three we recognized additional cost of sales of zero point $6 million for the step up of the value of existing inventory of Walter G. At the closing of the acquisition that was later sold during Q3 23.
In addition, we incurred <unk> 5 million from the amortization of intangible assets that were created when the purchase price for ultra G was allocated across all of our genius balance sheet excluding.
Excluding the impact of these two purchase accounting adjustments and stock op expense non-GAAP gross profit was 2.0 a million dollars or 45, 1% of revenue for Q3 23 up 19, seven percentage points from Q3 22.
This increase in gross margin on a non-GAAP non-GAAP basis was primarily a result of higher volumes of we work in my recycle units sold leveraging our fixed production costs and an increase in our average selling price due to a change in sales mix.
<unk> also provided a slight benefit to the consolidated gross margins for the portion of the quarter that we owned it.
GAAP operating expenses were $8 $8 million in Q3, 23 up $3 1 million or 56% compared to $5 7 million in Q3 22.
Within the functions GAAP R&D expense was $1 3 million in Q3, 23 as compared to $1 1 million in Q3 dollars 22, an increase of <unk> 2 million or 18% due to the acquisition of Walter G, which contributed zero point $3 million to the increase.
For the legacy <unk> business, which excludes the contribution of both or G.
R&D was 0.9 million a decline of 0.1 million or 14%, primarily due to lower spending on subcontractors and consultants on the <unk> seven projects. Since we are in the final stages towards FDA submission.
GAAP selling and marketing expense was $4 1 million in Q3, 23, as compared to $2 6 million in the prior quarter up $1 5 million or 58%.
GAAP selling and marketing expense in Q3 23 included 0.2 million of amortization of intangibles from the acquisition of Walter G.
On a non-GAAP basis, selling and marketing expense was $3 8 million up $1 2 million or <unk> 50 per cent. The largest single factor in the increase was the contribution of Walter G, which added 0.7 billion expense to the quarter four.
For the legacy <unk> business, which excludes the contribution of Walter G. non-GAAP selling and marketing expense was $3 1 million in Q3, 23, an increase of zero point $6 million or 23%.
The increase in legacy reward selling and marketing expense was primarily due to higher consulting fees associated with the CMS reimbursement related activity as we had heightened efforts in this area during Q3.
As well as higher Tradeshow expenses.
GAAP General and administrative expense was $3 5 million in Q3, 23 as compared to zero point excuse me as compared to 2 million in Q3, 22 up $1 5 million or 73%.
GAAP G&A expense included $37000 of amortization of intangible assets from the acquisition of Ultra G and $1 3 million of M&A related transaction costs.
On a non-GAAP basis, G&A expense was $1 9 million up 0.1 million or 8% Ultra G contributed <unk> 2 million to this increase.
See we walk non-GAAP G&A in Q3, 23 was down slightly versus the spending level in Q3, 'twenty two or about 2%.
Our GAAP operating loss for the third quarter was $7 9 million compared to an operating loss of $5 4 million in the third quarter of 2022.
The non-GAAP operating loss, which excludes the items I've discussed previously was $4 9 million in Q3, 23 as compared to $5 1 million in Q3 dollars 22.
Ultra G was profitable in the quarter and contributed to the improvement in the non-GAAP operating loss performance.
We ended the quarter with $3 2 million of cash and cash equivalents and no debt. Our operating cash usage in Q3 was $7 4 million, which is higher than recent quarters due to approximately $2 million in cash paid for the one time M&A related expenses and meaningful investment in CMS and VA policy.
Support.
We expect the incremental M&A related expenses expenditures to be significantly lower in Q4 23 in the prior quarter, if our revenue to be higher in relation to our cost structure. So the cash burn rate in Q4 should improve considerably from Q3 23 levels for.
For Q4, 'twenty four we expect a sequential increase in legacy we walk revenue and a full quarters contribution of revenue from Walter G.
On a going forward basis, our top financial priority will be to reduce significantly and eventually eliminate our cash burn rate with the <unk> acquisition completed in the integration underway. Our goal is to grow our topline and in a capital efficient way to minimize investment in additional resources and to prioritize our spending to only support our core objectives.
Yeah.
Lastly, I want to provide an update on the status of our listing requirements for Nasdaq.
As you May know back in October we were notified by NASDAQ that our second 180 day compliance period had expired and that we were still in non compliance with NASDAQ listing rule.
555 zero a to maintain a minimum bid price of one dollar per share.
We responded this notification with the request for hearing before the NASDAQ hearing panel. It also subsequently requested an expedited review since we qualified for this we received back a response that the expedited review resulted in us being granted an extension until January 31, 2024 to regain compliance with rule 5550.
We continue to be committed to driving improved fundamentals and financial performance and we work to regain compliance with this rule.
With that I'd like to turn the call back to Larry for further remarks.
Thank you Mike.
I'd now like to provide a little more detail on our CMS activities.
Implementation efforts and our financial operating direction.
In 2023 with CMS Medicare we have submitted about 'twenty metamere claims and paused new submissions momentarily to implement claims using the newly assigned benefit category with lump sum payment beginning January 2024.
We are not yet included in these deliveries in our revenue forecast until the timing and payments are established.
Our immediate focus is participating in the upcoming <unk> November 29th meeting and providing the requested data which reflects our current 2023 commercial updated technology.
Yeah.
CMS published the preliminary price based on a 2020 claims.
And they noted they welcomed data on current pricing and product models.
The data we will present at this meeting on the 29th is based on the submitted claims to Medicare Since April 2023.
These claims reflect the accurate list price of the device to be taken in consideration by CMS in their pricing formula.
Historically once distribute houses as complete a final price will be published in late January or early February with an effective date of April one 2024.
In parallel we will begin to educate physicians on the specific inclusion and exclusion criteria. So they can determine which of their patients may potentially benefit with this technology.
We have aggressive plans to collaborate with commercial payers and the spinal cord community to increase awareness of these achievements and access to the technology.
We will also work with the spinal cord community directly to ensure they understand that access has become a reality after all the years with no available pathway.
We will utilize a mix of online effort media flea and telephonic or zoom support provide information community as well as planned targeted approaches with engage payers.
Our large deals.
Since we will be also a key part of our educational efforts in the market.
Yeah.
We're also excited about the sport, we are seeing with our new VA centers and the initiatives by Congress and the Senate to broaden awareness and consideration of walking once again.
The support in parallel for the stand Act by the paralyzed veterans of America, and the disabled veterans community is fantastic advocacy for this community.
The VA remains a leader in research on spinal cord injuries and although it has taken some time with the individual spinal cord injury centers to provide products. They are leading the way in enabling walking in everyday life.
<unk> that is moving through Congress has four key elements one annual exoskeleton evaluations are codify it in law for those veterans, who secretly care through the VA.
Two.
The VA provides congress updates on progress in terms of numbers of evaluations training and device approvals.
And three it includes exoskeleton manufacturers and other external stakeholders when considering changes to the clinical practice guidelines published NBA govern the evaluation training and procurement of exoskeleton devices and.
And finally for appropriate usage of exoskeleton device it becomes a measurable element of the overall performance metrics for leadership within existing veterans integrated service networks.
Or b regions.
Our role is to use our large field organization to provide the training and support needed to assist these liaise as needed with our innovative technology.
Yeah.
I would now like to address our operational direction for the rest of 2023.
And as we look into 2024.
2022, and 2023 were investment years to advance government policy.
To build our infrastructure organically and with an acquisition to advance our technology.
Okay.
As we close 2023, we're changing to a new operating phase that is based on execution and building on the tremendous successes in 2022 and 2023.
For 2024 revenue must grow investment must decrease and operating efficiency becomes a paramount measurement.
We will hold off on providing 2024 specific growth expectations until we gain more detail on the CMS final payment level and on the timing of the first $20 to 40 cases repayment.
Then we will have information and experience to provide more detail.
As 2024 is a financial execution here, our burn rate must decrease substantially.
Combined with our revenue growth, we see decreases in certain investment areas as key's priorities change we.
We see decreases in government investment in government policy and we begin to see synergy in the operations of the combined entity.
I look forward to defining these further in our Q4 earnings call.
We simply had a fantastic Q3 and early Q4 after years of building investment we are optimistic about the future and the knowledge that we walk into <unk> will endure for those who need them based on the fore sight and policies of CMS and the VA.
We now have all the needed elements for growth and execution.
It's up to us to be financially prudent and to work just as hard in this new phase as we have during these years of development.
Thank you everyone for your time today, and we'd like to open up the floor to questions. Please. Thank you at this time, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Your easiest speaker phone please pickup your handset before pressing the keys.
Your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And the first question comes from Bank, you Robert <unk> from H C. Wainwright.
Thank you good morning.
Larry and.
Mike.
Let's start on the altar G.
So in terms of that new business.
And as you said.
The first quarter that you have under your belt it has been profitable.
Which is which is good news.
Can you comment a little bit about.
But how.
Ultra Gs.
Progressing in your hands and also.
How do you see.
Our cross selling.
From Walter G to reward because we work, it's also entering and execution phase as you call. It.
Again, I think theres parts of that for me and for Mike.
First we are really thrilled with how this is progressing and how it's come together.
And our favorite measurement of this is.
How will we hit the ground running the day after the acquisition.
For revenue results and beginning to integrate.
We have taken this period to focus on hitting the numbers for Q3 Q4 and in parallel to do a lot of work on the proper structural setup for this combined organization that will go into place on January one.
And we've outlined a very extensive program to have everybody trained.
But we're going to wind up having as a sales organization, whose reach is just dramatically broader than it was as two standalone entities.
And the synergistic component of this is.
All of the 600 spinal cord injury centers in the United States have ultra <unk>.
So they are very good connection points.
And the larger organization for ultra <unk> benefit as they will now have more territories and the as they launch a new product in 2024, they can get to the smaller clinics on a better geographic basis.
So the operating structure.
That has taken effect as of the first of January.
Is what we believe is the right structure to benefit both companies us to work on CNS MBA from the <unk> and us the other part of us.
To be able to get to these clinics with the new product.
And broader reach an ultra GT fund.
<unk>.
Did you want anything further on the financial side of this or did that answer your question RK.
No. This is good I'll come to the finance in a minute, but before we get there.
In your prepared remarks, you also made comments on.
Our new auditors J model.
Well as a new <unk> model can you give some highlights about what.
What is new and in these two models.
Or planning to.
Planning to start to commercialize.
Yes, we havent completely.
Advertised what we're bringing to the market.
And a big sense.
But internally there is a slightly different goals in both for ultra G. We have a model that will play to a broader and newer audience.
A device that is designed really specifically to meet the needs of smaller private clinics and now with a larger team that we can call on those clinics. That's why we believe this fits well. So it's an additional product line and they are operating for a segment that they really haven't pursued at a high level.
And it is a very economic and very good operational system for the small private clinic.
So that's the <unk> model and we'll begin that launched in the first late first half of the year as our attention.
On the <unk> side.
We have a product with a number of improvements that we're focusing on making them easier to use so its not a radically different product.
But it is a product that has.
<unk> is powered differently in terms of battery structure in life. It can.
Operate multiple speeds, which makes it easier to use in the community.
And we've improved the cloud connectivity, which frankly, we want to use to help drive utilization because data will be available and we can help users understand use and we can encourage them to use it even more.
With these metrics so.
The products are a little bit different one driven at utilization. The other one is a new market segment.
One more question for you on the operational side.
So as we enter into.
No.
Potentially good good good growth rate.
In the U S. The three work.
Do you think it will also contribute to that growth.
Before.
Yes, we do expect growth in Europe.
I think the rate of growth in the United States.
Cause of the CMS size of the segment.
The VA is going to be the majority of our growth.
I think growth in Europe.
We will be driven a little bit by.
Just reopening at a little more of they've been slow to get their clinics going at the highest levels from a personnel point of view.
Over the course of the year personnel shortages and things of that type.
But we do see expansion.
In Europe.
Specifically within the reward side and on the <unk> side. They have a very good distribution distribution network that we believe will be able to build out as well.
Thank you a couple of quick questions on the financial side. So revoke sales came in at $1 5 million for the quarter.
What drove that that growth within the reward business and also for alter Gs sales.
You stated $2 $9 million this quarter. So what are we comparing that against say <unk>.
Sequentially, how much has it.
Good one.
And I'll stop right there.
Sure.
Questions, Firstly, I want to clarify I think I misspoke on the call about the cash balance the correct cash balance was $32 6 million.
Okay.
I misread that.
Scribing the the cash the cash balance so in terms of the growth on the <unk> side.
It was really.
Across the board in terms of.
There was like I said sequential improvement in Germany.
Europe I would say that the majority of the growth was really driven by the U S.
And.
Yes.
Sales to the VA for the Exoskeletons as well as continued strong performance by the the Monocycle product line.
Thank you and then on the altar G Valles.
Yeah, so the ultra gcs I would say they don't they don't necessarily.
It is not a level lives level of sales through the quarter. It is it tends to be as with a lot of capital equipment products tens are a lot of business in general tends to be towards the second half more towards the second half of the year. So you can't you can't sort of just take that the $2 9 million and just.
No.
Assume that it was level throughout the quarter so.
We've described in the past the business as being about a $20 million business.
So you can sort of tie.
Well it looks like giving guidance at this stage, so I'm being a little bit coy, but you can make it.
A determination of what you think the business will do based on how we've described it on an annualized basis, I think we'd like to own it for one more quarter and kind of go through the whole quarterly cycle of our internal forecasts and then realizing the results before we start to provide external guidance for that business line, because it's still new to us but.
But you get the gist of the scale of that business.
Thank you thanks for taking my questions.
Thank you and the next question comes from Martin Pollack with FMR Holdings.
Yes.
Wonderful.
Finally, becoming operational company with real business.
Just two questions to start with.
You've talked about.
You know the two entities and I ought to gene reward when will we see some.
Segment reporting that will truly get into the at least the operating line for both companies.
At this point should we expect that by fourth quarter or did you say beginning next year, we will see segment reporting.
That'll be the first question please.
Hey, Bob Good question so.
I think right now, we're making that determination with our with our auditors there are certain accounting requirements around when segment reporting is justified.
We plan to run the businesses as one business. This is not a case of two separate business entities that are just are running.
In separate silos, there's going to be a lot of cross pollination of our cost structure and our entire commercial team is really supporting all of the product lines. So.
At this point I don't know yet if we will in fact need to provide.
Segment reporting because I.
Our intention is that we're not running this.
Separate segments, they are going to be one consolidated business line, but we still need to do more research into that and certainly.
We will provide an update in terms of where the what the final determination is.
It seems that.
If that's okay.
Never really get a chance to see what that transfer.
Current basis, what is the profitability of ultra <unk> separate from reward I don't know that that's you know.
There'll be a reason not to separate them.
The different products, but I think that also ends up.
Creating questions about where the cash.
The earnings are coming from it seems to me the two products are still discreet enough.
So.
I really think it would be very very wise for you to provide more of that type of reporting that just on the revenue line, but as it filters down to the EBIT line.
Youre, suggesting you're ready that you make some money.
Even in that period.
<unk> reported that.
Ultra juice profitable what is the level of profitability that I mean.
What would you be expecting.
For that.
Even if it came in a matter of discussion as opposed to the segment breakdown because I think we need to know that.
Second question is when it comes to the cash burn.
Sales for the first time I've heard will aspirational comments that suggest that cash burn is coming down dramatically.
You said significantly, but when you say, we're expecting higher revenues, we're expecting a significant decline in cash use or cash burn.
Are we still holding out to the notion that you'll never need additional financing in the cash on hand will be sufficient.
To go through 2024 and 25.
But give us a little bit more perspective on that cash burn going into Q4, and then into next year certainly.
I know, you're not really make a full year forecast, but what is significant decline mean.
Can you amplify on that because this is Jeff.
It seems not enough to really get a good handle is it.
Burn rate of $2 5 million per quarter or is it is it four or is it what number is that.
I appreciate if you could give us some kind of clue into that.
Okay.
Give some comments on this flurry.
First on the things that are really going to reduce our investment to succeed with CMS has been very large.
Be it legal and other advisors be it data collections be it build in infrastructure.
We should treat it.
The investment paid off.
Relative to getting to the endpoint that they were charged for it but we don't need and will not require the majority of those activities any longer as we go into next year, So youre going to see a significant reduction in efforts on government spend.
We've talked a little bit about the VA and we believe as this new act goes through again there'll be a significant reduction on some of our activities there as well in terms of.
Government policy.
We also see a lot of operational efficiency as we pointed out our sales forces are going to be one sales force. It's no longer broken out the same rep is going into the hospital selling multiple product lines.
And.
That is has its efficiency to it in a significant way with more territories less travel.
And to your point do we believe we have sufficient cash to get to profitability. The answer is absolutely we do.
We see growth with CMS with the VA with new product lines with the Altra Gee, we have one this year, we look to do another one in 2025 as well in the allergy product line. They didn't have the cash to do those that as some of the synergistic effect of this we have to execute.
But we believe that we can relative to the amount of burn rate.
That's a hard one wed like to finish our all of our specific plans, but all scale that at least at some level. We're looking at reductions in burn rates in the direction of half a year over year.
The actual numbers will make visible as they occur.
Revenue is going up some of our expenses are going down we know what we have to do and we're going to do it.
So.
Really I think in previous quarters.
That said you like that.
To some extent a lot depends on the revenue growth at this point.
It seems like that continues to be the case, but now you're also pointing out certain expenses real.
Expenses, there will not be there.
<unk>.
All of the cost of integrating the companies quick then.
Acquisition.
And what costs no longer have to incur so I don't want to put words in your mouth, but if youre, saying.
By the time they are.
Half of the burn or it could be.
Could be mitigated or maybe run rate could be down 40%, 50%.
Should one assume that at some point the run rate of cash burn in 2020 for maybe a quarter one quarter two.
On a run rate will be down to that two two and a half million dollars. Any reason why your comments are pointing us to that direction.
We clearly expect our burn rate to go down quarter over quarter over quarter.
We haven't quantified it.
I'd like to quantify the exact dates I'm getting paid by CMS. So I can see the top line, that's going to offset some of that bottom line and.
And that's going to become apparent to us, but that's why we're not being we can't give more specific guidance, but we expect to report production burn rate every quarter and the year ahead.
Okay, because it does seem that these comments are for the first time.
It's a really point us to the lower expenses.
That will be incurred that alone is very different than what you've said in the past, where you've said well a lot will depend on revenue growth you've implied there'll be some costs will be.
Lower but this seems to be these comments are really.
More significant is that.
So I'm hearing you.
One more question with regard to this legislation the new Bill that's being proposed for the VA I found it curious that.
Well anybody the red for the first time would've thought Oh. This is something brand new well you've been selling to the VA from the very beginning.
And there was never a notion August what accelerated.
<unk> to generate even more activity out of the VA.
What that is.
We'd like to know whether you when you're talking about the VA itself independent of CMS.
Doing this bill goes through and I don't know what that.
Does happen.
The number of cases that could literally ends up being new sales.
At some point, obviously, there is a sales cycle that takes place six months or so.
But could you.
VA sales be.
Exponentially much higher.
The bill.
Being approved.
Well, the bill being implemented and followed we'll change it.
Best way to look at this is you don't CMS for Medicare and Medicaid is 56% of the spinal cord injury population in United States and if you could just Medicare alone it's 31%.
The next largest single block in the United States as the veterans, which is roughly 9%.
So this opens up the door for us if we get it properly.
<unk> integrated into the VA.
Processes access to our two biggest markets.
Yeah the VA.
I can only complement how wonderful they've been on the R&D side.
It didn't translate as well as we would've hoped on the execution side.
Covid gotten away frankly in a big way.
But we've seen that change and some behavior. This year as I indicated we had three really active operating centers for the whole U S that we're really getting things done we now have nine.
That's.
By percentages it sounds great.
But it certainly increases our revenue.
And this bill that.
Congress.
Yes.
<unk> taken through the house and go into the Senate.
Shows the commitment I think of key people in Congress to taking care of veterans and.
We believe we will build on that we'll provide the process for.
For it but general Bergman in particular, along with the others that co sponsored this bill.
And they brought a.
U S Marine who was paralyzed and walking.
The hill with them.
They are quite serious about supporting us and supporting the veterans and we think we'll build on that.
Just assuming let's say the bill goes through.
The woman that happens.
How does that change your strategy with regard to.
And we're getting some of those resources are also straight into towards the V. A.
Potential patients.
Any change takes place immediately.
And I think this could open up a huge number of new cases.
It will open more cases, and I think it will do it gradually but what we've done structurally and part of the whole design of both organic and inorganic growth through acquisition was to have a field presence that could implement well.
The VA is really good and how they manage veterans, but they need support they need good support for training they need good support on a day to day basis.
And making sure these veterans get through the system at least from a product supply and in the <unk>.
Elements that we have to give them with the larger sales organization. The design of that is to be able to call on <unk> and help them.
And with any support that they require from industry.
And also do the same with CMS.
We needed that larger organization to implement on our sales goals and Thats why the combination of all these factors go together the larger organization and team plus VA plus CMS are all favorable to allow growth.
It'll never be fast enough, but it will grow.
Yes.
Yeah last question if I may.
Larry.
Certainly the.
Announce.
Price per unit $186000 that you were.
Essentially yes.
Greg put it into the <unk>.
Your expectation or at least your request.
Yes.
Start to cough stock retreated significantly when we saw the number 94006 hundreds so you expressed.
We're quite pleased you also indicated that the possibly now is that there will be a baseline to grow from with the hope that you'll be getting some.
Consideration for the stair climbing.
Approval as well as turning sharp corners.
The number.
Sounds like it's going to be higher than that time before obviously and that implementation is there a number you think.
So one could expect that.
The BMS will provide additional funding for.
Recognizing them as Dave said exactly that.
What is the number that you would say.
There's one that would make you pleased.
I would imagine you have looking for $50000 to that.
But what kind of number is reasonable to expect.
Well Marty what I was very pleased about is that CMS came forward and said we want to use current market pricing as part of our consideration for our formula and that's the right way to do it from a government policy point of view, so I actually endorsed.
Big government policy, which I don't do very often.
I don't want to put a specific number two we will go back and give them. The invoices of the current model they will put it in a formula or consider it.
And we will work with that number.
We we being covered for 56% of the.
Population and 31% specifically be in the Medicare with the 25% be in Medicaid.
Matters, so we're going to be able to grow at whatever number they give us.
But they came in and asked for the right data, we're going to give them the right data and.
Maybe slowly but government policy is working well.
Were.
We're making progress in the two largest government entities that make up our business.
And it's taken a lot of time and a lot of investment, but we're done with the investment and are excited to move forward.
What do you said market Mark.
Price so market data.
Clearly, indicating its higher than the 94000.
Hugh.
Your implied some number that you would you.
You would say that is more reasonable.
Did you what is that number I mean is there.
Is there a way for us to gauge what content market data.
Thinking about what is that kind of price.
What is the market.
The number is going to be Cms's number not our number and it will be for every person who is paralyzed.
We believe it's going to be a number that works for our business.
But I've got to let them do their process before I put a number out there.
And.
That's not going to take too long.
We've.
Get to present on November the 29th.
Historically, they have given answers to those deliberations roughly late January early February.
And also they have a lot of pending claims they could choose to pay one before that or not.
We're not far away from getting a good number.
And the other being.
That good number is the number that you would say.
A step up of about 94600, right that seems to be what youre, suggesting.
Whatever that number is okay.
But that is the way I think the initial release suggested that they're willing to go back.
So the 2020.
Beyond 2020, recognizing that you.
Improvements clearly the FDA approval for bulk stair climbing.
The case as well.
Turning corners.
So you would say.
The 94 600 plus.
I think that's what it seems to be so right.
Well clearly, we're presenting a 2023 number which is they used a base number that they were very clear about it was 125000 that was published in the public documents.
We have a list price of 186000.
They will consider that.
From our material, we provide them and they will put it in their formula which is a fairly complex formula that is available on the CMS website.
If you could.
Pursue that.
That should give us a number that we can work with.
That is our that's all the data I can give you because it is all I have today.
Okay.
Thank you very much.
It seems things are really moving in the right direction. After all these years were finally getting closer to.
But a lot of depth of the tunnel.
I hope that.
Clearly this is a new day for re work.
All the best.
Thank you very much we appreciate it.
Thank you and this concludes our question and answer session I would like to turn the Florida My clause for any closing comments.
First I'd like to thank everybody for participating and.
I close the call I talked about us moving into a new phase of execution.
And that's what we're going to be able to start reporting on as we go into 2024.
And it's time to pay attention to us in a different phase of our where our company is.
And it's a phase of revenue growth and being prudent in managing our financial position.
To get this company to reduce its burn rate.
And to get to breakeven on the cash we have.
Want to emphasize that's where we are pointing ourselves and thats where were committed.
So I look forward to future calls because I get to talk about these things and I'll do the best we can with those so with that thank you everyone for your time today and please reach Joseph yet further questions.
Thank you. The conference has now concluded. Thank you for attending today's presentation and you may now disconnect your lines.
Yeah.