Q1 2024 ReWalk Robotics Ltd Earnings Call
Operator: Good day, and welcome to the LifeWord First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode.
Good day and welcome to the life word first quarter 'twenty 'twenty four earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Mike Lawless, Chief Financial Officer. Please go ahead.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star and then two.
Please note. This event is being recorded I would now like to turn the conference over to Mike Wallace Chief Financial Officer. Please go ahead.
Michael A. Lawless: Thank you, Dave. Good morning, and welcome to Layford's first quarter 2024 earnings call. I'm Mike Lawless, Layford's Chief Financial Officer, and with me on today's call is Larry Jasinski, our Chief Executive Officer. Earlier this morning, LifeWord issued a press release detailing financial results for the three months ended March 31, 2024. The press release and a webcast of this call can be accessed through the Investor Relations section of the LifeWord website at www.golifeword.com.
Speaker Change: Thank you Dave Good morning, and welcome to <unk> first quarter 2024 earnings call. Unlike Lawless <unk>, Chief Financial Officer, and with me on today's call as large as <unk>, our Chief Executive Officer.
Speaker Change: Earlier this morning, <unk> issued a press release detailing financial results for the three months ended March 31, 2024 of the press release and a webcast of this call can be accessed through the Investor Relations section.
Speaker Change: With web site at <unk> Dot com.
Michael A. Lawless: Before we get started, I'd like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation, or intent regarding future events or the company's future performance may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These four forward-looking statements are based on information available to LifeWord Management as of today and involve risks, uncertainties, and other risks, including those noted in our press release and our filings with the SEC.
Before we get started I'd like to remind everyone that any statements made on today's conference call that express a 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.
Michael A. Lawless: Such forward-looking statements are not guarantees of future performance, and actual results may differ materially from those projected in the forward-looking statement. Lightfort 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 of this.
Michael A. Lawless: The call will be available shortly after completion, and accessible from the dial-in information in today's press release. The archived webcast will be available in the Investor Relations section of our website. For the benefit of those who may be listening to a replay or on the archive webcast, this call was held and recorded on May 15, 2024. Since that time, LifeWord may have made subsequent announcements related to the topics discussed, so please refer to 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 LifeWord CEO Larry Jasinski. Thank you, Mike.
Speaker Change: These forward looking statements are based on information available to <unk> management as of today and involve risks uncertainties and uncertainties, including those noted in our press release and our filings with the SEC.
Such forward looking statements are not guarantees of future performance actual results may differ materially from those projected in the forward looking statements.
Speaker Change: Like what 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.
Speaker Change: A replay of this call.
Speaker Change: Paul will be available shortly after completion accessible from the dial in information in today's press release, the archived webcast will be available in the Investor Relations section of our website.
Speaker Change: But the benefit of those who may be listening to replay or on the archived webcast. This call was held and recorded on May 15th 2024 since that time life word may 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.
Speaker Change: And with that I'll turn the call over to Lakewood CEO, Larry just lynskey Larry.
Lawrence J. Jasinski: Thank you Mike Good day to all.
Lawrence J. Jasinski: Let me start with a quote from Eric Hinbert. Eric is a remarkable young man who became paralyzed and was the first person to have his Rewalk system paid for by Medicaid. He said, quote, "For me, the Rewalk exoskeleton is a medical necessity. When I started walking again with my Rewalk, my life changed. Increased accessibility to the Rewalk personal exoskeleton by way of Medicare reimbursement has the power to change lives. I want people like me to know there is still life to live, quote.
Lawrence J. Jasinski: Let me start with a quote from Eric Hyndburn Eric.
Lawrence J. Jasinski: Eric because it remarkable young man, who became paralyzed and was the first person to have his reward system paid for by Medicare.
Lawrence J. Jasinski: He said quote.
Eric Hyndburn: For me the rework exoskeleton as a medical necessity.
Speaker Change: When I started walking again with my reward my life changed.
Speaker Change: Increased accessibility of the reward personal exoskeleton by way of Medicare reimbursement has the power to change lives.
Speaker Change: I want people like me to know there is still life to live unquote.
Speaker Change: Re work.
Lawrence J. Jasinski: Rewalk, Now is Lifeboard, initiated efforts with CMS in 2020. Two occurrences were critical to what I call absolute success. Exoskeletons have been codified into a Medicare benefit category and have an established fee schedule payment.
Speaker Change: Now is the lifeblood initiated efforts with CMS in 2020.
Speaker Change: Two occurrences were critical to what I call absolute success.
The skeletons had been codify it a Medicare benefit category.
Speaker Change: And having established the scheduled payments.
Lawrence J. Jasinski: This is achieved thanks to many. The diligence done by CMS, support from the medical community, and society support from leading organizations such as the Item Coalition, which is a non-profit devoted to access, and MDMA, the Medical Device Manufacturers Association. United Spinal, the Christophe Reeve and Dana Reeve Foundation, and the Paralyzed Veterans of America.
Speaker Change: This was achieved thanks to many.
Speaker Change: The diligence done by CMS.
Speaker Change: Support from the medical community.
Speaker Change: Society support from leading organizations such as the item coalition, which is a nonprofit devoted to access.
Speaker Change: An M D M E. The medical device manufacturers Association.
Speaker Change: United spinal.
Speaker Change: The Christopher Reeve and Dana Reeve Foundation, the paralyzed veterans of America.
Lawrence J. Jasinski: Broad bipartisan support from key members of Congress and many individual letters from Rewalkers and their families made a difference. This absolute success means we can provide access to those who are medically qualified. We can change their lives, and we can build a sustainable company and industry. We are proud to have led this effort.
Speaker Change: Broad bipartisan support from key members of Congress and many individual letters for me walkers and their families.
Speaker Change: These all made a difference.
Speaker Change: This absolute success means we can provide access to those who are medically qualified.
Speaker Change: We can change their lives and we can build a sustainable company and industry.
Speaker Change: We are proud to have led this effort.
Lawrence J. Jasinski: Q1 results were sales of $5.3 million, an increase of 340% versus Q1 2023. These were led by the approval of 14 Medicare claims and gaining sufficient information to establish a basis for revenue recognition of our submission. We have submitted 35 claims and have 21 still pending.
Speaker Change: Q1 results were sales of $5 3 million, an increase of 340% versus Q1 2023.
Speaker Change: These were led by the approval of 14, Medicare claims and gaining sufficient information to establish a basis for revenue recognition of our submissions.
Speaker Change: We had submitted 35 claims and have 21 still pending.
Lawrence J. Jasinski: Moving forward this calendar year, working with the current market parameters, we plan to deliver 60 to 75 more systems to qualified Medicare patients. Our Altergy anti-gravity business required a period early in Q1 for training and transition, which limited sales as we were forming the new field organization with 15 U.S. territories. Subsequently, the volume of bookings and sales gained traction to traditional levels by March, which is continuing into Q2. With the enlarged sales organization and a new product introduction at mid-year, we anticipate that the All4G anti-gravity offering will grow in parallel with the growth from Rewalk's penetration of the market for Medicare beneficiaries.
Speaker Change: Moving forward this calendar year working with the current market parameters, we plan to deliver 60 to 75 more systems to qualified Medicare patients.
Speaker Change: Our ultra G anti gravity business required a period early in Q1 for training and transition, which limited sales as we reforming the new field organization with 15 U S territories.
Subsequently the volume of bookings and sales gain traction to traditional levels by March which is continuing into Q2.
Speaker Change: With the enlarged sales organization and a new product introduction at mid year, we anticipate that the altra junior anti grabber gravity offerings will grow in parallel with growth for Milwaukee penetrating the market for Medicare beneficiaries.
Lawrence J. Jasinski: As a result, our annual guidance for 2024 with sales of $28 to $32 million remains unchanged. We are pleased to achieve our Q1 guidance of between $5 to $5.5 million with sales of $5.3 million. While we have affirmed our annual guidance, the quarterly patterns of processing with CMS need more time to emerge, and the uptick from our new AlterG anti-gravity system will define the rate of growth for that business. Our focus will be on achieving year-end numbers with the understanding that there will be some lumpiness in revenue within the quarter.
Speaker Change: As a result, our annual guidance for 2024 with sales of $28 million to $32 million remains unchanged.
Speaker Change: We are pleased to achieved our Q1 guidance of between five to $5 $5 million with sales of $5 3 million.
Speaker Change: While we have affirmed our annual guidance the quarterly patterns of processing with CMS needs more time to emerge and the uptick from our new Ultra G. Anti gravity system will define the rate of growth for that business.
Speaker Change: Our focus will be on achieving year end numbers with the understanding that there will be some lumpiness in the revenue within the quarters.
Lawrence J. Jasinski: Our guidance on earnings remains a reduction in our operating loss to the low double-digit teens via a quarter-by-quarter reduction of our loss in burden rate. This reduction is driven by revenue growth and Leveraging Organizational Efficiency. The level of investment in obtaining CMS payment and R&D will also decrease over the year.
Speaker Change: Our guidance on earnings remains a reduction in our operating loss to the low double digit teens via a quarter by quarter reduction of our loss and burn rate.
Speaker Change: This reduction is driven by revenue growth.
Speaker Change: And leveraging organizational efficiency.
Speaker Change: Level of investment in obtaining CMS payment and R&D will also lessen over the year.
Lawrence J. Jasinski: Getting to this juncture has taken a long time. We are incredibly appreciative of the support of our shareholders, our customers, and our internal team. The path we are pursuing is top-line growth with operating inefficiency that allows us to reach break-even in 2026 on our current cap. Now, I'd like to turn the call over to Mike Lawless for a financial review. Mike. Thank you, Larry.
Speaker Change: Getting to this juncture has taken a long time.
Speaker Change: We are incredibly appreciative of the support of our shareholders, our customers and our internal team.
Speaker Change: Path, we are pursuing its topline growth with operating inefficiency that allows us to reach breakeven in 2026 on our current cash.
Speaker Change: Now I'd like to turn the call over to Michael I'll list for a financial review Mike.
Michael A. Lawless: Thank you, Larry. Before I review the results of the quarter, I want to remind everyone that our first quarter gap results reflect immunization of intangible assets resulting from the purchase price allocation for the acquisition of Alter-G, transaction-related expenses and credits, and integration and rebranding expenses, which can obscure investors' visibility into the underlying operational performance of Lifeboard. In order to facilitate the understanding of both the gap results and the operational results of Lifeboard, I'm going to discuss Q124 on both the gap and a non-gap basis, which excludes the items listed in the reconciliation table provided in today's earnings release.
Mike: Thank you Larry before I review the results of the quarter I want to remind everyone that our first quarter GAAP results reflect amortization of intangible assets, resulting from the purchase price allocation for the acquisition of Walter G transaction related expenses and credits and integration and rebranding expenses, which can obscure investors visibility into the underlying operation.
Mike: Performance of LIBOR in order to facilitate the understanding of both the GAAP results and the operational results of lifeline I'm going to discuss Q1 'twenty four on both a GAAP and a non-GAAP basis, which excludes the items listed in the reconciliation table provided in today's earnings release and I encourage you to reference these tables as I discuss the financials.
Michael A. Lawless: And I encourage you to reference these tables as I discuss the financials. Ahem, Lakewood reported revenue of $5.3 million in the first quarter of 2024, compared to $1.2 million in the first quarter of 2023, up $4.1 million, or 340%.
Mike: [noise] LIBOR reported revenue of $5 3 million in the first quarter of 2024 compared to $1 2 million in the first quarter of 2023 up $4 1 million or 340%.
Michael A. Lawless: Revenue from the sale of Rewalk Systems was $2.2 million in Q1'24, up $1.3 million from Q1'23, driven by the Medicare approval. Revenue from Alter-G was $2.8 million in the quarter, which was below our expectation due to the temporary impact of the Q1-24 integration and training of the former Rewalk and Alter-G commercial teams, which resulted in reduced sales capacity in the quarter. Fortunately, these activities were completed in Q1-24, and we have experienced improved sales effectiveness and productivity thus far in Q2-24 compared to the prior quarter.
Mike: Revenue from the sale of we walk systems was $2 2 million in Q1, 'twenty four up $1 3 million from Q1, 'twenty three driven by the Medicare approvals.
Revenue from Ultra G was $2 8 million in the quarter, which was below our expectation due to the temporary impact of the Q1 'twenty for integration and training of the former we walk in Ultra G. Commercial teams, which resulted in reduced sales capacity in the quarter. Fortunately. These activities were completed in Q1 24, and we have experienced improved sales.
Mike: Second is the productivity, thus far in Q2 24 compared to the prior quarter.
Michael A. Lawless: Other revenue, consisting primarily of sales of myocycles, was $0.3 million, up $0.1 million from Q1'23. I'd like to discuss two issues which affect revenue recognition for sales of Rewalk systems to Medicare beneficiaries and which also help you to interpret the financial results. First, in order for us to submit a Medicare claim for payment, the Rewalk system must be delivered, and the Medicare beneficiary takes ownership.
Mike: Other revenue consisting primarily of sales of Meiocyte goals was zero point $3 million up 0.1 million from Q1 'twenty three.
Michael A. Lawless: Typically, this completes the performance obligation and satisfies revenue recognition requirements. However, for the first 35 Medicare systems we provided, we initially did not initially recognize any revenue because we did not know which claims would eventually be approved, nor did we know the final payment amount. More recently, with Medicare establishing payment and a track record of Medicare claims approvals, we now have enough information to recognize Medicare revenue upon delivery of the system.
Mike: I'd like to discuss two issues, which affect our revenue recognition for sales of reward system to Medicare beneficiaries, and which also helps you to interpret the financial results.
Michael A. Lawless: As a result, in Q124, we took revenue on the units that we had previously provided to customers and which were in service by applying a discount factor to the Medicare revenue, assuming that a percentage of the claims may not eventually be approved. As the volume of claims that are processed continues to grow, we will monitor our ongoing approval rate and adjust the discount factor as needed to reflect our experience. There are a couple of implications for our finances that I want to point out.
Mike: First in order for us to submit a Medicare claims for payment the reward system must be delivered in the Medicare beneficiary takes ownership.
Mike: Typically this completes the performance obligation and satisfies revenue recognition requirements.
Michael A. Lawless: First, since we are recognizing only a portion of the Medicare revenue but 100% of the product cost, this revenue methodology serves to initially reduce our gross margins by the amount of revenue we are reserving. Second, there is a portion of revenue from these sales which we can later recognize when the claim is eventually approved, thereby recognizing the full amount owed by Medicare. In total, if all the prior Medicare claims that we recognized in Q1 are later approved, we can recognize an additional approximately $300,000 of revenue with no corresponding cost of sales.
However for the first 35 Medicare systems, we provided we did not initially recognized any revenue because we did not know which claims would eventually be approved nor do we know the final payment amount.
Mike: More recently with Medicare, establishing a payment and a track record of Medicare claims approvals. We now have enough information to recognize Medicare revenue upon delivery of the system.
Mike: As a result in Q1 'twenty four we took revenue on the units that we had previously provided to customers and which were in service by applying a discount factor to the Medicare revenue assuming that a percentage of the claims may not eventually be approved as the volume of claims that are processed continues to grow we will.
Mike: Monitor our ongoing approval rate and adjust the discount factor as needed to reflect our experience.
Mike: There are a couple of implications for our financials, but I want to point out first since we're not since we are recognizing only a portion of the Medicare revenue, but 100% of the product cost. This revenue methodology serves to initially reduce our gross margins by the amount of revenue we are reserving.
Mike: Second there is a portion of revenue from these sales, which we can later recognize when the claim is eventually approved thereby recognizing the full amount owed by Medicare.
Mike: In total if all the prior Medicare claims that we recognized in Q1 or later approved we can recognize an additional approximately $300000 of revenue with no corresponding cost of sales.
Michael A. Lawless: In future quarters, we expect that the initial lower margins on the new Medicare claims submitted will be supplemented by the additional revenue recognized for the approved claims from prior quarters. Second, there's another factor that affects our ability to recognize revenue, and that is the status of each customer's supplemental insurance. To review, Medicare covers 80% of the cost of goods and services it approves.
Mike: In future quarters, we expect.
Mike: That the initial lower margins on the new Medicare claims submitted will be supplemented by the additional revenue recognized for the approved claims from prior quarters.
Mike: Second there is another factor that affects our ability to recognize revenue and that is the status of each customer's supplemental insurance to review Medicare covers 80% of the cost of goods and services. It approves. The other 20% is the out of pocket paid by the Medicare beneficiary, who may have supplemental insurance.
Michael A. Lawless: The other 20% is the out-of-pocket paid by the Medicare beneficiary who may have supplemental insurance. Since we have no claims approval history with the supplemental insurance, our revenue policy will be conservative, and we will recognize revenue for the remaining 20% of the transaction value only upon payment from the supplemental insurance provider. The final implications of this are the same as those for the Medicare revenue that I described earlier.
Mike: Since we have no claims approval history with the supplemental insurance our revenue policy will be conservative and we will recognize revenue for the remaining 20% of the transaction value only upon payment from the supplemental insurance provider.
Mike: The final implications of this are the same as the ones for the Medicare revenue that I described earlier.
Michael A. Lawless: Initially, our gross margins are reduced by the revenue not recognized by the supplemental insurance payment. However, we have an additional approximately $400,000 of revenue that we could recognize in future quarters as supplemental insurers pay claims. Taking together these two factors, in Q124, we have reserved approximately $700,000 of revenue pending approval of claims by Medicare and Supplemental Insurance, and this affects our gross margin in Q1-24 by approximately 8 percentage points. Okay, moving to the pipeline.
Mike: Initially our gross margins are reduced by the revenue not recognized by the supplemental insurance payments. However, we have an additional approximately $400000 of revenue that we could recognize in future quarters as supplemental insurers pay claims taken.
Mike: Taking together these two factors in Q1 24, we have reserved approximately $700000 of revenue pending approval of claims by Medicare and supplemental insurance and this affects our gross margin in Q1 'twenty four by approximately eight percentage points.
Michael A. Lawless: Our pipeline metrics showed improvement in the first quarter across our two major product lines. For Rewalk Systems, the current pipeline of active rentals consists of 32 cases, which is up eight from last quarter and is broken down with 24 in Germany, six in VA hospitals, and two with self-pay individuals. As of the end of Q124, our overall number of Rewalk cases in process was 91, with 54 in Germany and 37 in the U.S., many of which are for Medicare beneficiaries.
Speaker Change: Okay moving to pipeline our pipeline metrics showed improvement in the first quarter across our two major product lines for reward systems. The current pipeline of active rentals consists of 32 cases, which is up eight from last quarter and is broken down with 24 in Germany six N V.
Speaker Change: Hospitals, and two with self pay individuals'.
Speaker Change: As of the end of Q1 'twenty four our overall number of reward cases in process was 91 with with 54 in Germany and 37 in the U S. Many of which are for Medicare beneficiaries.
Michael A. Lawless: For AlterG Systems, we ended Q124 with orders of 68 AlterG Systems units and backlogs. This is up 22 units from the Q4-23 backlog level. The higher AlterG backlog combined with an improved pace of new leads and bookings so far this quarter gives us confidence in improved sales performance for AlterG systems in Q2-24. Moving to gross profit, in the first quarter of 2024, our GAAP gross profit was $1.4 million, or 26.4% of revenue, compared to $0.6 million, or 46.4% of revenue, in the first quarter of 2023.
Speaker Change: For Ultrashape systems, we ended Q1, 'twenty four with orders of 68 Ultra G systems in backlog.
Speaker Change: This is up 22 units from the Q4 'twenty three backlog level the.
Speaker Change: The higher ultra G backlog combined with an improved pace of new leads in bookings. So far this quarter gives us confidence in improved sales performance for ultra <unk> systems in Q2 24.
Michael A. Lawless: On a non-GAAP basis, which excludes the items listed in the attached non-GAAP reconciliation table, non-GAAP gross profit was $1.8 million, or 33.7% of revenue, in the first quarter of 2024, as compared to 46.2% for the Forbes score in 2023. There are two primary drivers which adversely affected the gross margin in Q1. First, the low volume of Alter-G revenue caused by the temporary impact of the integration and training of the former Rewalk and Alter-G commercial teams contributed to lower absorption of production and overhead costs in our factories.
Speaker Change: Moving to gross profit.
Speaker Change: In the first quarter of 2024, our GAAP gross profit was $1 4 million or 26% 26, 4% of revenue compared to zero point $6 million or 46, 4% of revenue in the first quarter of 2023.
Speaker Change: On a non-GAAP basis, which excludes the items listed in the attached non-GAAP reconciliation table non-GAAP gross profit was $1 8 million or 33, 7% of revenue in the first quarter of 2024.
Speaker Change: As compared to 46, 2% for the first quarter 2023.
Michael A. Lawless: The impact of this was approximately 4 percentage points of margin in Q1. The second major factor was the initial revenue recognition that we applied to the Medicare claims that I previously discussed. As I described, if we had not reserved for the potential for some of these claims to be denied, we could have achieved up to an additional eight points of gross margin.
Speaker Change: There are two primary drivers, which adversely affected gross margin in Q1.
First the low volume of Walter G revenue caused by the temporary impact of integration and training of the former reward and ultra G. Commercial teams contributed to lower absorption of production and overhead costs in our factory.
Speaker Change: The impact of this was approximately four percentage points of margin in Q1 the.
Speaker Change: The second major factor was the initial revenue recognition that we applied to the Medicare claims that I previously discussed as I described if we had not reserved for the potential for some of these claims to be denied we could've achieved up to an additional eight points of gross margin taken together. These two factors contribute to up too.
Michael A. Lawless: Taken together, these two factors contributed to up to 12 percentage points of margin impact in Q124. It's important to recognize that this revenue and margin is not permanently excluded from our results. Importantly, as claims are approved, we will recognize this income in future periods.
Speaker Change: 12 percentage points of margin impact in Q1 'twenty for.
Speaker Change: It's important to recognize that this revenue and margin is not permanently excluded from our results importantly, as claims are approved we will recognize this income in future periods.
Michael A. Lawless: Operating expenses. Gap operating expenses were $7.9 million in the first quarter of 2024, up $3.0 million, or 60%, as compared to $4.9 million in Q1'23. On a non-GAAP basis, which excludes the items listed in the attached non-GAAP reconciliation table, adjusted operating expenses were $7.3 million in Q1'24, as compared to $4.5 million in Q1'23, a $2.8 million increase. The primary driver of this increase is the additional headcount from the acquisition of AlterG and the build-out of our commercial resources.
Speaker Change: Operating expenses.
Speaker Change: GAAP operating expenses were $7 9 million in the first quarter of 2024 up 3.0 million or 60% as compared to $4 9 million in Q1, 'twenty three on a non-GAAP basis, which excludes the items listed in the attach non-GAAP reconciliation table adjusted operating expenses were $7 3 million in Q1 24.
Speaker Change: As compared to $4 5 million in Q1, 'twenty, three a $2 $8 million increase.
Speaker Change: The primary driver of this increase is the additional head count from the acquisition of Ultra G and the build out of our commercial resources. We expect Q1 'twenty four to have the highest operating expense level for 2024 due to activities related to the integration and training of the commercial team seasonal factors and the phasing in of additional ACA.
Michael A. Lawless: We expect Q1-24 to have the highest operating expense level for 2024 due to activities related to the integration and training of the commercial team, seasonal factors, and the phasing in of additional acquisition savings in future quarters. Our GAAP operating loss for the first quarter of 2024 was $6.5 million compared to our operating loss of $4.3 million in the first quarter of 2023. On a non-GAAP basis, which excludes the items listed in the non-GAAP reconciliation table, the operating loss was $5.5 million in Q1'24 compared to $3.9 million in Q1'23.
Speaker Change: <unk> savings in future quarters.
Speaker Change: Our GAAP operating loss for the first quarter of 2024 was $6 5 million compared to an operating loss of $4 3 million in the first quarter of 2023 on.
Speaker Change: On a non-GAAP basis, which excludes the items listed in the non-GAAP reconciliation table. The operating loss was $5 5 million in Q1 24 compared to $3 9 million in Q1 'twenty three.
Michael A. Lawless: The operating loss was affected by the same factors I described in the reduced gross margin. As Larry described, we expect our quarterly non-GAAP operating loss to narrow considerably as we move through the year as our sales volume ramps up. We ended the quarter with $20.7 million in cash and equivalents and no debt. Our cash usage in Q1 was $7.7 million, which was higher than expected. The first quarter of each year traditionally consumes the highest amount of cash because of Payouts of Variable Compensation, Annual Payments for Insurance Policies, and seasonally higher sales and promotional spending.
Speaker Change: The operating loss was affected by the same factors I described in the.
Speaker Change: Reduced gross margin.
Speaker Change: As Larry described we expect our quarterly non-GAAP operating loss to narrow considerably as we move through the year as our sales volume ramps up.
Speaker Change: We ended the quarter with $20 7 million in cash and equivalents and no debt our cash usage in Q1 was $7 7 million, which was higher than expected the first quarter of each year traditionally consumes the highest amount of cash because of.
Speaker Change: Payouts of variable compensation annual payments for insurance policies.
Speaker Change: And seasonally higher sales and promotional spending this past quarter there were additional factors, including the lower gross margin I described earlier, the timing of revenue recognition and receivables collection severance payments and fluctuations in our working capital we expect that a portion of the overage.
Michael A. Lawless: This past quarter, there were additional factors, including the lower gross margin I described earlier, the timing of revenue recognition and receivables collection, severance payments, and fluctuations in our working capital. We expect that a portion of the overage from Q1 should be recovered as we move through the year. As our sales volume ramps up, gross margins improve, and working capital fluctuations normalize. Alright, now, I'd like to discuss financial guidance. As we stated at the beginning of the year, we expect full-year revenue of $28 to $32 million, which we continue to believe is an appropriate range.
Speaker Change: From Q1 should be recovered as we move through the year as our sales volume ramps up gross margins improve and working capital fluctuations normalize.
Speaker Change: Now I'd like to discuss financial guidance.
As we've stated in the beginning of the year, we expect full year revenue of $28 million to $32 million, which we continue to believe is an appropriate range. The quarterly revenue should build through the year based on the increasing contribution from Medicare and sales of the author G product line, which will be augmented by new product introduction in mid 2024.
Michael A. Lawless: The quarterly revenue should build through the year based on the increasing contribution from Medicare and sales of the Altergy product line, which will be augmented by a new product introduction in mid-2024. With that, I'll turn the call back to Larry for further remarks.
Speaker Change: With that I'll turn the call back to Larry for further remarks.
Lawrence J. Jasinski: Thank you Mike.
Lawrence J. Jasinski: I would now like to provide more detail on our market development and financial goals. The key objectives after gaining a defined Medicare payment rate and completion of the commercial integration from the Rewalk Altergy in the second half of 2023 are, number one, execution with sales. Number two, organizational implementation infrastructure to support Medicare claim submission to successfully penetrate this new and now emerging market. Number three, market development in terms of filling the funnel with appropriate potential users of the Rewalk system.
Lawrence J. Jasinski: I would now like to provide more detail on our market development and financial goals. The key objectives after gaining a defined Medicare payment rate and completion of the commercial integration from the rework Ultra G. In the second half.
Lawrence J. Jasinski: 2023, our.
Lawrence J. Jasinski: Number one execution with sales.
Lawrence J. Jasinski: Number two organizational implementation infrastructure to support Medicare claims submission to successfully penetrate this new and now emerging market.
Lawrence J. Jasinski: Number three market development in terms of building the bundle with appropriate potential users of the reward system.
Lawrence J. Jasinski: Number four, managing the reduction in our operating loss, Q over Q, to meet our goal of break-even operations. And number five, the launch of the new Alter-G product at about mid-year and preparation for the launch of the new version of the Rewalk post-FDA clearance. Let's expand on each of these objectives. [inaudible] We now have what we have sought for five years, market access to exoskeletons for a sizable number of potential beneficiaries.
Lawrence J. Jasinski: Number four managing the reduction in our operating loss Q over Q to meet our goal of breakeven operations and number five launch of the new Ultra G product at about midyear and preparation for the launch of the new version of the reward post FDA clearance.
Lawrence J. Jasinski: Let's expand on each of these objectives first sales.
Lawrence J. Jasinski: We now have what we have thought for five years market access to exoskeletons for a sizeable number of potential beneficiaries.
Lawrence J. Jasinski: We have the organization resourced, trained, stabilized, and ready to execute on sales $28 to $32 million for 2024. Second, capacity to implement. We have designed the infrastructure based on our experience with the first 35 submissions. We are targeting the ability to process approximately 100 systems in 2024, 200 in 2025, and 400 in 2026. These are targets we can adjust as demand requires. Essential requirements are ensuring HIPAA compliance with Medicare regulations.
Lawrence J. Jasinski: We have the organization resource trained stabilized and are ready to execute to sales $28 million to $32 million for 2024.
Lawrence J. Jasinski: Second capacity to implement.
Lawrence J. Jasinski: We have designed infrastructure based on our experience with the burst 35 submissions.
Lawrence J. Jasinski: We are targeting the ability to process approximately 100 systems in 2024.
Speaker Change: 202025 and 402026.
Speaker Change: These are targets, we can adjust as demand requires.
Speaker Change: Central requirements are ensuring HIPAA compliance to Medicare regulations, scalene flexibility using internal and external resources and the whiteboard has the ability to capture data to qualify and quantify our process progress.
Lawrence J. Jasinski: Scaling flexibility using internal and external resources, and the Lifeboard has the ability to capture data to qualify and quantify our progress. Third, market development. Adoption of life-changing and disruptive technologies takes time and focused development effort. In simplest terms, we must fill the funnel, working with health care providers and potential users. It starts with education and selecting qualified candidates and by having an infrastructure that is efficient and streamlined for the prescriber and the user.
Speaker Change: Third market development.
Speaker Change: Adoption of life, changing and disruptive technologies takes time and focused development efforts.
Speaker Change: In the simplest terms, we must fill the funnel working with health care providers and potential users. It starts with education and selecting the qualified candidates and by having the infrastructure that is efficient and streamlined for the prescriber and the user.
Lawrence J. Jasinski: Our communication pathways to expand include extensive digital lead generation, utilizing our direct sales team for in-clinic and physician education to identify appropriate patients, and establishing centers of excellence throughout the United States. Also important for our long-term growth is working with medical professional organizations to establish treatment guidelines for clinicians.
Speaker Change: Our community communication pathways to expand include extensive digital lead generation.
Speaker Change: Utilizing our direct sales team in clinic and physician education to identify appropriate patients.
Speaker Change: And establishing centers of excellence throughout the United States.
Speaker Change: Also important for our long term growth is working with medical professional organizations to establish treatment guidelines for clinicians.
Lawrence J. Jasinski: Fourth, Reducing Our Operating Loss. This is accomplished through a combination of top-line growth, planned improvement, and organizational efficiency. Our revenue needs to reach $50 to $55 million annually for break-even operations with reasonable, ongoing investment.
Speaker Change: Fourth reducing our operating loss.
Speaker Change: This was accomplished from a combination of topline growth and planned improvement and organizational efficiency.
Speaker Change: Our revenue needs to reach 50 to 55 million annually for breakeven operations with reasonable ongoing investments.
Lawrence J. Jasinski: Our internal focus efforts include margin improvement, further consolidation for operational efficiency in terms of both cost and effectiveness, and New Product Activities. Fifth, New Product Launch. We plan to launch a new Ultra-G antigravity model, which has features and pricing specifically designed to address the needs of smaller clinics.
Speaker Change: Our internal focus efforts include margin improvement.
Speaker Change: Further consolidation of our operational efficiency in terms of both cost and effectiveness.
Speaker Change: And new product activity.
Speaker Change: Fifth new product launches, we plan to launch a new ultra G. Anti gravity model, which is features and pricing specifically designed to address the needs of smaller clinics, we expect to launch this design in the coming months.
Lawrence J. Jasinski: We expect to launch this design in the coming months. Depending on our FDA submission timing and the clearance progress, we will bring to market a seventh generation of the Rewalk design. It is part of the constant advancement of adding new features and improvements from our extensive interaction with our users. This is an advantage of being first to market and having the most extensive base of field experience. It is time to start scaling this enterprise from a milestone to two.
Speaker Change: Depending on our FDA submission timing and the clearance progress.
Speaker Change: We will bring to market a seventh generation of the rework design it as part of the constant advancement of adding new features and improvements from our extensive interaction with our users.
Speaker Change: This isn't an advantage of being first to market and having the most extensive base of field experience.
Speaker Change: It is time to start scaling this enterprise from the milestones achieved.
Lawrence J. Jasinski: For board refreshment and leadership, we added Mike Swinford to our board early in Q2 after Medicare established a payment rate for the Rewalk. He brings extensive knowledge of the industry, understands the requirements of market development, and has experience with the fundamentals of effective commercialization. Internally, we have built the commercial team as needed for implementation for both Rewalk expansion and for Altergy growth. We are on our way! So everybody, thank you for your time today, and I'd like to open this up to questions.
Speaker Change: We're board refreshment and leadership, we added Mike Swinford to our board early in Q2 after Medicare established a payment rate with Reebok.
Speaker Change: Yeah.
Speaker Change: He brings extensive knowledge of the industry.
Speaker Change: Understands the requirements of market development and has experienced with the fundamentals of effective commercialization.
Speaker Change: Internally, we have built the commercial team as needed where implementation for both rework expansion and <unk> growth.
Speaker Change: We are on our way.
Speaker Change: So everybody. Thank you for your time today and we'd like to open this up for questions.
Speaker Change: Yes.
Operator: We will now begin the question and answer session. To ask a question, you may press star and then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Swayampakula. Ramakanth, with H.C. Wainwright, please go ahead.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star and then one on your Touchtone phone, if you're using a speaker phone. Please pick up your handset before pressing the keys. If at any time. Your question has been addressed and you would like to withdraw your question. Please press star and then.
Speaker Change: Two at this time, we will pause momentarily to assemble our roster.
Speaker Change: Yeah.
Speaker Change: The first question comes from sway unpack cooler.
Ryan Mckenna: Ryan Mckenna.
Speaker Change: With H C. Wainwright. Please go ahead.
Swayampakula Ramakanth: Thank you. This is RK from HC Wainwright.
Ryan Mckenna: Thank you. This is all came from Hep C wainright.
Speaker Change: Larry and Mike.
Speaker Change:
Lawrence J. Jasinski: Good morning, Larry and Mike. Actually, congratulations. I think this is a great start to the year with everything in place. As you said, your first goal of being execution of sales, I think that's finally we get to really talk about this, which is very good. In terms of sales itself and the... 2.5, a little bit north of 2.5 million in sales recognition for the first quarter. I know Mike gave a lot of details on how to think about the sales cadence from here.
Speaker Change: Actually congratulations I think this is a this is a great start.
Speaker Change: Of the year.
But with everything in place.
Speaker Change: At this time.
Speaker Change: First of all as being execution of sales I think.
Speaker Change: I think that's the big.
Speaker Change: Finally, we get to really talk about this which is very good.
Speaker Change: In terms of.
Speaker Change: In terms of sales itself.
And the.
Speaker Change: To Bahrain.
Speaker Change: Prime a little bit north of $2 5 million in field.
Speaker Change: Admissions for the first quarter.
Speaker Change: No Mike gave a lot of minoshe on on how to think about the sales.
Speaker Change: Cadence from here.
Lawrence J. Jasinski: I'm trying to understand and be clear in my head. Did that include all of the 35 placements that you have done so far, or what part of it is included, and what part is not included? I tried my best to follow all the details. I have notes, so I'll go back and check. But I just wanted to make sure how much of those 35 units have been recognized this quarter.
Speaker Change: I'm trying to understand and be clear in my head did.
Speaker Change: Did that include all of the 35 placements.
Speaker Change: You've done so far are or what what part of it is included in what part of it is not included.
Speaker Change: Hum.
Speaker Change: My best to follow all the details I haven't not so I'll go back and check, but I just wanted to make sure how much of those 34 units have been.
Speaker Change: Nice this quarter.
Michael A. Lawless: That's a good question. I'm glad to clear that up for you. So, if you recall in Q1, we recognized revenue for one of the 35 in Q1 because we actually received payment in that case. So, we knew the amount to satisfy all the requirements I outlined before. We knew the amount, and we knew we had been approved because we had received payment. So, in that case, we took revenue in Q1 for that one isolated unit.
Speaker Change: That's a good question I'm glad glad clear that for you. So we if you recall in Q1, we.
Speaker Change: We recognized revenue for one of the 35 in Q1, because we actually received payment in that case. So we knew the <unk> to satisfy all the requirements I outlined before we we knew the amount and we knew we had been approved because we had received payment. So in that case, we took revenue in Q1 for that one isolated unit.
Michael A. Lawless: And then, sorry, that was, I'm sorry, that was Q4, my apology. In Q1, now, with the current quarter reporting, we recognize revenue for the remaining units that are in service now, yes. So, as I described, we reserved for two sets of clarifications. One is the approval of the Medicare system, and the second one is the payment by the supplementary insurance company.
And any sorry that was I'm sorry. This is that was Q Q4, my apology. The Q1 now with the current quarter were reporting we have recognized revenue for the remaining units that are in service now yes.
Speaker Change: So it's as I described we've reserved for two two sets of clarifications. One is the approval of the Medicare system and the second one is the payment by the supplementary insurance company.
Michael A. Lawless: So, just so that I'm quite clear, it's 34 units then? Correct. Okay. Thank you. So, and in terms of paperwork and process to get the said reimbursement amount from Medicare, is that process in place, or are you still trying to, you know, iron out some kinks in the process itself?
Speaker Change: So Jeff just so that I'm quite clear its 34 units for them.
Speaker Change: Correct.
Okay. Thank you for that.
Speaker Change: So.
Speaker Change: And.
Speaker Change: In terms of.
Speaker Change: People work in process.
Speaker Change: To get.
Speaker Change: Did the deferred a reimbursement amount from the Medicare.
Speaker Change: Is that process in place.
Speaker Change: You're still trying to iron out some kinks and they define the process itself.
Lawrence J. Jasinski: and This is Larry Arkay. We are completely ready, and everything is in place. We are ready to run. We've learned what we needed to learn and have an organization that we've really tried to streamline. The thing that matters to us When a physician writes a prescription, we want the process to be easy for them, and we follow up and take it through the system, so we're ready to go. And that's why filling the funnel is the focus. We know what we need to do and are very thrilled with how they've been being processed, especially these three weeks since approval. They've been really rapid, and we're really encouraged.
Lawrence J. Jasinski: And this is Larry RK, we are completely.
Lawrence J. Jasinski: Ready and everything is in place.
Lawrence J. Jasinski: We are ready to run.
Speaker Change: We've learned what we needed to learn and have an organization that we've.
Speaker Change: Really tried to streamline it the thing that matters to us when a physician writes a prescription we want the process to be easy for them and we follow up and take it through the system. So we're ready to go.
Speaker Change: That's a that's why it filling the funnel is the focus we know what we need to do.
Speaker Change: And our very thrilled with how they've been being processed, especially these three weeks since approval. They have been they've been really rapid and we're really encouraged.
Lawrence J. Jasinski: So talking about that, I know Mike made some comments about seeing a good flow of interest during the second quarter. Can you add to those comments, please?
Speaker Change: So I'm talking about that and I know I'm, Mike made some comments about.
Speaker Change: Seeing a good flow of.
Speaker Change: Interest during the second quarter.
Speaker Change: Can you add to those comments please.
Lawrence J. Jasinski: Yeah, well, we have an interest in we've seen a significant increase in our leads, which we're quite happy about, and we're bringing those into the system. So that's the most important measurement.
Speaker Change: Oh, yeah, well, we have interest and we've seen a significant increase in our leads which we're quite happy about.
Speaker Change: And we're bringing those into the system.
Speaker Change:
Speaker Change: So that's the most important measurement when I talk about that we need to fill the funnel.
Lawrence J. Jasinski: When I talk about that we need to fill the funnel, we also talk to many physicians that are not aware that this can now be paid for by their patients. And so when I talked about the communication effort of the 15 sales territories, a key element for them is to be advising and teaching these hospitals and clinics that this is now paid for. We've made a lot of effort to put a lot of publicity out there, but we still get in and go, oh, I didn't know this was paid for. We don't want to hear that too much anymore if we can educate them.
Speaker Change: We also talked to many positions that are not aware that this can now be paid for it for their patients.
Speaker Change: And so where I talked about the communication effort of the 15 sales territories, a key element for them.
Speaker Change: Be advising and teaching these hospitals and clinics that this is now paid for.
Speaker Change: We're.
Speaker Change: We've made a lot of effort to put a lot of publicity out there, but we still get it. It goes Oh I didn't know this was paid for we don't want to hear that too much.
Speaker Change: If we could.
Speaker Change: Educated so the so the second major initiative of our company beyond the digital effort is doing this work with 101.
Lawrence J. Jasinski: So the second major initiative of our company beyond the digital effort is doing this work one-on-one at every major center that refers patients. The other area is establishing self-generating groups by working with the large centers that have good satellite networks. So if you have a core SEI center that may have 15 or 20 sites around it, we would like them to build up their network referrals and process these through, and we're assisting them in providing the support for that.
Speaker Change: Every major center that reverse patients. The other area is establishing self generating groups by working with the large centers that have good satellite networks.
Speaker Change: So or if you have a core Sci center that may have 15 or 20.
Speaker Change: Sites around it.
Speaker Change: We would like them to build up their network referrals and processes through and we're assisting them in providing the support for that so interest yes, as we're it's really good.
Lawrence J. Jasinski: So interest, yes, it's really good. We have to make it bigger to make sure we hit our 100, 200, 400 numbers for these next few years, and we've built a plan and an organization that we're now executing on to do it. So I still have to show the rest of the results, but the first part of the results is that incoming leads have increased year over year substantially.
Speaker Change: Have to make it bigger to make sure we hit our 100 200 400 numbers for these next few years.
Speaker Change: And we built.
Speaker Change: A plan and an organization that we're now executing on to do it.
Speaker Change: So I still have to show the rest of the results, but the first part of the results is the incoming leads have increased year over year substantially.
Lawrence J. Jasinski: Fantastic. Thank you very much, Larry and Mike, and we'll get back to you soon. Thanks.
Speaker Change: And that's it thank you very much Larry and Mike and I will get back to you soon thanks.
Speaker Change: Thank you.
Operator: Again, if you have a question, please press star, then 1. This concludes our question and answer session. I would now like to turn the conference back over to Larry Jasinski for any closing remarks.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: Okay.
Speaker Change: This concludes our question and answer session I would now like to turn the conference back over to Larry Jasinski for any closing remarks.
Lawrence J. Jasinski: Thank you, Dave. For everybody that attended today and for everybody listening, we greatly appreciate your time and our support during this period when we were trying to establish a base to grow this business. And as I closed at the end of the scripted session, we're at that time. And We're excited about it, and we have the right team in place. I use the analogy of us being standing on the sidelines getting ready to get in the game.
Dave: Thank you Dave.
Lawrence J. Jasinski: Everybody that attended today and for everybody listening we greatly appreciate your time and our support during this period, where we were trying to establish a base to grow this business.
Speaker Change: As I close at the end of the scripted session.
Speaker Change: We're at that time.
And we're excited about it and we have the right team in place I use the analogy of a we've been standing on the sidelines getting ready to.
Speaker Change: Get in the game, we're in the game now.
Lawrence J. Jasinski: We're in the game now. And we have to do this well, and it's time to execute, as I listed our five goals. So if anybody has further questions, feel free to reach out to Mike or myself or key members of our team, and we'll try to provide every piece of information we can.
Speaker Change: And we have to do this well and it's time to execute as I list of listed on our five goals. So if anybody has further questions feel free to reach to Mike or myself are key members of our team and we'll try to provide every piece of information we can.
Speaker Change: Thank you everybody.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.