Q3 2024 Hyperfine Inc Earnings Call

November 12, 2024

When you are in love bring happiness and joy Also be happy When you love smile Smile

Speaker Change: Good afternoon and welcome to Hyperfine's 3rd Quarter 2024 Earnings Conference Call. Currently, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call.

Speaker Change: As a reminder, this call is being recorded for replay purposes.

Speaker Change: I would now like to turn the call over to Marissa Bych from Gilmartin Group for introductory disclosures.

Marissa Bych: Thank you for joining today's call. Earlier today, Hyperfine, Inc. released financial results for the quarter ended September 30, 2024. A copy of the press release is available on the company's website, as well as SEC.gov.

Speaker Change: Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker Change: Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

Speaker Change: All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, expense management, expectations for hiring, training and adoption, growth in our organization.

Speaker Change: Market Opportunity, Commercial and International Expansion, Regulatory Approvals, and Product Development are based upon our current estimates and various assumptions.

Speaker Change: Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factor section of our latest periodic filing with the Securities and Exchange Commission.

Speaker Change: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 12, 2024.

Speaker Change: Hyperfine Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.

Speaker Change: With that, I will turn the call over to Maria Sainz, President and Chief Executive Officer.

Maria Sainz: Good afternoon and thank you for joining us. On the call with me today is our Chief Administrative Officer and Chief Financial Officer Brett Hale.

Maria Sainz: We delivered another strong quarter with revenue of $3.6 million, representing 56% year-over-year growth, over 270 basis points of sequential gross margin expansion, and continued reduction in cash flow.

Maria Sainz: Revenue performance was driven by sales of our portable imaging system in both the U.S. and international markets.

Maria Sainz: International contributions to revenue were healthy in the third quarter and we did not experience the extent of seasonality that we had anticipated.

Maria Sainz: Our growth going forward will be driven by expansion into multiple new sites of care and international geography.

Maria Sainz: In the U.S. alone, we have a $6 billion-plus total addressable market opportunity for placements in first-room and office settings.

Maria Sainz: Our expansion is enabled by our technical and clinical developments as ever-improving image quality and compelling clinical evidence are key catalysts for adoption of these new brain imaging technologies.

Maria Sainz: An important development in the third quarter was the progress made on our commitment to further improve image quality to enable faster adoption of our technology.

Maria Sainz: Early in the quarter, we received FDA clearance of our 9th generation AI-powered software.

Maria Sainz: This approval marks an important step forward in the imaging capability of our unique ultra-low field portable brain MRI, reducing acquisition time without compromising image quality, delivering higher overall clinical performance.

Schroeder's Scan Prints make subsistent images.

Maria Sainz: especially useful in time-sensitive medical settings such as the ICU dealing with critically ill patients with unstable intracranial pressure as well as emergency departments for the triage of stroke where time is bright.

Maria Sainz: Keeping with our steady pace of innovation, we plan to obtain clearance and launch our next-generation AI-powered software in the first half of 2025.

Maria Sainz: This 10th generation software will bring a step-function image quality improvement over our recently launched 9th generation software.

feedback from key opinion leaders involved

Maria Sainz: in our image development process is extremely positive. And their assessment is that the images from our 10th generation AI-powered software are more like those obtained from conventional 1.5 Tesla MRI systems.

Maria Sainz: This feedback demonstrates that our work to develop excellent, decision-enabling image quality through AI-powered software releases is paying off well.

Maria Sainz: Not only will our next update benefit our existing customer base but most importantly it will also make adoption of also low field brain MRI a faster process for new users.

Maria Sainz: enabling a shorter learning curve for radiologists and accelerating market update of our technology.

Maria Sainz: As the first portable ultra-low field MRI for the brain, our device has collected over 150,000 images by now.

Maria Sainz: We are continually learning from this real-world data from the subsystem install phase to enhance the product and especially our image quality.

Maria Sainz: Artificial intelligence is central to the process of each generation with the subsystem.

Maria Sainz: Upcoming versions of software will integrate new AI deep learning-based techniques to further improve the consistent imaging pipeline across all sequence types, that is, the T1, T2, FLIR, and diffusion-weighted imaging.

Maria Sainz: The integration of deep learning does not require any additional steps from the user and enhances the image quality and consequently the diagnostic value of the images generated at ultra-low fields.

Maria Sainz: The algorithms are designed to improve the image quality of our scan output while reducing the impact of scanned artifacts.

Maria Sainz: The images created with these algorithms are validated by expert radiologists.

Maria Sainz: As we move forward, we are continuously investing in improving our AI-driven image quality through each image-in-focus software release.

Maria Sainz: I will now provide an update on our clinical studies. The CARE PMR study is progressing well. We are scanning to detect ARIA complications in patients monitored with MRIs as part of their amyloid-targeting therapy at three Leckendy infusion programs.

Maria Sainz: MRI is center to the scientific and clinical dialogue regarding amyloid targeting therapy and to the expansion of screening, diagnosis, and treatment of the Alzheimer's disease.

Maria Sainz: Work-life challenges are recognized broadly as the field aims to increase access, convenience, and equity in Alzheimer's care.

Maria Sainz: The impact of our technology for the treatment of Alzheimer's is real.

Maria Sainz: Physicians from Washington University in St. Louis and Mass General Hospital presented very promising initial cases and data on ARIA-E detection compared with conventional MRI scanners.

Maria Sainz: as well as on the use of the soup system for monitoring the progression of Alzheimer's.

Maria Sainz: The most recent presentation at the Clinical Trials in Alzheimer's Disease meeting included images of multiple ARIA-E cases.

I'm concluded.

Speaker Change: and that this study highlights the potential of innovative imaging technologies to advance patient care and monitor neurodegenerative conditions.

Speaker Change: Their very significant workflow benefits bring in brain imaging closer to patients with Alzheimer's disease and their clinicians.

Speaker Change: with the potential to substantially impact access, cost, and equity in Alzheimer's care.

Speaker Change: Guided by key opinion leaders in this field, we have also started to explore other Alzheimer's applications besides ARIA-E detection.

Speaker Change: with a goal towards broadening and enabling monitoring of disease and screening of patients at multiple sites of care.

In scripts.

Speaker Change: Data from Action PMR continue to strengthen with the publication in Q3 of a subset of data from a study from MGH and University of Buffalo providing early evidence that the SOOP system is a promising tool for enabling critical stroke treatment choices in urgent care settings.

Speaker Change: The data that was published in the August 2024 edition of Annals of Neurology highlighted ultra-low-field MRI's ability to be used as a tissue cloth to characterize acute stroke.

Speaker Change: In September 2024, data from a study from the University of Glasgow was presented at the European Society of the Neuroradiology Meeting.

Speaker Change: The study analyzed images from the soup system to assess its performance in acute care scope workup compared to the current standard of care.

Speaker Change: They analyzed time-to-scan, diagnostic performance, specificity, and patient experience comparing ocular low-field MRIs, conventional MRIs, and CTs.

Speaker Change: Key findings show that the SUS system was dramatically faster than conventional MRI with a median IQ scan of 2.5 hours compared to 27.7 hours.

Speaker Change: The data also demonstrated reliability in acute stroke diagnosis with comparable diagnostic performance of head CT and family specificity when compared to routine clinical MRIs, i.e. 1.5 Tesla.

Speaker Change: We are collaborating with neurosurgeons and interventional stroke key opinion leaders planning studies to focus on the workflow benefits of using the SUCC system in the emergency departments and clinics, and anticipate this work to initiate in early 2025.

Speaker Change: The workflow benefits associated with timely and convenient access to MRI are real in both growth triage and the management of patients with Alzheimer's disease.

Speaker Change: We have a highly differentiated opportunity to improve care pathways for both patient populations which represent very large areas of unmet clinical needs globally.

Speaker Change: As a reminder, our studies aim to support the adoption of our innovative portable MRI system in different types of care for multiple clinical applications.

Speaker Change: Our system has been cleared by the FDA for broadly scanning brains of patients of all ages, and the work we are doing in stroke and Alzheimer's is already covered by our existing indications for use.

Speaker Change: Further expansion will come from our plan to make the soup system available beyond the hospital setting and in the neurology office setting.

Speaker Change: By the end of 2024, we expect the Inter-Societal Accreditation Commission, IAC.

Speaker Change: a leading CMS-approved accreditation body to issue updated MRI standards that include the use of portable, point-of-care, ultra-low-field-brain MRIs.

Speaker Change: offices and then pursue accreditation through IAC and once completed, exams with subsistence in those offices will be eligible to be covered by CMN.

Speaker Change: This will bring us one step closer to having physicians obtain diagnostic-quality MR brain images within their offices, providing patients with timely and convenient MRI access at the point-of-care.

Speaker Change: opening up a very exciting and transformative business for food system placement.

Speaker Change: We have taken steps to enhance our commercial capabilities to serve this new market with a comprehensive strategy, including the addition of a dedicated member of our executive team focused on this new business protocol.

Speaker Change: We already see strong early organic interest from the office setting for a portable MRI for several clinical use cases, including Alzheimer's disease.

Speaker Change: The new role of the office is an incremental side of care for the subsystem which we anticipate contributing to growth starting in the second half of 2025.

Speaker Change: Last, regarding growth drivers, we continue to make progress internationally with the expansion of our distribution network to commercialize our subsystems in European markets and have just obtained CE approval of our latest generation software.

Speaker Change: With CE approval of our 9th generation software and a broad distribution network in place, covering all the major markets, we're well positioned for European commercial expansion going into 2025.

Speaker Change: At the recent European Society of Neuroradiology conference, we had the opportunity to witness firsthand the enthusiasm and positive feedback from European clinicians towards the utility and value of our soup system.

Speaker Change: 2025 will be a full year with our international distribution network in place as well as our anticipated regulatory approval in India in the second half of the year.

We have great momentum across all of our initiatives.

Speaker Change: I want to wrap my remarks by summarizing our plan to drive business acceleration and growth in 2025 and beyond.

Speaker Change: The use of soup in stroke triage will drive placement in emergency departments.

Speaker Change: And our work in Alzheimer's will drive additional subsystem placement in hospital-based clinics and including centers.

Speaker Change: These new types of outpatient care will be incremental to our critical care business and will start contributing to the growth of our hospital business in the second half of 2025.

Speaker Change: Further, our strategy to expand into neurology offices provides a compelling incremental business opportunity beyond the hospital that will be a new focus area for us in 2025.

Speaker Change: and a strong contributor to growth in the second half of 25 and beyond.

Speaker Change: I want to also emphasize that expansion into new types of care is supported by technology enhancements and clinical evidence.

Speaker Change: I am very pleased with the progress on technology and clinical evidence, and we will continue to drive those efforts with efficient allocation of capital and strong execution.

Speaker Change: were on the doorstep of a step-by-step improvement in image quality to drive faster adoption of our technology, which, coupled with the extension into multiple new sites of care and international markets,

Speaker Change: provides the foundation for growth acceleration in the second half of 2025 and beyond.

Speaker Change: I am confident in the opportunity in front of us and the execution and capabilities of our team.

Speaker Change: I would now like to turn the call over to Brett to review our performance in the court.

Brett Hale: Thank you, Maria. Tune in to our financial results for the third quarter of 2024.

Brett Hale: Revenue for the quarter ended September 30th, 2024 was $3.6 million, up 56% compared to the third quarter of 2023.

Brett Hale: resulting in a record gross margin of 52% and our second straight quarter of gross margin percentage of 50% and above.

Brett Hale: Year-to-date, we've generated $5.1 million in gross profit, up 36% from the first nine months of 2023, and year-to-date gross margin is 48%.

Brett Hale: representing over 330 basis points of gross margin expansion from the first nine months of 2023.

Brett Hale: R&D expenses for the third quarter of 2024 were $5.9 million compared to $5.7 million in the third quarter of 2023.

Brett Hale: Hale's general and administrative expenses for the third quarter of 2024 were $7 million, compared to $7.1 million in the third quarter of 2023.

Brett Hale: Net loss of the third quarter was $10.3 million equating to a net loss of $0.14 per share as compared to a net loss of $10.8 million or a net loss of $0.15 per share for the same period of the prior year.

Brett Hale: The improvement in net loss was a result of our strong revenue, expanding growth margins, and the spending discipline and cost-saving initiatives we have implemented across the business over the past year.

Brett Hale: Our cash growth in the third quarter of 2024 was $8.9 million, and as of September 30, 2024, we have $45.8 million in cash-in-cash equivalents on our balance sheet.

Brett Hale: Year-to-date, our tax burn of $30.2 million is down 6% compared to $32 million for the first nine months of 2023.

Brett Hale: Turning to guidance, we are narrowing our revenue outlook for the full year 2024 to a range of $14 to $14.5 million, representing approximately 30% year-over-year growth.

Brett Hale: For the full year 2024, we are also updating our growth margin to 47 to 50 percent, which represents the high end of the previous rate.

Brett Hale: We continue to drive healthy margins at our stage and believe this positions the company well for additional margin expansion at scale.

Brett Hale: We remain optimistic that we will surpass 50% growth margins comfortably and sustainably as we realize the commercial acceleration from our growth catalyst.

Speaker Change: We continue to see our cash burn decrease and operating leverage increase, providing us a cash runway for the business in early 2026, funding the commercial realization of the growth catalyst Maria mentioned previously.

Speaker Change: We expect to continue to deliver steady progress of revenue growth, growth margin expansion, and cash burn reduction ahead of our growth catalyst that will drive business acceleration in the second half of 2025.

Speaker Change: At this point, I'd like to turn the call back to Maria for closing comments.

Maria Sainz: Thank you, Brett. The team made great progress in the third quarter, driving technical and clinical development to drive side-of-care expansion, all while delivering a strong quarter financially.

Speaker Change: With line of sight to several meaningful revenue catalysts in 2025, I have never been more optimistic about the business.

Speaker Change: With that, I want to thank you all for your time and open up the line for questions.

In order to ask a question at this time,

Speaker Change: Press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.

Speaker Change: Your first question comes from the line of Larry Beagleson with Wells Fargo. Please go ahead.

Speaker Change: Hi, good afternoon. This is Simran Anwar-Larry. Congrats on a great quarter and thank you for taking the questions here.

Maybe just starting off on capital trends in the quarter.

Speaker Change: Just following there, any color you can provide on U.S. or O.U.S. splits, as well as any greenfields, same store sales.

Speaker Change: Sure, and good afternoon. You didn't hear because we didn't mention it, but we actually placed 13 systems and it was a strong balance between U.S. and O.U.S. placements.

Speaker Change: As you saw, there's a slight improvement in ASB associated with the strength of the mix. So, 13 is the answer to your question, Simran.

Speaker Change: Got it. Very helpful. And maybe just on guidance, you know,

Speaker Change: Guidance of the midpoint implies flattish sequential sales in Q4, which is typically your strongest capital quarter.

Speaker Change: I guess, you know, given all of the momentum you're seeing, why wouldn't you see an acceleration?

Speaker Change: into the quarter and maybe just talk about what gets you to the low and the high end of the range.

Speaker Change: So there's not usually that rush to use the budget or lose it at the end of the year.

Speaker Change: Often we actually get access to strategic funds or we get access to donor funds. There's different mechanisms outside of the traditional capital budget that end up funding the purchase of our system.

Speaker Change: So, we don't really have that favorable seasonality that other capital equipment sees. And when we look at this quarter, it's actually a slightly shorter in terms of selling days for us in getting all the deal specifics lined up.

Speaker Change: We feel really strong about the quarter. We think it will be another strong quarter. We've been on quite a nice streak of strength of the quarters.

Speaker Change: At the midpoint, roughly, we're still talking about 30% year-on-year growth, and we see Q4 as a solid quarter to wrap up the year, but we don't see any of that special seasonality that is sometimes associated with folks that are relying on the final breaths of the capital budget.

Speaker Change: Yeah, I would add in Q3, we didn't see the seasonality that we had talked about in the prior earnings.

call one or two deals.

Speaker Change: actually closed ahead of schedule. So, unbalanced when we look at the full year, the $14 to $14.5 million of revenue range.

Speaker Change: As Maria indicated, we feel very good about that, 30%, you know, roughly year-over-year growth at the midpoint.

Speaker Change: Got it. Very helpful. And just one last one, if I can squeeze in here.

Speaker Change: On the new software launch in the U.S., you know, I saw that you guys have moved to full rollout in July.

Speaker Change: When do you expect all of the U.S. systems to have the latest upgrade, and can you talk about the impact you are seeing to the funnel, as well as adoption?

Speaker Change: Sure, so we have been progressively rolling it out. I would say we have a very large number of accounts and we prioritize appropriately to the bigger users, so we see the rollout going as expected. Probably the majority of the accounts will be done clearly as we wrap up this year.

Speaker Change: This software, as you know, has the benefit of having no image quality compromise.

Speaker Change: but a significant gain in the time it takes to acquire the images, and that has been...

Speaker Change: We have received a lot of very positive feedback on that as it relates to just also managing the time the patient is in the scan and making sure that there is less motion.

Speaker Change: So, we closely tracked a number of the initial accounts where we released to get as much sort of insight.

Speaker Change: before we trained the full sales force and started the broader rollout. So that process went really well with a very good understanding of the value proposition.

Speaker Change: what we're working on now, which would be real in the first half of 2025, and that's the 10th generation of software. And I have to say the team has done a fantastic job really taking our deep learning techniques and our AI techniques up a very significant level. And we're getting to image resolution and images that look

Speaker Change: quite close to what a 1.5 Ketla system is, which to me is really not just one more software version, but really a departure in a very positive way towards a significant sort of

Speaker Change: Got it, Maria, very helpful. Just to clarify, you expect a limited launch of the 10th generation in the first half?

Speaker Change: I expect that we would get clearance and if it is as good as we believe it is from our R&D work and the early validation and the early images will probably go quite quickly into a rollout in the first half.

Got it. Thank you guys so much.

Sure, thank you. Thanks for your question.

Speaker Change: Your next question comes from the line of Yuan Ji with B. Reilly. Please go ahead.

Speaker Change: Congrats on this quarter's performance. Since you just attended AEIC and CTAB, I'm curious if there's any perception difference between the US-based doctors and EU-based doctors.

Speaker Change: on the criteria to initiate treatment for Alzheimer's and then any difference on their perception on the MRI scan in follow-up scanning.

Speaker Change: Great question Yuan and I actually was there at the TTAD myself so I can report firsthand. I want to say there's a lot of similarities in the fact that everyone agrees that

Speaker Change: The bottleneck is this MRI monitoring requirement and how inconvenient that is to the patient workflow, to how burdensome it is.

Speaker Change: to the care partners and the patients themselves. And a lot of people that are starting programs are already talking about the challenge of really orchestrating all of the different appointments. So I would say that's a global theme.

The European community is a little bit up in arms.

Speaker Change: in the fact that their regulators have actually been a lot more conservative and as you know there is no CE approval for any of the ATTs and the UK approval came with a

Speaker Change: a more restricted labeling than the U.S. approval. So, there is a lot of enthusiasm and optimism that the regulators will see the light. I think the U.K.

Speaker Change: Approval was really a beam of bright light in the fact that the world will actually, in Europe, catch up quickly to to the U.S.

Speaker Change: I think I have to say that our poster was up for three full days and the traffic and the level of interest was

Speaker Change: significantly higher than I've ever anticipated in some of the the U.S. meetings. This is a meeting that is a little unique in that there is no booths and stands so

Speaker Change: The sessions all happen in one big conference room and then there is the poster walk-through.

Speaker Change: It's quite different in Europe than it is here, given the social medicine sort of environment there. So, probably a little easier to penetrate with more structure in the way the systems work. Hopefully, that addresses your question.

Speaker Change: Yeah, thanks for the helpful color there. That's great to hear. And maybe another question on the EU expansion. Great to see your quarterly performance there as well. You mentioned the workflow issue. I'm wondering, is the demand of MRI the same between the EU and the U.S.? Does it have this capacity issue and whether they are reimbursed at a similar rate as U.S.?

Thank you.

Speaker Change: Their issue of the waitlist in the UK is quite unique to the NHS system, so that's more UK than the rest of Europe.

Speaker Change: I think what we see with our system is, as you know, we just got approval of our ninth generation software.

Speaker Change: The European clinicians have only really had exposure to the 8th and 9th generation software, for all intents and purposes, since we recently focused on Europe, and they believe the data is incredibly

The images are incredibly good and diagnostic quality.

Speaker Change: Just a month before CTAD, we were at the European Society of Neuroradiology, and actually, Glasgow presented stroke data there with incredible...

Speaker Change: value assessment around the time to scan advantages of using our system. And the fact that this was head above.

a head CT.

No pun intended.

Speaker Change: in terms of the triage of stroke. So I think they...

Speaker Change: Their care delivery across both a stroke emergency medicine and neurodegenerative is a little bit different. There is higher appreciation of the value of our technology as it is today because this is everything they've been exposed to.

Speaker Change: Got it. Yes, this is very, very helpful. That's all from us.

Okay, thank you.

Speaker Change: There are no further questions at this time. I will now turn the call back over to Maria Sainz, President and CEO, for closing remarks.

Maria Sainz: Well, thank you very much, all of you, for listening in today and for your questions, and we look forward to further updates throughout the quarter and then at the end of Q4. Thank you very much.

Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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Thanks for watching!

Speaker Change: Good afternoon and welcome to Hyperfine's third quarter 2024 earnings conference call.

Currently, all participants are in listen-only mode.

Speaker Change: We will be facilitating a question and answer session towards the end of today's call.

Speaker Change: As a reminder, this call is being recorded for replay purposes.

Speaker Change: I would now like to turn the call over to Marissa Bych from Gilmartin Group for introductory disclosures.

Speaker Change: Thank you for joining today's call. Earlier today, Hyperfine, Inc. released financial results for the quarter ended September 30, 2024. A copy of the press release is available on the company's website, as well as SEC.gov.

Speaker Change: Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker Change: Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

Speaker Change: Market Opportunity, Commercial and International Expansion, Regulatory Approvals, and Product Development are based upon our current estimates and various assumptions.

Speaker Change: These statements involve material risks and uncertainties that could cause actual results or events materially differ from those anticipated or implied by these forward-looking statements.

Accordingly, you should not place undue reliance on these statements.

Speaker Change: For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factor section of our latest periodic filing with the Securities and Exchange Commission.

Speaker Change: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 12, 2024.

Speaker Change: With that, I will turn the call over to Maria Sainz, President and Chief Executive Officer.

Maria Sainz: Good afternoon and thank you for joining us. On the call with me today is our Chief Administrative Officer and Chief Financial Officer Brett Hale.

Maria Sainz: We delivered another strong quarter with revenue of $3.6 million, representing 56% year-over-year growth.

Maria Sainz: Revenue performance was driven by sales of our portable imaging system in both the US and international markets.

Maria Sainz: International contributions to revenue were healthy in the third quarter, and we did not experience the extent of seasonality that we had anticipated.

Maria Sainz: Our growth going forward will be driven by expansion into multiple new sites of care and international geography.

Maria Sainz: An important development in the third quarter was the progress made on our commitment to further improve image quality to enable faster adoption of our technology.

Maria Sainz: Early in the quarter, we received FDA clearance of our 9th generation AI-powered software.

Maria Sainz: Keeping with our steady pace of innovation, we plan to obtain clearance and launch our next-generation AI-powered software in the first half of 2025.

Maria Sainz: This 10th generation software will bring a step-function image quality improvement over our recently launched 9th generation software.

feedback from key opinion leaders involved

Maria Sainz: This feedback demonstrates that our work to develop excellent, decision-enabling image quality through AI-powered software releases is paying off well.

Maria Sainz: Not only will our next update benefit our existing customer base, but most importantly, it will also make adoption of also low-field brain MRI a faster process for new users.

Maria Sainz: enabling a shorter learning curve for radiologists and accelerating market update of our technology.

Maria Sainz: As the first portable ultra-low-field MRI for the brain, our device has collected over 150,000 images by now.

Maria Sainz: We are continually learning from this real-world data from the subsystem install phase to enhance the product and especially our image quality.

Maria Sainz: Upcoming versions of software will integrate new AI deep learning-based techniques.

Maria Sainz: to further improve the consistent imaging pipeline across all sequence types, that is, the T1, T2, flare, and diffusion-weighted imaging.

Maria Sainz: The integration of deep learning does not require any additional steps from the user and enhances the image quality and consequently diagnostic value of the images generated at ultra-low fields.

Maria Sainz: The algorithms are designed to improve the image quality of our scan output while reducing the impact of scan artifacts.

Maria Sainz: The images created with this algorithm are validated by expert radiologists.

Maria Sainz: As we move forward, we are continuing investing in improving our AI-driven image quality through each imaging-focused software release.

Maria Sainz: I will now provide an update on our clinical studies. The CARE-PMR study is progressing well. We are scanning to detect ARIA complications in patients monitored with MRI as part of their amyloid targeting therapy as three Leckendy infusion programs.

Maria Sainz: MRI is center to the scientific and clinical dialogue regarding amyloid targeting therapy and to the expansion of screening, diagnosis, and treatment of the Alzheimer's disease.

Maria Sainz: Work-life challenges are recognized broadly as the field aims to increase access, convenience and equity in Alzheimer's care.

Maria Sainz: The impact of our technology for the treatment of Alzheimer's is real.

Maria Sainz: at three major Alzheimer's meetings in the last three months, starting with the Alzheimer's Association International Conference this summer, and most recently, clinical trials in Alzheimer's disease 2024 in Madrid.

Maria Sainz: Physicians from Washington University in St. Louis and Mass General Hospital presented very promising initial cases and that data on ARIA-E detection with compared with conventional MRI scanners.

Maria Sainz: as well as on the use of the soup system for monitoring the progression of Alzheimer's.

Maria Sainz: The most recent presentation at the Clinical Trials in Alzheimer's Disease meeting included images of multiple ARIA-E cases.

Maria Sainz: and concluded that the fluke system presents a promising and cost-effective alternative to the conventional pre-Tesla MRI with the added advantage of workflow optimization.

Maria Sainz: and that this study highlights the potential of innovative imaging technologies to advance patient care and monitor neurodegenerative conditions.

Maria Sainz: Their very significant workflow benefits bringing brain imaging closer to patients with Alzheimer's disease and their clinicians, with the potential to substantially impact access, cost, and equity in Alzheimer's care.

Speaker Change: Guided by key opinion leaders in this field, we have also started to explore other Alzheimer's applications besides ARIA-E detection with a goal towards broadening and enabling monitoring of disease and screening of patients at multiple sites of care.

Speaker Change: In stroke, data from Action PMR continue to strengthen with the publication in Q3 of a subset of data from a study from MGH and University of Buffalo, providing early evidence that the SOOP system is a promising tool for enabling critical stroke treatment choices in urgent care settings.

Speaker Change: The data that was published in the August 2024 edition of Annals of Neurology highlighted ultra-low-field MRIs' ability to be used as a tissue cloth to characterize acute stroke.

Speaker Change: In September 2024, data from a study from the University of Glasgow was presented at the European Society of the Neuro-Radiology Meeting.

Speaker Change: The study analyzed images from the soup system to assess its performance in acute care scope workouts compared to the current standard of care.

Speaker Change: They analyzed time-to-scan, diagnostic performance, specificity, and patient experience comparing orthological MRIs, conventional MRIs, and CTs.

Speaker Change: Key findings show that the SUS system was dramatically faster than conventional MRI with a median IQ scan of 2.5 hours compared to 27.7 hours.

Speaker Change: The workload benefits associated with timely and convenient access to MRI are real in both growth triage and the management of patients with Alzheimer's disease.

Speaker Change: We have a highly differentiated opportunity to improve care pathways for both patient populations which represent very large areas of unmet clinical needs globally.

Speaker Change: As a reminder, our studies aim to support the adoption of our innovative portable MRI system in different types of care for multiple clinical applications.

Speaker Change: Our system has been cleared by the FDA for broadening scanning brain for patients of all ages, and the work we are doing in stroke and Alzheimer's is already covered by our existing indications for use.

Speaker Change: Further expansion will come from our plan to make the soup system available beyond the hospital setting and in the neurology office setting.

Speaker Change: By the end of 2024, we expect the Inter-Societal Accreditation Commission, IAC.

a leading CMS-approved accreditation body.

Speaker Change: to issue updated MRI standards that include the use of portable point-of-care ultra-low-field brain MRIs.

Speaker Change: offices and then pursue accreditation through IAC and once completed, exams with subsistence in those offices will be illegible to be covered by CNN.

Speaker Change: We already see strong organic interest from the office setting for a portable MRI for several clinical use cases, including Alzheimer's disease.

Speaker Change: The new role of the office is an incremental side of care for the subsystem which we anticipate contributing to growth starting in the second half of 2025.

Speaker Change: At the recent European Society of Neuroradiology conference, we had the opportunity to witness first-hand the enthusiasm and positive feedback from European clinicians towards the utility and value of our soup system.

Speaker Change: 2025 will be a full year with our international distribution network in place as well as our anticipated regulatory approval in India in the second half of the year.

We have great momentum across all of our initiatives.

Speaker Change: I want to wrap my remarks by summarizing our plan to drive business acceleration and growth in 2025 and beyond.

Speaker Change: The use of soup in stroke triage will drive placement in emergency departments.

Speaker Change: And our work in Alzheimer's will drive additional subsistence placement in hospital-based clinics and e-community centers.

Speaker Change: These new types of outpatient care will be incremental to our critical care business and will start contributing to the growth of our hospital business in the second half of 2025.

Speaker Change: Further, our strategy to expand into neurology offices provides a compelling, incremental business opportunity beyond the hospital that will be a new focus area for us in 2025 and a strong contributor to growth in the second half of 2025 and beyond.

Speaker Change: I want to also emphasize that expansion into new types of care is supported by technology enhancements and clinical evidence.

Speaker Change: I am very pleased with the progress on technology and clinical evidence, and we will continue to drive those efforts with efficient allocation of capital and strong execution.

Speaker Change: We're on the doorstep of a step-function improvement in image quality to drive faster adoption of our technology which coupled with the extension into multiple new sites of care and international markets

Speaker Change: provides the foundation for growth acceleration in the second half of 2025 and beyond.

Brett Hale: I would now like to turn the call over to Brett to review our performance in the court.

Brett Hale: Thank you, Maria. Tune in to our financial results for the third quarter of 2024.

Brett Hale: Gross profit for the third quarter of 2024 was $1.9 million compared to $1.1 million in the third quarter of 2023, resulting in a record gross margin of 52% and our second straight quarter of gross margin percentage of 50% and above.

Brett Hale: Year-to-date, we've generated $5.1 million in gross profit, up 36% from the first nine months of 2023. And year-to-date gross margin is 48%, representing over 330 basis points of gross margin expansion from the first nine months of 2023.

Brett Hale: R&D expenses for the third quarter of 2024 were $5.9 million compared to $5.7 million in the third quarter of 2023.

Brett Hale: Hale's general and administrative expenses for the third quarter of 2024 were $7 million, compared to $7.1 million in the third quarter of 2023.

Speaker Change: The improvement in net loss was a result of our strong revenue, expanding growth margin, and the spending discipline and cost-saving initiatives we have implemented across the business over the past year.

Speaker Change: Our cash growth for the third quarter of 2024 was $8.9 million, and as of September 30, 2024, we have $45.8 million in cash-in-cash equivalents on our balance sheet.

Speaker Change: Year-to-date, our tax burn of $30.2 million is down 6% compared to $32 million for the first nine months of 2023.

Speaker Change: Turning to guidance, we are narrowing our revenue outlook for the full year 2024 to a range of $14 to $14.5 million, representing approximately 30% year-over-year growth.

Speaker Change: For the full year 2024, we are also updating our growth margin to 47 to 50 percent, which represents the high end of the previous rate.

Speaker Change: We continue to drive healthy margins at our stage and believe this positions the company well for additional margin expansion at scale.

Speaker Change: We remain optimistic that we will surpass 50% growth margins comfortably and sustainably as we realize the commercial acceleration from our growth catalyst.

Speaker Change: Regarding cash earned, we now anticipate total cash earned to be $37 to $40 million for the full year 2024.

Maria Sainz: We continue to see our cash burn decrease and operating leverage increase, providing us a cash runway for the business in early 2026, funding the commercial realization of the growth catalyst Maria mentioned previously.

Maria Sainz: We expect to continue to deliver steady progress of revenue growth, growth margin expansion, and cash burn reduction ahead of our growth catalyst that will drive business acceleration in the second half of 2025.

Speaker Change: At this point, I'd like to turn the call back to Maria for closing comments.

Maria Sainz: With line of sight to several meaningful revenue catalysts in 2025, I have never been more optimistic about the business.

Maria Sainz: With that, I want to thank you all for your time and open up the line for questions.

In order to ask a question at this time,

Speaker Change: Your first question comes from the line of Larry Beagleson with Wells Fargo. Please go ahead.

Speaker Change: Hi, good afternoon. This is Emera Nog for Larry. Congrats on a great quarter and thank you for taking the questions here.

Maybe just starting off on capital trends in the quarter.

Speaker Change: I don't think I heard in your prepared remarks how many capital placements there were. And, you know, just following up there, any color you can provide on U.S. and O.U.S. splits, as well as any greenfield versus same-store sales.

Speaker Change: Sure, and good afternoon. You didn't hear because we didn't mention it, but we actually placed 13 systems and it was a strong balance between US and OUS placements. As you saw, there's a slight improvement in ASB associated with the strength of the mix, so 13 is the answer to your question, Simran.

Speaker Change: Got it. Very helpful. And maybe just on guidance, you know,

Speaker Change: Guidance at the midpoint implies flattish sequential sales in Q4, which is typically your strongest capital quarter.

Speaker Change: I guess, you know, given all of the momentum you're seeing, why wouldn't you see an acceleration?

Speaker Change: into the quarter and maybe just talk about what gets you to the low and the high end of the range.

Speaker Change: So there's not usually that rush to use the budget or lose it at the end of the year.

Speaker Change: So, we don't really have that favorable seasonality that other capital equipment sees, and when we look at this quarter, it's actually a slightly shorter in terms of selling days for us in getting all the deal specifics lined up.

Speaker Change: We feel really strong about the quarter. We think it will be another strong quarter. We've been on quite a nice streak of strength of the quarters.

Q3 2024 Hyperfine Inc Earnings Call

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