Q3 2024 Lifeward Ltd Earnings Call
Good day and welcome to the life for third quarter 2024 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
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Speaker Change: Now I'd like to turn the conference over to Mike Wallace CFO. Please go ahead.
Speaker Change: Thank you Danielle good morning, and welcome to <unk> third quarter, 2024 earnings call and Mike Lawless liquids, Chief Financial Officer, and with me on today's call is large iwinski, our chief Executive Officer, and I loved our Vice President of Finance earlier. This morning, Lifford issued a press release detailing financial results for the three and nine months ended September 30.
Speaker Change: 2024, which along with this call discuss certain non-GAAP information.
Speaker Change: Release, including relevant non-GAAP reconciliations and a webcast of this call can be accessed through the Investor Relations section of the life of website at <unk> Dot com before.
Speaker Change: 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. These forward.
Speaker Change: Forward looking statements are based on information available to <unk> management as of today and involve risks and uncertainties.
Speaker Change: Those noted in our press release and our filings with the SEC.
Speaker Change: 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: <unk>, specifically disclaims any intent or obligation to update these forward looking statements.
Speaker Change: Whether as a result of new information future developments or otherwise, except as required by law. A replay of this will be available. Shortly after the completion of the call accessible from the dial in information in today's press release, the archived webcast will be available in the Investor Relations section of our website for the benefit of those who maybe listening to the replay or the archived.
Speaker Change: This call was held and recorded on November 12 2024.
Speaker Change: Since that date late Ford 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.
Larry: With that I'll turn the call over to Larry.
Larry: Thank you Mike.
Larry: Welcome everybody and I appreciate you joining today.
Larry: So building our mission of providing access to technology that changes lives and our progress in building towards an enduring financial business advanced during Q3.
Larry: The LIFO charge consists of two primary businesses.
Larry: One focused on a novel system, allowing ambulation and improved health outcomes and quality of life for spinal cord injury individuals.
Larry: And the other anti gravity technology for off leading individuals' for conditioning and jewelry recovery treatment of neuro disorders weight loss and overall health and wellness.
Larry: We are very excited about our novel exoskeleton technology, the rework exoskeleton because.
Larry: Although the product has been available on the market for a number of years. We are now at the start of commercial expansion as a result of the Medicare coverage that the company was able to gain this past April.
Larry: Our immediate coverage base in the United States since its added over 17000 individuals with the potential to add coverage of another 25000 as access expands additional payers.
Larry: Our differentiated anti gravity technology services, a range of users from professional athletes to everyday patients.
Larry: In particular, those recovering from a broad range of injuries, those seeking weight loss solutions and those with neurological impairments such as Parkinson's. We're restoring gate is so critical.
Larry: The combination of the products forms of business days with operating synergy.
Larry: Depth of our relationships with clinics, and importantly, with physical medicine, and rehabilitation physicians, who prescribed and guide training on our products and up to 17500 clinics in our direct markets.
Larry: Let me relate to stories to bring these innovative designs to life.
Speaker Change: Well they changed my life.
Yeah.
Speaker Change: Well, it's a story of a patient gained access to week, where we walk through Medicare coverage.
Speaker Change: She knows she made peace with life in a wheelchair and looked a good life.
Speaker Change: But when Medicare allowed access she and her physician decided to try we walk so that she could achieve with physical activity goals engaged health benefits such as improved pain reduction improvement in social functioning muscle health and improved downhill amongst a few.
Speaker Change: Since reward she relayed a feeling of normalcy will get indication unless the number of health benefits for Milwaukee once again.
Speaker Change: We named her device Luke re Walker.
Speaker Change: Another patient suffered from extensive knee pain and her weight preventive knee surgery to address her pain.
Speaker Change: With the advice of a position she utilized ultra <unk> differential air pressure technology, and she was able to reduce your weight exercising the ultra G.
Speaker Change: This enabled her to subsequently have the knee surgery, which allowed a major improvement in her life.
Speaker Change: This is one of the growing segments for anti gravity technology.
Speaker Change: The company made significant progress during the quarter.
Speaker Change: Key developments.
Speaker Change: We continue to grow the business with a 39% increase over the prior year quarter.
Speaker Change: We had 20 more individuals regain ambulation rework placements in the quarter.
Speaker Change: Coverage for reward started with the establishment of payment in April and the process for qualifying documentation processing trial and training takes time.
Speaker Change: Our range has been broad.
Speaker Change: Ranging from 55 days to over 1000 days.
Were cases that were both sourced and completed in 2024 the claims processing timeframe. It's been about 150 days in these cases.
Speaker Change: Which we are working to shorten going forward.
Speaker Change: We have built an engine to process claims with a dedicated team of clinicians and case managers that will allow us to support the volume we see in the coming quarters.
Speaker Change: Overall U S leads have expanded 62%.
Speaker Change: Over prior year due to our expanded coverage and commercialization efforts to drive adoption and uptake.
Due to these efforts our current U S pipeline with Medicare and other U S. Payers is now approximately 70 qualified contract, which bodes well for future quarters and drives our optimistic outlook.
Speaker Change: Turning our focus to the Altra G technologies, while theres been a lot of good that gives me and should give you great optimism for the future. The business has not delivered on my expectations. This year.
Speaker Change: I am convinced this is a fantastic technology based on the high level of utilization clinics, the direct customer feedback and supporting scientific literature.
Speaker Change: It's an important part of our strategy moving forward.
Speaker Change: But we came out of the gate slower than we planned in 2024, and the acquisition, which in retrospect should not have been surprising given the amount of change turnover and distraction that comes with the consolidation.
Speaker Change: Secondly, we are being impacted by the delays in capital expenditures, particularly in smaller provider organizations that have been well reported in the industry.
Speaker Change: Our market intelligence tells us that others in the space are seeing the same impact.
Speaker Change: We do continue to have optimism here since our third quarter placement run rate was better than the first half of the year.
Speaker Change: We have the best product and to the best of our knowledge on not losing sales to competitors and the market reaction to our recently introduced Neo model has been strong with about 40 orders to date.
Speaker Change: We are also aligning our sales and marketing efforts with how the rehabilitation provider industry has consolidated.
We are anticipating a strong fourth quarter for ultra G, which will set us up well for 2025.
Speaker Change: In 2024, we are focused on operational efficiency.
Speaker Change: We made an announcement last week about the closure of two facilities and the financial impact.
Speaker Change: This is a final step with a number of moves to consolidate efforts leading to a streamlined organization and the ability to focus on driving our growth.
Our $6 7 million adjusted operating expense in the quarter is the lowest in the previous five quarters. This will improve as we drive the log sales to capture the efficiencies of this latest consolidation.
Speaker Change: Our model supports the ability to reach breakeven and requires a subdued pace of Medicare and ramping provinces.
Speaker Change: Successful penetration with the new Ultra G Neil system.
Speaker Change: And some recovery funding activity in the capital equipment market that we anticipate in 2025.
Speaker Change: Our R&D focus in 2024 was driven by the launch of the Neo and the Neo plus which was successfully launched mid year.
Speaker Change: And by the <unk> seven O assistant, which is much easier to use and adds essential real tone and transmission of data on utilization.
Speaker Change: Seven O is under FDA review and in the follow up question base.
Speaker Change: We will complete the requested studies with additional data by year end we.
Speaker Change: We anticipate FDA clearance to follow in the early months of 2025.
Speaker Change: I would now like to turn the call over to Michael for a financial review Mike.
Michael: Thanks, Larry.
Michael: Before I review the results for the third quarter of 2024, I want to remind everyone that I'm going to discuss the results on both a GAAP a standard GAAP basis, as well as a non-GAAP basis, which excludes the items listed in the reconciliation tables provided in today's earnings release I.
Michael: I encourage you to reference the GAAP results and reconciliation tables as I discuss the financials.
Michael: For Q3 life reported earnings of revenue of $6 1 million in the third quarter of 2024 compared to $4 4 million in the third quarter of 2023 up $1 7 million or 39%.
Michael: Revenue from the sale of our traditional products and services, including reward exoskeleton as micro cycles and restore exo suit was $2 5 million up $1 1 million or 73% from the third quarter of the prior year driven primarily by an increase in reward system revenue in the U S and Germany.
Michael: Revenue from multi GE products was $3 6 million in the third quarter of 2024, which was an increase of <unk> 6 million in the third quarter of 2023, when we acquired <unk> in August of that year.
Michael: During Q3 dollars 20 for the reward sales were adversely affected by some of the delayed some delays in nutrition of Medicare cases that we had expected would close during the quarter. Additionally, the ultrashape sales were affected by the continued softness in capital spending by clinics in the U S, which impacted the volume of sales leads and conversion rates in Q3.
Michael: In the third quarter, our pipeline metrics continued to show improvement across the two major product lines at the end of the third quarter. Our overall number of reward cases in process in the United States. As already mentioned consisted of approximately 70 qualified candidates for future claims submission with Medicare and other payers. These use cases are work in process and supper.
Michael: I meant the cases in process that we have historically reported each quarter in Germany, where we have 45 cases in process at the end of Q3.
Michael: So the reward systems active rentals also represents an important pipeline metric. The current pipeline of active rentals consists of 25 cases, which is broken down with 23 in Germany and two in the U S VA hospitals.
Michael: These re walk rentals with some attrition typically convert to sales within within a three to six month period.
Michael: For Ultra G systems, we ended the third quarter with orders for 74 Ultra <unk> systems in backlog, which is the third quarter in a row of sequential increases in the backlog amount we.
Michael: We continue to be encouraged by the strength of the pipeline metrics for both the reward and ultra <unk> systems. As these are leading indicators of future growth and evidence of the improving sales effectiveness of our combined commercial resources.
Michael: Moving to gross profit in the third quarter of 2020 for our gross profit was $2 2 million or 36, 2% of revenue compared to <unk> 9 million or 19, 6% of revenue in the prior prior year.
Michael: On a non-GAAP basis, adjusted gross profit was $2 6 million or 42, 5% of revenue for the third quarter of 2024 as compared to 2.0 or 45, 1% in the third quarter of 2023.
Michael: This decline in gross margin percentage is primarily attributable to lower absorption of factory overhead costs at our Fremont facility due to lower production volumes of ultra and <unk> systems and higher labor costs.
Michael: Moving to operating expenses GAAP operating expenses were $5 4 million in the third quarter of 2024 compared to $8 8 million in the third quarter of 2023.
Michael: On a non-GAAP basis, adjusted operating expenses were $6 7 million in the third quarter 2024, compared to $6 9 million in the third quarter of 2023.
Michael: This decline is primarily due to lower R&D expense from the conclusion of the development activity for the reward seven.
Michael: Our GAAP operating loss for the third quarter was $3 2 million compared to an operating loss of $7 9 million in the third quarter last year.
Michael: On a non-GAAP basis.
Michael: <unk> operating loss was $4 1 million in the third quarter of 2024 compared to $4 9 million in the third quarter of 2023.
Michael: We expect our quarterly operating loss to narrow further in the fourth quarter based primarily on greater sales volume and higher gross margins.
Moving to the balance sheet, we ended the quarter with $10 7 million in cash and equivalents and no debt. Our cash usage in Q3 was $4 5 million, which showed improvement from prior quarters as I mentioned on the Q2 earnings call and important factor affecting our cash burn is the timing of Medicare payments, while we have made some progress receiving payments for prior.
Michael: <unk> the overall process for claims review and approval by the Max continues to be very time, consuming which impacts the timing of the eventual payments.
Michael: We're working with the Macs routinely and we have confidence that we will eventually streamline and expedite the approvals in the future.
Michael: Factoring in the third quarter results, we're revising our 2020 for full year revenue expectations to a range of $25 million to $26 million.
For 2024 based on the current recovery in trends, thus far in the fourth quarter life with respect to sequential revenue growth to resume this quarter to generate the highest quarterly revenue for the year.
Michael: With that I'd like to turn the call back to Larry for further remarks.
Larry: Thank you Mike.
Larry: To summarize before answering your questions.
Speaker Change: We believe in the health benefits of reward to eligible patients.
Speaker Change: Are excited about our technology and see very encouraging trends for growth.
Speaker Change: We also understand the steps we must take to continue to drive uptake and adoption and are impacted by the time it will take to expand this market to reach its potential.
Speaker Change: This includes collaborating with key influential position and patient groups, who are actively supporting our initiatives into the commercial and battery systems.
Speaker Change: Ultra V is a great and effective technology and with the combination of revenue recovery to historical levels and the cost reductions from of our facility changes, we anticipate it will be accretive to our operations in 2025.
Speaker Change: The path to profitability requires revenue levels of approximately 12% to $13 million per quarter.
Speaker Change: And we are aggressively built into these targets.
The market size.
Speaker Change: Our commercial engine that continues to grow the qualified lead pipeline.
Speaker Change: Medical education on the medical necessity of ambulation and plans for expanding coverage are the drivers.
Speaker Change: The efficiency efforts and lowering operating costs completed during 2024 and disciplined expense control going forward are essential elements to reduce our burn rate.
Our cash balance of greater than $10 million can support this pathway if market growth occurs within our timeframe.
Speaker Change: The significant milestones achieved in 2023, and 2024 have created a tremendous opportunity for our company and this industry.
Speaker Change: We plan to conduct an investor day after the end of the year to provide more insight into how we will achieve our commercial goals.
Speaker Change: Along with more in depth review of our technology and the expansion of that utilization.
Speaker Change: We will announce more details on the scheduling of the industrial event in the near future.
Speaker Change: Market creation is not easy and it takes time and resources.
Speaker Change: The need for these products is very clear and the ability to commercialize is wheel with coverage established since April of this year.
Speaker Change: This is absolutely doable, we are committed and on our way to achieve our goals.
Speaker Change: I'd now like to open the call to questions.
Speaker Change: Thank you operator, we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: The first question comes from.
Speaker Change: So I am Oscar cooler, Rob Mccarthy from H C. Wainwright. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Good morning, Larry.
Speaker Change: <unk>.
Speaker Change: A couple of quick questions.
Uh huh.
Speaker Change: I was not there at the beginning of the call. So I'm just trying to understand.
Speaker Change:
Speaker Change: With you or.
Speaker Change: With your new guidance.
Speaker Change: How comfortable are you with.
Speaker Change: With that guidance, because it's a good drop since the second quarter.
Speaker Change: And also.
Speaker Change: Are there.
Speaker Change: Any.
Speaker Change: Issues in terms of.
Speaker Change: Filing with the with the CMS and getting reimbursement.
Speaker Change: Okay I'll start that we are comfortable with that guidance absolutely.
Speaker Change: And we are finding with CMS that the timing for processing is going a little longer than we thought.
Speaker Change: As I mentioned is the average for the 2024 claims is about 150 days.
Speaker Change: And they have been a little slower to pay for.
Speaker Change: For us to get the cash at the backend of this.
Speaker Change: So those have impacted us a little bit for the timing for this year.
Mike: And Mike anything you would add to that.
Mike: No I mean frequently it's a case of just documentation and validation of all of the.
Speaker Change: These claims when they are submitted are much more complex and much more detailed than claims that we've traditionally done for the VA or for workers' compensation insurance and so there is just and I think there is an added learning curve on the part of the Max to understanding the product in the.
Speaker Change: So the medical documentation that theyre going to require for us to be able to provide so and some of these cases there is just.
Speaker Change: The requirement to kind of go back and forth a little bit to provide supplemental information, often which puts us back at the back of the queue again servicing to be processed so.
Speaker Change: Sort of the circumstances that we're dealing with what I think we're confident with education and with with higher volumes that this process will come more routine.
Speaker Change: Okay.
Speaker Change: And then with regards to the <unk> business.
Speaker Change: Is that any possibility for a positive surprise in terms of.
Speaker Change: <unk>.
Speaker Change: When you run this.
Speaker Change: From that business.
Speaker Change: And.
Speaker Change: I know you have impact too much.
<unk> best selling that product.
This year, but from from what you have seen.
Speaker Change: You know are you how comfortable are you with that.
With how you expect this business to run and it is running at this point.
Speaker Change: Well as we pointed out of the call it is improving quarter over quarter over quarter got off to a little bit of a slower start than we wanted.
But I'd break it into burst.
Speaker Change: Technology is remarkably well received by the market.
Speaker Change: The hold backs I think are a combination of some of the integration of the company.
Speaker Change: But we've also seen capital equipment sales between us and measuring other companies in the industry as we've looked at intelligence has been limited and slower in 2025 for all capital equipment.
Speaker Change: But what we have seen the.
Speaker Change: The quarterly improvement and in particular as we're looking at our backlog and our activities here in Q4, we seem to be recovering nicely.
Speaker Change: And expect a very good Q4.
Speaker Change: And we have the new deal product and the Neal plus which we only launched mid year and we already have 40 orders in place on that product line. So ultra V is going the right direction.
Speaker Change: One last question from me Larry.
In the end you gave some commentary about.
Speaker Change: What sort of revenue run you need to be at to attain profitability.
Speaker Change: So.
Speaker Change: Based on how the business is running at this point.
Speaker Change: Yeah. It is.
Can you tell us like.
Speaker Change: How many quarters it would take to get there or at least your expectation.
Well, we don't have a specific model, we put out publicly but.
Speaker Change: We expect the growth in rewards to be substantial with the number of leads we have and the potential remember only about 150 days a little more post actually be able to sell the product so <unk>.
Speaker Change: Excuse me <unk> growth will be the primary driver to get to those kind of quarterly numbers to get us to breakeven.
Speaker Change: And in parallel we expect ultra G to recover between the new product and the acceptance of it in a broader range of centers.
Speaker Change: Both of those are the growth vehicles. The re work as the larger growth vehicle Ultra G will get back to historical numbers, we believe and expect it to grow with the launch of the new product because that gets us into a new market segment.
Speaker Change: So we forecast that is doable within the.
Speaker Change: The cash we have but it depends on the pace of the uptake.
Speaker Change: So I would just add to that.
Speaker Change: I already mentioned, we've done a lot of effort to streamline the organization further as we announced in the last.
Speaker Change: One of the reason with press releases and.
Speaker Change: We're very confident that.
Speaker Change: The altered the former LPG business will be solidly profitable in 2025.
Speaker Change: At a lower revenue run rate than we had originally anticipated but at the same time, we are growing it again, so ultimately it's a more profitable leaner more efficient organization as it's been integrated into the re work organization.
Speaker Change: Thank you. Thank you gentlemen for taking all my questions.
Speaker Change: Thanks, Okay.
Speaker Change: The next question comes from Martin Polak from FMR quoting. Please go ahead.
Speaker Change: Yes.
Great.
Speaker Change: Yes, yes, okay.
Speaker Change: Hello, guys generally it.
Speaker Change: It seems that the cash burn rate.
Speaker Change: Very low sales.
Speaker Change: It'll be respectable.
Speaker Change: But if you could give.
Speaker Change: Give us some idea of what to fourth quarter burn may look like.
The $2 5 million or $2.
Speaker Change: Yes.
Speaker Change: Members of accounts receivables are collected.
Speaker Change: Do you see that number.
Speaker Change: Cladding materially you had expected.
Speaker Change: Previous quarters to suggest this could be in the low.
Speaker Change: Single digit.
Speaker Change: Possibly couple million dollars of cash burn.
Speaker Change: That's one point, but clearly.
Speaker Change: The market is not the bonds that.
Speaker Change: Looking at two tests levels and I'll probably thinking.
Speaker Change: For profitability, how do we do.
Speaker Change: That was the company that will be able to sustain.
Speaker Change: Itself without having to raise additional tests that you are confident that you may not need it.
Speaker Change: If you would give us a look into 2025.
Speaker Change: I will say one more thing that I think this investor day.
Speaker Change: Very welcome.
Speaker Change: In terms of news that is.
Speaker Change: Unprecedented you've never done that before.
Speaker Change: So I think there'll be some people, who really look forward to get to know the company better.
Speaker Change: Okay, that's all for us.
Speaker Change: Okay. So your first question specifically around Q4 so.
Speaker Change: We would expect that the burn rate for Q4 will come down quite a bit from Q3.
Speaker Change: It's all going to depend to some extent around variables. We don't have a lot of visibility to which is the degree to which we receive more payments.
Speaker Change: Payments for Medicare, but even absent significant payments for Medicare we're going to see.
Speaker Change: Good improvement in the in the burn rate in Q4.
Speaker Change: I don't I can't really go beyond that in terms of quantity quantify because.
Speaker Change: Like I mentioned, we don't have visibility to.
Speaker Change: The payments coming from the Max dose.
Speaker Change: Those are a little less.
Speaker Change: <unk> that we could see into so.
Speaker Change: But I think with the higher revenue volumes with some.
Speaker Change: Some other trends that I mentioned earlier with higher gross margins with <unk>.
Speaker Change: Our opex levels, we would see you.
Speaker Change: We would expect to see some good improvement.
Speaker Change: And the burn rate in Q4.
Speaker Change: And regarding <unk>.
Speaker Change: Go right ahead.
Okay I was going to answer just on the.
Speaker Change: Sustainability without additional cash question.
Speaker Change: We are working to our current cash for both revenue going up and the expenses going down we've taken all the steps in both cases.
Speaker Change: The defining uptake is going to be CMS.
Speaker Change: Element is going to be the CMS uptake and.
That is something that we have made great progress on if you look at the 70 patients that are coming into our contact group that will flow into many of those will be in Q4, many of them will be in.
Speaker Change: 2045, but it's the right direction for relatively what impacts our cash and our ability to get there.
Speaker Change: I guess back to so.
Speaker Change: What seems to have trouble the market.
Speaker Change: The Q2 results.
Speaker Change: For 'twenty, what's clinically.
Speaker Change: Good numbers.
Speaker Change: The stock has been virtually.
Speaker Change: 50%.
Speaker Change: And it seems that maybe the messaging to the ones that.
Speaker Change: That's for sure.
Speaker Change: It is the test the real number.
Speaker Change: Think investors now looking at yet because 2020, maybe Bob maybe profitable.
Speaker Change: But.
Speaker Change: What he talks about the $12 million to $13 million towards profitability.
Speaker Change: Remember that you were looking at that would be.
Speaker Change: Okay in terms of not requiring test.
Speaker Change: There would be some low level what is your budget 2020.
Speaker Change: Five.
Speaker Change: Can you what is the confidence level on.
Extra on the revenue side, obviously a bit.
Speaker Change: CNS is important.
Speaker Change: Altra is already going to be improving.
Speaker Change: That you can actually.
Speaker Change: Yet through.
Speaker Change: The first couple of quarters of 2025, and maybe then you have our CMS.
Speaker Change: Revenues flowing through in the second half of the year.
Speaker Change: Not even asking about profitability I'm asking about sustainability here.
Speaker Change: Well.
Speaker Change: I guess, one factor that we hadn't talked about which might give you a little more insight to is that the.
Speaker Change: The facility consolidation of Fremont.
Speaker Change: Not only will that obviously took a lot costs out of our cost structure as we mentioned in our press release and it is going to improve our gross margins as we mentioned in the press release, it's also going to help us from an asset utilization of cash utilization because.
Speaker Change: We will not have the degree to which we hold now inventory on the balance sheet because that will be held by our country.
Speaker Change: Our contract manufacturing partner, so we expect to see as we move into 2020.
Speaker Change: 25.
Speaker Change: We're going to kind of work down some of the remaining balance of inventory that we hold on our books and then going forward the production and the sale of units.
Speaker Change: We're going to be transferred to the to the new contract manufacturer. So.
Speaker Change: As part of that transition, we will realize some cash utilization benefit.
Speaker Change: Up some cash out of working capital that we currently carry on the books as inventory so.
Speaker Change: That's another factor that.
Speaker Change: For you to think about as we try to transition from 24.
Speaker Change: It's 25.
Speaker Change: Other than the expense side, where we've done.
Speaker Change: A lot of streamlining that we're very happy that we believe is in the world. It really comes down to revenue and the growth and.
Speaker Change: <unk> growth.
Speaker Change: <unk>.
Speaker Change: It has got to recover and then grow from there both showing those trends if we keep these trend lines. We're on the path we want to be in.
Speaker Change: So essentially are you affirming your oh that.
Speaker Change: You're not looking too.
Speaker Change: Vicki will require additional cash.
Speaker Change: To get to through 2025.
Speaker Change: Thats, what you are saying right now is that correct.
Speaker Change: Yes, if the market can grow as those if we continue to grow like we think we can and the market will grow with us.
Speaker Change: It's absolutely the case.
Speaker Change: And clearly for that cash burn even as early as fourth quarter will come down remarkably.
Speaker Change: That's quite a quite a large amount a large number therefore that might be sustained into next year, you hope will improve.
Speaker Change: The improving trends Ultra G.
Kevin: Kevin you across the.
Kevin: Cost reduction program.
Kevin: Yeah Okay.
Kevin: Market Buzz that.
Kevin: It sounds like a very reasonable scenario.
Kevin: Yeah.
Kevin: Third quarter cash burn was impressive considering the revenues war.
Speaker Change: Quite a bit lower than I expected.
Speaker Change: Alright, Thank you gentlemen.
Mary: Thank you Mary.
Mary: As a reminder, if you have a question please press star one.
Speaker Change: The next question comes from Ben Hayner from Lake Street Capital markets. Please go ahead.
Ben Hayner: Good morning, gentlemen, thanks for taking the questions.
Ben Hayner: First off just kind of a point of clarification, maybe I think you mentioned that one of your patients got reward systems during the quarter.
Ben Hayner: Did you happen to disclose how many of those were part D patients.
Speaker Change: No. We've just been given a global number and we haven't been covering the different areas, which we sell.
Speaker Change: Okay. So I don't expect that and then on the guidance for Q4 does that does that assume maybe ultra G slips a little bit from last year's Q4 number.
Speaker Change: We're going to have a good Q4 with all digi.
Speaker Change: So it helps recover there's going to be pretty close to a little bit better improvement over Q4 last year.
Speaker Change: Okay. That's helpful and then.
Speaker Change: Then.
Speaker Change: Just thinking about.
Speaker Change: The supplemental insurance, but some of these appropriate patients I have I know.
Speaker Change: It's taken longer to get paid on a lot of these things, but are you starting to see supplemental insurance get paid on it.
Speaker Change: The 20%.
Speaker Change: Figure that.
Speaker Change: It could be available to you as well or is that.
Speaker Change: Okay.
Speaker Change: Well.
Speaker Change: That sort of gets triggered with the completion of the claim review and processing by Medicare. So that's sort of it for the time being that sort of held up in that same dynamic that we described earlier about the claim review and approval process.
Speaker Change:
Speaker Change: So.
Speaker Change: Typically Medicare will then notify the secondary payer that the that the.
The payment is due from them as well and that but that is that is sort of contingent upon everything else being completed first so we're at sort of the same boat right now.
Speaker Change: Okay.
Speaker Change: You have a sense of how many.
Folks they are delivering these things do have supplemental insurance I mean is it.
Speaker Change: 50%, 60%, 20%, where does that kind of span.
Speaker Change: We haven't reported the number is it's gone up and down a lot. We're trying to find patients that habit or sometimes encourage them to get it before they they.
Speaker Change: I'll go through the Medicare process.
Speaker Change: Because they've had open enrollment going on so we've been trying to help that alone.
Speaker Change: I can get back to the market with a more specific number because it's changed so much it's had a lot of range since we've been doing it.
Speaker Change: Okay.
Speaker Change: Yes, I don't need that I was just curious about that.
Got it settled down.
Speaker Change: And then on the accounts receivable for the Medicare claims.
Speaker Change: I think you mentioned that I didn't quite catch it but how far do those go back and at what point do you have.
Speaker Change: Start considering our our write off of some of those.
Speaker Change: Well, then I'll go back that far because we've only been.
Speaker Change: Starting to put those in.
Speaker Change: Some late last year, but the the law for coverage started in January for the lump sum, but didn't start prepayment until April.
Speaker Change: So we expect all the ones that are approved eventually will be paid and we're continuing to see a fairly high rate by the time, we get through the process.
Speaker Change: For for these going through so we don't see anything in the short term for that.
Speaker Change: And we do and we do reserve a portion of the <unk>.
Speaker Change: The amount that we think we're due for the fact that there may be some claims that are that are not ultimately not approved so we're not taking the full benefit of a 100% of each claim that we submit.
Speaker Change: As you would with any any other payer was theirs.
Speaker Change: A certain portion of that docket date.
Speaker Change: Okay. That's helpful makes sense and then lastly for me on.
The whole process.
Getting the reimbursement are you kind of developing a sort of checklist or.
Speaker Change: Process.
Speaker Change: You kind of have reasonable assurance that these things are going to go through if you have collected all of us.
Speaker Change: All of these certain pieces of data or is that still kind of in the process.
Speaker Change: The feedback loops and figuring it all out.
Speaker Change: I would say we've made tremendous progress and it's now in a very late.
Speaker Change: Phase, we pretty much know what they want all the way through and have modified it and built our system around it.
Speaker Change: CMS is still learning at the same rate we are.
Speaker Change: They are working.
Speaker Change: So okay.
Speaker Change: Please go.
Speaker Change: Go ahead sorry.
Speaker Change: No we've got.
Speaker Change: Alright materials, we need.
Speaker Change: Yeah.
Okay, great well, thanks for taking the questions guys.
Brett: Okay. Thanks, Brett.
Brett: Okay.
Speaker Change: Concludes our question and answer session I would like to turn the conference back over to Larry Jasinski for closing remarks.
Larry Jasinski: Thank you Danielle.
Larry Jasinski: Thank you everybody for joining us today, I would like to close with.
Larry Jasinski: One of the leading indicators, we chose to pointed out today. The 70 leads that we have that's a big deal for US we had essentially zero qualified prior to April because we didn't know what qualification would be.
Larry Jasinski: And to remind you of qualification is it's something that meets the screening criteria, it's a favorable insurance pathway and they're motivated to move forward after they've been.
Larry Jasinski: Informed about the out of pocket responsibility those are good things.
Larry Jasinski: So it's a very different kind of base that we've had.
Larry Jasinski: In the past because we're now building it.
Larry Jasinski: I would also emphasize our work on demand creation.
Larry Jasinski: Really this is education of our market.
Larry Jasinski: Got it increased the number of leads we have our goal is to increase by multiples.
Larry Jasinski: Two or three years to.
Larry Jasinski: To get to larger numbers for the future. We are going to do extensive doctor in clinic lead programs to get the one hundreds of patients.
Larry Jasinski: Flow into our system in the weeds and we're going to work with centers of excellence will go into some detail on this in the earnings call.
Larry Jasinski: But essentially we still have to change the world we've got to get everyone understanding that walking is medically necessary.
Larry Jasinski: And we need to get patients immediately after the injury understanding that this option is there for them so that either with Medicare two years later when they become eligible that they know what the product is and its available and those are really our focus is moving forward. So we appreciate everybody and we are very excited to be able to talk about this in great detail.
Larry Jasinski: Tail.
Larry Jasinski: In the Investor call, our investor meetings.
Larry Jasinski: And after the first of the year. Thank you everybody.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Larry Jasinski: Yeah.
Larry Jasinski: Yeah.
Larry Jasinski: [music].
Larry Jasinski: [music].
Speaker Change: Good day and welcome to the life for third quarter 2024 earnings Conference call.
All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
Speaker Change: After todays presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: Please note this event is being recorded.
I would now like to turn the conference over to Mike Wallace CFO. Please go ahead.
Mike Wallace: Thank you Danielle good morning, and welcome to <unk> third quarter 2024 earnings call, Mike lowest liquids, Chief Financial Officer, and with me on today's call is large lynskey, our chief Executive Officer, and I loved our vice President of finance.
Mike Wallace: Earlier, this morning, and issued a press release detailing financial results for the three and nine months ended September 32024, which along with this call discuss certain non-GAAP information press release, including relevant non-GAAP reconciliations and a webcast of this call can be accessed through the Investor Relations section of the life of website at <unk> Dot.
Mike Wallace: Com.
Mike Wallace: 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. These forward looking statements are based on information available to <unk>.
Management as of today and involve risks and uncertainties, including those noted in our press release and our filings with the SEC.
Mike Wallace: Such forward looking statements are not guarantees of future performance actual results may differ materially from those projected in the forward looking statements <unk>, specifically disclaims any intent or obligation to update these forward looking statements.
Mike Wallace: Whether as a result of new information future developments or otherwise, except as required by law. A replay of this will be available. Shortly after the completion of the call accessible from the dial in information in today's press release.
Mike Wallace: Archived webcast will be available in the Investor Relations section of our website, but the benefit of those who maybe listening to the replay or the archived webcast. This call was held and recorded on November 12, 2024 since that date <unk> made subsequent announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings.
Larry Jasinski: For the most up to date information and with that I'll turn the call over to Larry.
Larry Jasinski: Thank you Mike.
Larry Jasinski: Welcome everybody and I appreciate you joining today.
Larry Jasinski: So building our mission of providing access to technology that changes lives and our progress in building towards an enduring financial business advanced during Q3.
Larry Jasinski: The LIFO charge consists of two primary businesses.
Larry Jasinski: One focused on a novel system, allowing ambulation and improved health outcomes and quality of life for spinal cord injury individuals.
And the other anti gravity technology for off leading individuals' for conditioning injury recovery treatment of neuro disorders weight loss and overall health and wellness.
Larry Jasinski: We are very excited about our novel exoskeleton technology, the rework exoskeleton because.
Larry Jasinski: Although the product has been available on the market for a number of years. We are now at the start of commercial expansion as a result of the Medicare coverage that the company was able to gain this past April.
Our immediate coverage base in the United States since its added over 17000 individuals with the potential to add coverage of another 25000 as access expands to additional payors.
Larry Jasinski: Our differentiated anti gravity technology services, a range of users from professional athletes to everyday patients.
Larry Jasinski: In particular, those recovering from a broad range of injuries, though.
Larry Jasinski: We are seeking weight loss solutions and those with neurological impairments such as Parkinson's, We're restoring gate is so critical.
Larry Jasinski: The combination of the products forms of business days with operating synergy.
Larry Jasinski: <unk> of our relationships with clinics and importantly, the physical medicine, and rehabilitation physicians, who prescribe and guide training on our products and up to 17500 clinics in our direct markets.
Larry Jasinski: Let me relate to storage to bring these innovative designs to life.
Speaker Change: They change my life unquote.
Speaker Change: Well, it's a story of a patient who gained access to require we walk through Medicare coverage.
Speaker Change: She knows she made peace with life in a wheelchair and led to good luck.
Speaker Change: But when Medicare allowed access she and her physician decided to try the work so that she could achieve with physical activity goals and gain health benefit.
Speaker Change: Such as improved pain reduction improvement in social functioning in the mental health and improved downhill amongst a few.
Speaker Change: Since reward she related affiliate of normalcy look at indication unless the number of health benefits from rock and once again <unk>.
Speaker Change: We named her device Luke we Walker.
Speaker Change: Another patient suffered from extensive knee pain and her weight preventive knee surgery to address her pain.
Speaker Change: The advice of our physician see utilized ultra <unk> differential air pressure technology, and she was able to reduce your weight exercising the RTG.
Speaker Change: This enabled her to subsequently have the knee surgery, which allowed a major improvement in her life.
Speaker Change: This is one of the growing segments for anti gravity technology.
Speaker Change: The company made significant progress during the quarter.
Speaker Change: Key developments.
Speaker Change: We continue to grow the business with a 39% increase over the prior year quarter.
Speaker Change: We had 20 more individuals regain ambulation from rework placements in the quarter.
Speaker Change: Coverage for reward started with the establishment of payment in April and the process for qualifying documentation processing trial and training takes time.
Speaker Change: Our range has been broad.
Speaker Change: Ranging from 55 days to over 1000 days.
Speaker Change: Were cases that were both sourced and completed in 2024 the claims processing timeframe. It's been about 150 days in these cases.
Speaker Change: Which we are working to shorten going forward.
Speaker Change: We have built an engine to process claims with a dedicated team of clinicians and case managers that will allow us to support the volume we see in the coming quarters.
Speaker Change: Overall U S leads have expanded 62%.
Speaker Change: Over prior year due to our expanded coverage and commercialization efforts to drive adoption and uptake.
Speaker Change: Due to these efforts our current U S pipeline with Medicare and other U S. Payers is now approximately 70 qualified contact which bodes well for future quarters and drives our optimistic outlook.
Speaker Change: Turning our focus to the Altra G technologies, while theres been a lot of good that gives me and should give you great optimism for the future. The business has not delivered on my expectations. This year.
Speaker Change: I am convinced this is a fantastic technology based on the high level of utilization and clinics, the direct customer feedback and supporting scientific literature.
It's an important part of our strategy going forward.
Speaker Change: But we came out of the gate slower than we planned in 2020 for the acquisition, which in retrospect should not have been surprising given the amount of change turnover and distraction that comes with the consolidation.
Speaker Change: Secondly, we are being impacted by the delays in capital expenditures, particularly in smaller provider organizations that have been well reported in the industry.
Speaker Change: Our market intelligence, Telstra and others in the space are seeing the same impact.
Speaker Change: We do continue to have optimism here is our third core replacement run rate was better than the first half of the year.
We have the best product and to the best of our knowledge are not losing sales to competitors and the market reaction to our recently introduced Neo model has been strong with about 40 orders to date.
Speaker Change: We are also aligning our sales and marketing efforts with how the rehabilitation provider industry has consolidated we are anticipating a strong fourth quarter for ultra G, which will set us up well for 2025.
Speaker Change: In 2024, we are focused on operational efficiency.
Speaker Change: We made an announcement last week about the closure of two facilities and the financial impact.
Speaker Change: This is a final step with a number of moves to consolidated efforts, leading to a streamlined organization and the ability to focus on driving growth.
Speaker Change: Our $6 7 million adjusted operating expenses in the quarter is our lowest in the previous five quarters. This will improve as we drive the log sales to capture the efficiencies of this latest consolidation.
Speaker Change: Our model supports the ability to reach breakeven and requires a subdued pace of Medicare ramping processes.
Successful penetration with the new Ultra G Neil system.
Speaker Change: And some recovery funding activity in the capital equipment markets that we anticipate in 2025.
Our R&D focus in 2024, it was driven by the launch of the meal and the Neo plus which were successfully launched mid year.
And by the <unk> seven O assistant, which is much easier to use and adds essential real tonnage transmission of data on utilization.
Speaker Change: <unk> is under FDA review and in the follow up question base.
We will complete the requested studies with additional data by year end we.
Speaker Change: We anticipate FDA clearance to follow in the early months of 2025.
Mike Wallace: I would now like to turn the call over to Michael for a financial review Mike.
Mike Wallace: Thanks, Larry.
Before I review the results for the third quarter of 2024, I want to remind everyone that I'm going to discuss the results on both a GAAP standard GAAP basis, as well as a non-GAAP basis, which excludes the items listed in the reconciliation tables in provided in today's earnings release I.
Mike Wallace: I encourage you to reference the GAAP results and reconciliation tables as I discuss the financials.
Mike Wallace: For Q3 life reported earnings of revenue of $6 1 million in the third quarter of 2024 compared to $4 4 million in the third quarter of 2023 up $1 7 million or 39%.
Mike Wallace: Revenue from the sale of our traditional products and services, including reward exoskeleton as Biocycle and restore exo suits was $2 5 million up $1 1 million or 73% from the third quarter of the prior year driven primarily by an increase in reward system revenue in the U S and Germany.
Mike Wallace: Revenue from Walter G products was $3 6 million in the third quarter of 2024, which was an increase of <unk> 6 million in the third quarter of 2023, when we acquired <unk> in August of that year.
During Q3 dollars 20 for the reward sales were adversely affected by some of the delayed some delays and attrition of Medicare cases that we had expected would close during the quarter. Additionally, the ultrashape sales were affected by the continued softness in capital spending by clinics in the U S, which impacted the volume of sales leads and conversion rates in Q3.
Mike Wallace: In the third quarter, our pipeline metrics continued to show improvement across the two major product lines at the end of the third quarter. Our overall number of reward cases in process in the United States. As already mentioned consisted of approximately 70 qualified candidates for future claims submission with Medicare and other payers. These use cases are work in process and supper.
Mike Wallace: Cement the cases in process that we have historically reported each quarter in Germany, where we have 45 cases in process at the end of Q3.
So the reward systems active rentals also represents an important pipeline metric. The current pipeline of active rentals consists of 25 cases, which is broken down with 23 in Germany and two in the U S at VA hospitals.
Mike Wallace: These re walk rentals with some attrition typically convert to sales within within a three to six month period.
Mike Wallace: For Ultra G systems, we ended the third quarter with orders for 74 Ultra <unk> systems in backlog, which is the third quarter in a row of sequential increases in the backlog amount we.
Mike Wallace: We continue to be encouraged by the strength of the pipeline metrics for both the rework and <unk> systems. As these are leading indicators of future growth and evidence of the improving sales effectiveness of our combined commercial resources.
Mike Wallace: Moving to gross profit in the third quarter of 2020 for our gross profit was $2 2 million or 36, 2% of revenue compared to <unk> 9 million or 19, 6% of revenue in the prior prior year.
Mike Wallace: On a non-GAAP basis, adjusted gross profit was $2 6 million or 42, 5% of revenue for the third quarter of 2024 as compared to 2.0 or 45, 1% in the third quarter of 2023.
Mike Wallace: This decline in gross margin percentage is primarily attributable to lower absorption of factory overhead costs at our Fremont facility due to lower production volumes of ultra and <unk> systems and higher labor costs.
Mike Wallace: Moving to operating expenses GAAP operating expenses were $5 4 million in the third quarter of 2024 compared to $8 8 million in the third quarter of 2023.
Mike Wallace: On a non-GAAP basis, adjusted operating expenses were $6 7 million in the third quarter 2024, compared to $6 9 million in the third quarter of 2023 Mister.
Mike Wallace: This decline is primarily due to lower R&D expense from the conclusion of the development activity for the <unk> seven.
Mike Wallace: Our GAAP operating loss for the third quarter was $3 2 million compared to an operating loss of $7 9 million in the third quarter last year.
Mike Wallace: On a non-GAAP basis.
Operating loss was $4 1 million in the third quarter of 2024 compared to $4 9 million in the third quarter of 2023.
Mike Wallace: We expect our quarterly operating loss to narrow further in the fourth quarter based primarily on greater sales volume and higher gross margins.
Mike Wallace: Moving to the balance sheet, we ended the quarter with $10 7 million in cash and equivalents and no debt. Our cash usage in Q3 was $4 5 million, which showed improvement from prior quarters as I mentioned on the Q2 earnings call and important factor affecting our cash burn is the timing of Medicare payments, while we've made some progress receiving payments for prior.
Mike Wallace: <unk> the overall process for claims review and approval by the Max continues to be very time, consuming which impacts the timing of the eventual payments.
Mike Wallace: We're working with the Macs routinely and we have confidence that we will eventually streamline and expedite the approvals in the future.
Mike Wallace: Okay.
Mike Wallace: Factoring in the third quarter results, we're revising our 2020 for full year revenue expectations to a range of $25 million to $26 million.
Mike Wallace: For 2024 based on the current recovery in trends, thus far in the fourth quarter LIFO to expected sequential revenue growth to resume this quarter to generate the highest quarterly revenue for the year.
Speaker Change: With that I'd like to turn the call back to Larry for further remarks.
Larry Jasinski: Thank you Mike.
Larry Jasinski: To summarize before answering your questions.
Larry Jasinski: We believe in the health benefits of reward to eligible patients.
Larry Jasinski: Are excited about our technology and see very encouraging trends for growth.
Larry Jasinski: We also understand the steps we must take to continue to drive uptake and adoption and are impacted by the time it will take to expand this market to reach its potential.
Larry Jasinski: This includes collaborating with key influential position and patient groups, who are actively supporting our initiatives into the commercial <unk> systems.
Larry Jasinski: Ultra V is a great and effective technology and with the combination of revenue recovery to historical levels and the cost reductions from of our facility changes, we anticipate it will be accretive to our operations in 2025.
Larry Jasinski: The path to profitability requires revenue levels of approximately 12% to $13 million per quarter.
Larry Jasinski: And we are aggressively built into these targets.
Larry Jasinski: The market size.
Larry Jasinski: Our commercial engine that continues to grow the qualified lead pipeline.
Larry Jasinski: Medical education on the medical necessity of ambulation and plans for expanding coverage are the drivers.
The efficiency efforts and lowering operating costs completed during 2024 and disciplined expense control going forward are essential elements to reduce our burn rate.
Larry Jasinski: Our cash balance of greater than $10 million can support this pathway if market growth occurs within our timeframe.
Larry Jasinski: The significant milestones achieved in 2023, and 2024 have created a tremendous opportunity for our company and this industry.
Larry Jasinski: We plan to conduct an investor day after the end of the year to provide more insight into how we will achieve our commercial goals.
Along with a more in depth review of our technology and the expansion of that utilization.
Larry Jasinski: We will announce more details on the scheduling of the industrial events in the near future.
Larry Jasinski: Market creation is not easy and it takes time and resources.
Larry Jasinski: The need for these products is very clear and the ability to commercialize is real with coverage established since April of this year.
This is absolutely doable, we are committed and on our way to achieve our goals.
Speaker Change: I'd now like to open the call to questions.
Thank you operator, we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: The first question comes from.
Speaker Change: Hum cooler, Rob Mccarthy from H C. Wainwright. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Good morning, Larry.
Speaker Change: <unk>.
Speaker Change: A couple of quick questions.
Speaker Change: Uh huh.
Speaker Change: I was not there at the beginning of the call. So I'm just trying to understand.
Speaker Change:
Speaker Change: With you or with your new guidance.
Speaker Change: How comfortable are you with.
Speaker Change: With that guidance, because it's a good drop since the second quarter.
Speaker Change: And also.
Speaker Change: Are there.
Speaker Change: Any.
Speaker Change: Issues in terms of.
Speaker Change: Filing with the with the CMS and getting reimbursement.
Speaker Change: Okay I'll start that we are comfortable with that guidance absolutely.
Speaker Change: And we are finding with CMS that the timing for processing is going a little longer than we thought.
Speaker Change: As I mentioned is the average for the 2024 claims is about 150 days.
Speaker Change: And they have been a little slower to pay.
Speaker Change: For us to get the cash at the backend of this.
Speaker Change: So those have impacted us a little bit for the timing for this year.
Mike Wallace: And Mike anything you would add to that.
Mike Wallace: No I mean frequently it's a case of just documentation and validation of all of the.
Mike Wallace: These claims when they are submitted are much more complex and much more detailed than claims that we've traditionally done for the VA or for workers' compensation insurance and so there is just and I think there is an added learning curve on the part of the Max to understanding the product in the.
So the medical documentation that theyre going to require for us to be able to provide so and some of these cases there is just.
Mike Wallace: Our requirement to kind of go back and forth a little bit to provide supplemental information, often which puts us back at the back of the queue again servicing to be processed so.
Mike Wallace: Sort of the circumstances that we're dealing with what I think we're confident with education and with with higher volumes that this process will come more routine.
Mike Wallace: Okay.
Mike Wallace: And then with regards to the <unk> business.
Mike Wallace: Is that any possibility for a positive surprise in terms of.
Mike Wallace: <unk>.
Mike Wallace: When you run this.
Mike Wallace: From that business.
Mike Wallace: And.
Mike Wallace: I know you have impact too much experience best selling that product.
Mike Wallace: This year, but from from what you have seen.
Mike Wallace: You know are you how.
Mike Wallace: <unk>.
Mike Wallace: Right.
Mike Wallace: How you expect this business to run and it is running at this point.
Speaker Change: Well as we pointed out of the call it is improving quarter over quarter over quarter got off to a little bit of a slower start than we wanted.
Speaker Change: But I'd break it into burst the technology is remarkably well received by the market.
Speaker Change: The hold backs I think are a combination of some of the integration of the company.
Speaker Change: But we've also seen capital equipment sales between us and measuring other companies in the industry as we've looked at intelligence has been limited and slower in 2025 for all capital equipment.
Speaker Change: But what we have seen.
Speaker Change: The quarterly improvement and in particular as we're looking at our backlog and our activities here in Q4, we seem to be recovering nicely.
Speaker Change: And expect a very good Q4.
Speaker Change: And we have the new deal product and the Neal plus which we only launched mid year and we already have 40 orders in place on that product line. So ultra V is going the right direction.
Speaker Change: One last question from me Larry.
Speaker Change: In the end you gave some commentary about.
Speaker Change: What sort of revenue run you need to be at to attain profitability.
Speaker Change: So.
Speaker Change: Based on how the business is running at this point.
Speaker Change: Yes. It is.
Can you tell us like.
Speaker Change: How many quarters it would take to get there or at least your expectation.
Speaker Change: Well, we don't have a specific model, we put out publicly but.
Speaker Change: We expect the growth in rewards to be substantial with the number of leads we have and the potential and we are only about 150 days a little more posts actually be able to sell the product so <unk>.
Excuse me, we will grow to be the primary driver to get to those kind of quarterly numbers to get us to breakeven.
And in parallel we expect ultra G to recover between the new product and the.
Speaker Change: The acceptance of it in a broader range of centers.
Speaker Change: Both of those are the growth vehicles. The rework is the larger growth vehicle Ultra G will get back to historical numbers, we believe and expect it to grow with the launch of the new product because that gets us into a new market segment.
Speaker Change: So we forecast that is doable within the.
Speaker Change: The cash we have but it depends on the pace of the uptake.
Speaker Change: So I would just add to that.
Speaker Change: Larry mentioned, we've done a lot of effort to streamline the organization further as we announced in the last.
Speaker Change: One of the reason with press releases and.
Speaker Change: We're very confident that.
Speaker Change: The altered the former LPG business will be solidly profitable in 2025.
Speaker Change: At a lower revenue run rate than we had originally anticipated.
Speaker Change: At the same time, we are growing it again, so ultimately it's a more profitable leaner more efficient organization as it's been integrated into that we walk organization.
Speaker Change: Thank you. Thank you gentlemen for taking all my questions.
Speaker Change: Thanks, Okay.
Speaker Change: The next question comes from Martin Polak from FMR quoting. Please go ahead.
Speaker Change: Can you hear me.
Speaker Change: Yes, yes, okay.
Speaker Change: Hello, guys.
Speaker Change: The cash burn rate very low sales.
Speaker Change: Fairly respectable.
Speaker Change: But if you could.
Speaker Change: Give us some idea of what to fourth quarter burn may look like.
Speaker Change: The $2 5 million or two and a half.
Speaker Change: Members of accounts receivables are collected.
Speaker Change: Do you see that number.
Speaker Change: <unk> materially you had expected.
Speaker Change: Previous quarters to suggest this could be in the low.
Speaker Change: Single digit.
Speaker Change: Possibly a couple million dollars of cash burn.
Speaker Change: That's one point, but clearly.
Speaker Change: The market is not the bank that.
Speaker Change: Looking at two tests levels and I'll probably thinking.
Speaker Change: For profitability, how do we how are we have most of the companies that will be able to sustain.
Speaker Change: Itself without having to raise additional tests that you are confident that you may not need it.
Speaker Change: If you would give us a look into that 2025.
I will say what were the things that I think this investor day is very welcome.
Speaker Change: In terms of those that as.
Speaker Change: Unprecedented you've never done that before.
Speaker Change: So I think there'll be something to really look forward to get to know the company better.
Speaker Change: Okay, that's all for us.
Speaker Change: Okay. So yes. So your first question specifically around Q4 so.
Speaker Change: We would expect that the burn rate for Q4 will come down quite a bit from Q3.
Speaker Change: It's all going to depend to some extent around variables. We don't have a lot of visibility to which is the degree to which we receive more payments.
Speaker Change: Payments for Medicare, but even absent significant payments for Medicare we're going to see.
Speaker Change: Good improvement in the in the burn rate in Q4.
Speaker Change: I don't I can't really go beyond that in terms of quantity quantify because.
Like I mentioned, we don't have visibility to.
The payments coming from the Max dose.
Speaker Change: Those are a little less.
Speaker Change: <unk> that we can see into so.
Speaker Change: But I think with the higher revenue volumes with some.
Speaker Change: Some other trends as I mentioned earlier with higher gross margins with <unk>.
Our opex levels, we would see you.
Speaker Change: We would expect to see some good improvement.
Speaker Change: In the burn rate in Q4.
Speaker Change: And merging regarding <unk>.
Speaker Change: Go right ahead.
Speaker Change: Okay I was going to answer just on the.
Sustainability without additional cash question.
Speaker Change: We are working to a per cash for both revenue going up and the expenses going down we've taken all the steps in both cases.
Speaker Change: The defining uptake is going to be CMS.
Speaker Change: Element is going to be the CMS uptake.
Speaker Change: That is something that we have made great progress on if you look at the 70 patients that are coming into our contact group that will flow into many of those will be in Q4, many of them will be in.
Speaker Change: 2025, but it's the right direction for relatively what impacts our cash and our ability to get there.
I guess back to school.
Speaker Change: What seems to have trouble the market.
Speaker Change: The Q2 results.
Speaker Change: Got up to what's clinically well good numbers.
Speaker Change: The stock has been virtually.
Speaker Change: 50%.
Speaker Change: And it seems that maybe the messaging is still.
Speaker Change: Once the light.
Speaker Change: Sure.
Speaker Change: Uh huh.
Speaker Change: It is the test the real number.
Speaker Change: That I think investors know looking at yet because 2020, maybe Bob maybe profitable.
Speaker Change: But.
Speaker Change: What he talks about the co.
Speaker Change: $130 million towards profitability.
Is there a number that youre looking at that would be.
Speaker Change: Okay in terms of not requiring test.
Speaker Change: There would be some lower level.
Speaker Change: Budget 2025.
Speaker Change: Can you what is the confidence level.
On the revenue side, obviously uptick.
Speaker Change: CNS is important.
Speaker Change: Altra is already going to be improving.
Speaker Change: You can't actually.
Speaker Change: Yet through.
Speaker Change: The first couple of quarters of 2025, and maybe that you have of our CMS.
Speaker Change: Revenues flowing through in the second half of the year.
Speaker Change: He was asking about profitability I'm asking about sustainability here.
Speaker Change: Well.
Speaker Change: I guess, one factor that we hadn't talked about which might give you a little more insight to is that the.
Speaker Change: The facility consolidation of Fremont.
Speaker Change: Not only will that obviously take a lot costs out of our cost structure as we mentioned in our press release and it is going to improve our gross margins as we mentioned in the press release. It is also going to help us from an asset utilization of cash utilization because.
Speaker Change: We will not have the degree to which we hold now inventory on the balance sheet because that will be held by our.
Speaker Change: Our contract manufacturing partner, so we expect to see as we move into 2020.
<unk> five.
Speaker Change: That we're going to kind of work down some of the remaining balance of inventory that we hold on our books and then going forward the production and the sale of units.
Speaker Change: We're going to be transferred to the to the new contract manufacturer. So.
Speaker Change: As part of that transition, we will realize some cash utilization benefit.
Speaker Change: And free up some cash out of working capital that we currently carry on the books as inventory so.
That's another factor that.
Speaker Change: As for you to think about as we try to transition from 24 to.
Speaker Change: 25.
Speaker Change: Other than the expense side, where we've done.
Speaker Change: A lot of streamlining that we're very happy that we believe is in the world. It really comes down to revenue and the growth and.
Speaker Change: <unk> growth.
Speaker Change: <unk>.
It has got to recover and then grow from there both showing those trends if we keep these trend lines. We're on the path we want to be in.
Speaker Change #100: So essentially are you affirming your.
Speaker Change #101: Ah you're not looking to do.
Speaker Change #102: We don't think it will require additional cash.
To get to through 2025.
Speaker Change #103: Thats, what you are saying right now is that correct.
Speaker Change #104: Yes, if the market can grow as those if we continue to grow like we think we can and the market will grow with us.
Speaker Change #105: Absolutely the case.
Speaker Change #105: And clearly for that cash burn even as early as fourth quarter will come down remarkably.
Speaker Change #106: That's quite a quite a large amount a.
Speaker Change #106: Large numbers, therefore that might be sustained into next year you hope it works.
Speaker Change #106: The improving trends Ultra G.
Speaker Change #106: Across the cost reduction program.
Speaker Change #107: Yes, okay.
Speaker Change #107: The market buys that.
Speaker Change #107: It sounds like a very reasonable scenario.
Speaker Change #107: Yeah.
Third quarter cash burn was impressive considering the revenues were.
Speaker Change #107: Quite a bit lower than I expected.
Speaker Change #108: Alright, Thank you gentlemen.
Speaker Change #109: Thank you Barry.
Speaker Change #109: As a reminder, if you have a question please press star one.
Speaker Change #110: The next question comes from Ben Hayner from Lake Street Capital markets. Please go ahead.
Ben Hayner: Good morning, gentlemen, thanks for taking the questions.
Speaker Change #111: First off just kind of a point of clarification, maybe I think you mentioned that one of your patients got reward systems during the quarter.
Speaker Change #111: Did you happen to disclose how many of those were part D patients.
Speaker Change #112: No. We've just been given a global number and we haven't been covering the different areas, which we sell.
Speaker Change #113: Okay. So don't expect that and then on the guidance for Q4 does that does that assume maybe ultra G slips a little bit from last year's Q4 number.
Speaker Change #114: We're going to have a good Q4 with all digi.
Speaker Change #114: So it helps recover there's going to be pretty close to a little bit better improvement over Q4 last year.
Speaker Change #115: Okay. That's helpful and then.
Speaker Change #115: Then.
Speaker Change #115: Just thinking about.
Speaker Change #115: The supplemental insurance that some of these appropriate patients I have I know.
It's taken longer to get paid on a lot of these things, but are you starting to see supplemental insurance get paid for the.
Speaker Change #115: 20%.
Speaker Change #115: Figure that.
Speaker Change #115: It could be available to you as well or is that.
Speaker Change #115: Okay.
Speaker Change #115: Well.
Speaker Change #115: That sort of gets triggered with the completion of the claim review and processing by Medicare So that sort of for the time being that sort of held up in that same dynamic that we described earlier about the claim review and approval process.
Speaker Change #115:
Speaker Change #115: So.
Speaker Change #115: Typically Medicare will then notify the secondary payer that the that the.
Speaker Change #115: The payment is due from them as well and that but that is that is sort of contingent upon everything else being completed first so we're at sort of the same boat right now.
Speaker Change #115: Okay.
Speaker Change #116: You have a sense of how many.
Speaker Change #116: Folks they are delivering these things do have supplemental insurance I mean is it.
Speaker Change #117: 50% or 60%, 20%, where does that kind of span.
Speaker Change #118: We haven't reported the number is it's gone up and down a lot. We're trying to find patients that habit or sometimes encourage them to get it before they say.
Speaker Change #118: And I'll go through the Medicare process.
Speaker Change #118: Because they've had open enrollment going on so we've been trying to help that alone.
Speaker Change #118: I can get back to you with the market with a more specific number because it changed so much it's had a lot of range.
Speaker Change #119: Do it.
Speaker Change #119: Okay.
Speaker Change #119: I guess I don't need that.
Speaker Change #119: Curious about that I guess I can wait for that to kind of sell down.
Speaker Change #119: And then on the accounts receivable for the Medicare claims.
Speaker Change #120: I think you mentioned that I didn't quite catch it but how far do those go back and at what point do you have.
Speaker Change #120: Start considering our write off of some of those.
Speaker Change #121: Well, then I'll go back that far because we've only been.
Speaker Change #121: Starting to put those in.
Speaker Change #121: Some late last year, but the the law for coverage started in January for the lump sum, but didn't start prepayment until April.
Speaker Change #121: So we expect all the ones that are approved is actually will be paid and we're continuing to see a fairly high rate by the time, we get through the process.
Speaker Change #121: For for these going through so we don't see anything in the short term for that.
Speaker Change #121: And we do and we do reserve a portion of the.
Speaker Change #121: The amount that we think we're due for the fact that there may be some claims that are that are not ultimately not approved so we're not taking the full benefit of a 100% of each claim that we submit.
Speaker Change #121: As you would with any any other payer or theirs.
Speaker Change #121: A certain portion of that docket date.
Speaker Change #122: Okay. That's helpful makes sense and then lastly for me on the whole processor.
Speaker Change #123: Getting the reimbursement are you kind of.
Speaker Change #122: <unk> being a sort of.
Speaker Change #122: List or <unk>.
Speaker Change #122: Process.
Speaker Change #122: Kind of have reasonable assurance that these things are going to go through if you have collected all of us.
Speaker Change #122: All of these certain pieces of data or is that still kind of in the process.
Speaker Change #122: APAC loops and figuring it all out.
Speaker Change #122: I would say we've made tremendous progress and it's now in a very late.
As we pretty much know what they want.
Speaker Change #122: All the way through and have modified it and built our system around it.
Speaker Change #122: CMS is still learning at the same rate we are but they are working.
Speaker Change #124: So okay.
Speaker Change #124: Okay go ahead sorry.
Speaker Change #124: No we've got.
Speaker Change #124: Materials, we need.
Speaker Change #124: Okay.
Speaker Change #124: Okay, great well, thanks for taking the questions guys.
Speaker Change #125: Okay. Thanks, Brett.
Speaker Change #126: Okay. This concludes our question and answer session I would like to turn the conference back over to Larry Jasinski for closing remarks.
Larry Jasinski: Thank you Danielle.
Thank you everybody for joining us today, I would like to close with.
Larry Jasinski: One of the leading indicators, we chose to pointed out today. The 70 leads that we have that's a big deal for US we had essentially zero qualified prior to April because we didn't know qualification would be.
Larry Jasinski: And to remind you of qualification is it's something that meets the screening criteria, it's a favorable insurance pathway and they're motivated to move forward after they've been.
Larry Jasinski: Informed about the out of pocket responsibility those are good things.
Larry Jasinski: So it's a very different kind of base that we've had.
Larry Jasinski: In the past because we're now building it.
I would also emphasize our work on demand creation.
Larry Jasinski: Really this is education of our market.
Larry Jasinski: Got it increased the number of leads we have our goal is to increase it by multiples.
Larry Jasinski: Two or three years to get to larger numbers for the future. We are going to do extensive doctor in clinic lead programs to get the one hundreds of patients.
Larry Jasinski: To flow into our system in the weeds and we're going to work with centers of excellence will go into some detail on this in the earnings call.
But essentially we still have to change the world we've got to get everyone understanding that walking is medically necessary.
Larry Jasinski: And we need to get patients immediately after the injury understanding that this option is there for them so that either with Medicare two years later when they become eligible that they know what the product is and its available and those are really our focus is going forward. So we appreciate everybody in.
Very excited to be able to talk about this in great detail.
Larry Jasinski: The investor call, our investor meetings.
Larry Jasinski: And after the first of the year. Thank you everybody.
Speaker Change #127: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.