Ekso Bionics Holdings Inc (EKSO) 2017 Q3 法說會逐字稿

Greetings, and welcome to the Ekso Bionics Third Quarter 2017 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

For opening remarks, I will now turn the call over to David Carey of Lazar Partners. Thank you. David, you may begin.

Thank you, Devin. And thank you all for participating in today's call. Joining me from Ekso Bionics are Tom Looby, President and Chief Executive Officer; and Max Scheder-Bieschin, Chief Financial Officer. Earlier today, Ekso Bionics released financial results for the quarter and 9 months ended September 30, 2017. A copy of the press release is available on the company's website.

Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, our examination of historical operating trends and our future financial expectations, are based upon management's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission. Ekso 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. This conference call contains time-sensitive information and is accurate only as of the broadcast today, November 8, 2017.

I will now turn the call over to Thomas Looby. Tom?

Thank you, David, and thanks to everyone for participating on today's call. Ekso Bionics is operating at the nexus of technology and health care. And we believe that we are strongly positioned to address critical needs in the rehabilitation market.

We are pleased that in Q3 2017, we generated a 10% increase in total revenues and a 20% increase in the medical business as compared to Q3 2016. In addition, the success of our recent fundraising gives us significant financial resources to bridge the gap between the promise of our technology and the realization of its potential in the rehabilitation market. We made important progress in the third quarter in strengthening the resources that will allow us to achieve this critical objective in the months ahead, and we are very pleased with the feedback that we are receiving from customers and prospects about the benefits that our products provide to patients and health care facilities.

During today's call, I will review highlights from the third quarter and share several of the success stories that our customers have reported, and Max will provide an overview of our third quarter results.

We successfully completed a $34 million rights offering, $20 million of which was underwritten by Puissance Capital. Proceeds from this offering will support our ongoing efforts to advance the clinical, sales and marketing initiatives to accelerate the adoption of Ekso products in the rehabilitation market, proactively pursue lower cost manufacturing and broaden our footprint to Asia.

We believe the Asian market provides significant opportunities in both the medical and industrial segments, and we are actively evaluating potential routes to bringing Ekso products and technologies to countries throughout the region. Before we continue, I'd like to thank all of our existing shareholders who participated in this rights offering.

We also strengthened our leadership team through the appointment of Christian Babini as Vice President of Sales Americas; and Dr. Ted Wang to our Board of Directors. Christian has extensive and diverse experience in successfully driving standard of care market adoption with disruptive technology in the medical device robotics space. Christian has already made substantive contributions in strengthening our commercial efforts by developing sales infrastructure, training and a unique organizational approach. His focus is to optimize Ekso Bionics' efforts on placing systems with customers. Ted has a strong track record of success across multiple management functions and deep knowledge in health care, and more specifically, of our technology and customer base.

We believe that his insights will help us to realize our current opportunities and also identify new ones.

Ekso's management team and Board of Directors believe in and are committed to creating value from our innovative technology by increasing sales and building a sustainable business model around our unique and powerful technology. Key to achieving that goal is expanding the data that supports the clinical and financial benefits and efficiency gains that our products provide to patients in care facilities. In September, we announced a collaboration to study opportunities for incorporating Ekso GT in skilled nursing facilities with Genesis Rehab Services, a leading provider of physical, occupational, speech and respiratory therapy, with a focus on the older adult population.

Genesis is one of the most innovative providers of rehabilitation services, and we are excited to work with Genesis' Layhill Center in Maryland to demonstrate the ways in which Ekso GT can enhance patient care and outcomes, while increasing efficiencies and reducing cost for payers. We believe that the data from this pilot study will advance our efforts to make exoskeleton gait rehabilitation a standard of care for stroke and spinal cord injury patients.

Employees at the Layhill Center and Bensonhurst Rehabilitation, another skilled nursing facility participating in a pilot study, are very enthusiastic about Ekso GT. Their initial reports based on anecdotal evidence suggest increased confidence and engagement among patients using Ekso GT in the rehabilitation process and therapists have seen improved walking patterns for certain patients who have access to the Ekso GT therapy, even after they take off the exoskeleton. Both facilities also note that patients make progress in the rehabilitation for a longer period of time, resulting in financial benefits to the facility. In addition to the high level of enthusiasm among facility employees, I'd like to share 2 success stories that the employees have highlighted to us.

In one case, a woman who cannot walk 7 feet using parallel bars was able to walk 40 feet using a roller walker after just 2 sessions in the Ekso GT. A man who was entirely immobile was able to walk 20 feet with the rolling walker after 2 sessions in the Ekso GT.

These stories are emblematic of the transformative potential of Ekso GT as they reflect why we are so committed to raising awareness and increasing adoption of this innovative system. Mobility is a critical aspect of independent living, and we are dedicated to improving mobility for stroke and spinal cord injury patients who pursue the often grueling path of rehabilitation.

Beyond these patient stories, we also received very positive feedback from a recent user group meeting, an event at which we had our largest turnout ever. Participants provided us with additional case studies that demonstrate the tangible impact that our technology has on improving patient care and outcomes in the rehabilitation setting. Importantly, there was very positive patient-to-patient feedback, and we are pleased that patients are connecting with each other to share their rehabilitation journeys and the role that Ekso technology played in their recovery.

Beyond sharing information and experiences, I was struck by the sense of community that these participants established with each other and was gratified that many of them expressed strong interest in future meetings. Anyone who has been involved in the process of rehabilitation following a stroke or spinal cord injury, or has supported a friend or loved one through the process, knows that it is truly a team effort. We are committed to helping those teams succeed clinically and financially, and take pride in knowing that Ekso products are increasingly part of the rehabilitation solution. We also received very enthusiastic and positive feedback to the products that we showcased at the 2017 American Academy of Physical Medicine and Rehabilitation, or AAPM&R, Annual Assembly in October. This showcase offered AAPM&R attendees the opportunity to learn how our SmartAssist and EksoPulse technology can help them achieve the intelligent personalized patient care that only Ekso software can provide.

Clinicians were able to explore the technology firsthand and view videos highlighting clinician and patient experiences with the technology and connect with experts who have successfully used Ekso GT for stroke and spinal cord injury rehabilitation.

A key theme of our feedback we received is that Ekso GT is transforming the rehabilitation landscape. Our technology not only provides a safe and effective way to get stroke and spinal cord injury patients back on their feet and walking, it is also smart enough to read and adapt to each individual patient's capabilities. This is a critical differentiating factor compared with other rehabilitation devices because the ability to adapt to each patient's performance in real time helps to ensure that each patient receives the optimum amount of assistance during every therapy session.

Our ability to provide the optimum amount of assistance each and every time a patient uses the Ekso GT allows us to leverage the stroke rehabilitation market as a beachhead from which we can potentially launch future campaigns into new indications. Clinicians and therapists who use Ekso GT report that it helps them do a better job in helping their patients achieve their rehabilitation goals.

All of this feedback and engagement underscores the high satisfaction among those who have had hands-on experience with our products, and we believe that these additional voices will amplify the educational outreach that we are doing to key audiences and potential customers. We generally find that people who are aware of our technology are interested in adopting it, and our sales and marketing teams are working diligently to raise awareness and drive adoption of our products. Importantly, most of our customers who initially adopt Ekso GT via short-term rentals ultimately purchase units, and we are making good progress on converting a number of our current rental contracts into sales contracts before the end of 2017.

At this time, I'll turn the call over to Max, our CFO, to discuss our financial results. Max?

Thanks. Total reported revenue for the quarter ended September 30, 2017, was $1.6 million, including approximately $1.3 million in medical device revenue and 300,000 in industrial sales. These results are 10% above the $1.5 million in revenue generated in Q3 2016, 20% above the $1.1 million in medical revenue and 25% below the $400,000 in industrial sales. We shipped 11 net new units to 8 customers, including 1 new rented unit. In addition, 2 rented units that shipped in prior quarters were converted to a sale during this quarter. We now have in the field 240 sold units, plus 15 rented units.

Gross profit for the quarter was $500,000 compared to $400,000 for the same quarter last year. This is an increase in gross margin to 34% from 25% during the same period in 2016, driven primarily by placing more units in the field and lower service costs.

Operating expenses for the third quarter of 2017 were $7.6 million as compared to $7.3 million for the same period in 2016. This increase was due primarily to our continued investment in the commercialization of our medical devices for rehabilitation and our exoskeleton offerings for industrial applications, and an increase in clinical research activity. Net loss for the third quarter was $6.3 million, for a 46% reduction from the loss of $11.5 million for the third quarter of last year.

Cash on hand at September 30, 2017, was $33.4 million compared to $16.8 million at December 31, 2016. The increase in cash on hand is a result of the fully financed rights offering completed in the third quarter of 2017. For the 9 months ended September 30, 2017, the company used $25.6 million of cash in operations, compared to $20.6 million for the 9 months ended September 30, 2016.

Please see our 10-Q filed earlier today for further details regarding the quarter and 9 months ended September 30, 2017.

I will now turn the call back to Tom.

Thanks, Max. We are making solid progress in building and communicating the value proposition for our medical and industrial products, and our third quarter achievements are important steps on the road to realizing the value of Ekso's technologies.

As I shared at the outset, Ekso Bionics is at the nexus of unique technology and a significant and accelerating health care need. Predicting when the standard of rehabilitative care will move to robotic tools like the Ekso GT is not easy, yet current trends give us high confidence this transition will happen. Such a potential paradigm shift in standard of care would represent a huge breakthrough for those recovering from stroke and similar types of paralysis, and would help to restore and advance the health of an aging society.

The changing dynamic of rehabilitation paradigms creates a significant opportunity for Ekso Bionics to secure our position as the leader in exoskeleton technology.

Today our balance sheet is the strongest that it's ever been, and we are focused on leveraging our financial resources to identify and pursue options that will enable us to build a sustainable business model. With the investment by Puissance and the fully financed rights offering from September, we are strongly positioned to pursue a joint venture that provides a path to lowering our costs and take actions to prudently and efficiently further the adoption of our technology in both the medical and industrial markets in the United States and abroad.

Our vision is to use exoskeleton technologies to help humanity, and this requires nurturing and enabling change within the rehabilitation ecosystem in a way that allows its members to see beyond the way that they have grown accustomed to providing patient care.

Seeing a demonstration of the Ekso GT, either in person or online, makes it clear that this technology has the potential to transform human health. And we believe that it will become standard of care for treating paralysis resulting from stroke and spinal cord injury and has tremendous potential to address other mobility issues as well.

Change is never easy, and navigating the disruption that our transformative technologies are bringing to the rehabilitation market will take some time. By design, the Ekso Bionics leadership team has significant experience in developing new products and new standards of care in health care, and catalyzing change that helps to make the new into routine. There is a growing body of evidence that our approach is working. For example, we are seeing accelerated enrollment for study sites and patient enrollment for our WISE study in patients with spinal cord injury as well as increased adoption of Ekso GT at rehabilitation centers of excellence.

Similarly, we are experiencing strong uptake for our recently released SmartAssist gait assistance software. Additionally, we have a growing number of customers who are installing multiple Ekso GT units. Sales are still somewhat difficult to predict at the moment, given the evolving nature of the market, but we believe the evidence shows that the momentum is going in our direction and will increase in strength in the months ahead.

We are excited to continue building on the achievements to date, to ensure that our medical products become standard of care in the rehabilitation of stroke and spinal cord injury and that our industrial and personally used products achieve their full commercial potential.

Everyone at Ekso is working diligently to close out 2017 on a positive note, and we look forward to sharing our continued progress with you.

At this time, we are happy to take your questions.

Operator, you may now open the line for questions.

(Operator Instructions) Our first question comes from the line of Bruce Nudell with SunTrust Robinson Humphrey.

This is Matt in for Bruce. I guess, the first question on the 3Q results, could you give us any more color on the unit trends here? Looks like they were down sequentially a little bit. Would you just characterize this as normal summer seasonality? Or were placements lighter than you expected?

No. I think you hit the nail on the head. We know that in Europe, for example, a lot of the countries go on long holidays. Q3 tends to be a little bit softer because of that. But I think, more importantly, this is a capital good and it's in a new market, and it takes some time for the decision-making to take place at these clinics. And sometimes they fall in one quarter and sometimes they fall in the next. But more than just -- I know the unit placements is sort of an easy thing for people to latch on to, but we are seeing a lot of other indicators that are giving us a lot of confidence moving forward, including the pipeline building both in the U.S. and EMEA. Some of the changes that we have made on both coasts, so to speak, I think, are really helping us get better visibility to what that pipeline is going to look like in the future.

Got it. And so any color you can provide, I guess, on expected unit growth over the next few quarters, or adding color on the pipeline and how that might influence placements?

Yes, I'll let Max chime in, maybe, with a little bit more, maybe, detail. But let me just talk about some broad changes here. We mentioned Christian a couple of times during our prepared comments. And he comes by way of 2 or 3 different companies that have tried to do and succeeded in doing what we're doing, which is innovating an area of medicine with robotics. And I'm just very pleased that in the first 3 weeks of his tenure with us, it has been just a radical change in how we approach it. Not to say that we were doing anything incorrect before, but I think that where we have matured with some of our value proposition, he's coming in at a perfect time to really leverage that value proposition. And one of the key changes is our focus on the C-Suite in hospitals. Of course, patients, patient families and clinicians, they see the change that we are making in the lives of these patients every single -- every single day, every single step. I think what we need to do is to be very clear with the leadership in these clinics and these hospitals, that when they recruit a new patient, because they are recruiting them for Ekso Bionics and the Ekso GT, that is a very good, profitable revenue stream for these clinics. They want to sell these beds. And when you can articulate that message very clearly to these leaders, I think we're going to see the uptick in our sales there.

Further to what Tom was talking about regarding the quarter, Matt. I mean, we're halfway through the quarter. We're very positive about what the end of the year looks like. Tom mentioned the growth in the pipeline. I think the other positive trend of note is the continued rental conversion of our rentals that we have in the field. So we have a good outlook and good potential for those units. Tom talked about Christian's efforts and the impact he's had. I think Matthias has gone through a big change in EMEA. He's changed out his entire sales and marketing team. Now that's behind him, and I think you'll start seeing traction from those efforts as well in this quarter and then in the ensuing quarters in 2018.

Got it. That's great. And then, I guess, just shifting gears to Asia. Could you give us any more color there? What markets geographically are most important to you? And could that be a major commercial impact over the next 12 to 24 months for you guys?

Well, you ask a lot in that question. And I'm glad you asked about 12 to 24 months. You know we started to talk about our research in Asia a few quarters ago. And we say research because I think we've been very prudent that we wanted to have investment lead our penetration into that market. And with the rights offering behind us, and with our Puissance investing, we are very much -- we've got the balance sheet to now look in that area. And more than that, Puissance brings with them some expertise and it may be helping us evaluate the Chinese market in particular. So few things that are of interest for us in Asia. Certainly, as a commercial outlet for our products. And we know that, that is huge. They have an aging population. They have sort of a nascent physical therapy as a career. Their clinics are kind of all over the range. So we know that they're going to have to do 2 things over in that area of the world: hire physical therapists and train them; and use technologies to leverage relatively scarce resources, whether that's home caregivers or professional caregivers. They're going to need technologies like the Ekso GT to be able to do that. So the commercial outlet is one thing of interest, but also the access to talent, operations, maybe even supply, all these things we're going to explore. But Asia is also a bit bigger than China. So while we are looking specifically into China, we're also being, I think, proper in looking at other areas in Asia where they have maybe faster regulatory processes but also attractive health care economies. So we haven't pulled the trigger yet with these plans. We are certainly in the planning phase. But we're going to make sure that whatever plan we put forth, the revenue potential and the cost base are going to be quite closely tethered to each other. So we're going to operate in this new region, I think, in a very prudent way.

Great. And then just one last one for me. You put out the press release during the quarter on the Genesis Rehab opportunity. Can you give us any more color on, sort of, the data that you're looking to compile there and when we might see those results?

Yes. While we designed a pretty elaborate prospective multi-centered study with the WISE study, this one actually came to us -- it also took a while to develop, but this one is about all of those patients that go into skilled nursing facilities for various reasons. And many of them, not about stroke or spinal cord injury, but can these technologies help people create steps and rehabilitate, or in essence, not lose some capability because they're sitting in a hospital bed for long periods of time. So that really is, sort of, the general lay of the land with regard to these pilot studies. What I've been encouraged about, I think, is in the last quarter just the enthusiasm that we're hearing from these centers. We have started discussions, but as you know, sometimes things take time, but we did this maybe about a year ago. I think that really the interest has accelerated in these pilot studies. And I hope that it creates not just a fan base from these 2 clinics, but also data that we can use maybe to expand our label in the future.

Matt, one of things specific to the skilled nursing facilities is they tend to see the -- through the physical rehabilitation, their gait process peaking relatively early. And what we're hoping to show and see is that with the SmartAssist software, where we have this capability of detecting someone's weakness and then the device complements that, what we're seeing initially, anecdotally and then hopefully continued over time, is that our device allows somebody to continue to improve their gait, allowing them to continue with gait therapy and hopefully being released in much better shape than they were -- have been to date with current standard of care.

And I would just -- as a personal note, I had a loved one who suffered a heart attack 4 or 5 years ago and went into a skilled nursing facility for a very long -- for a number of months. And they didn't have exoskeletons at this time. I think that from a personal point of view, if this technology had been around then, I think the rehabilitation would have taken a lot less time and would have had greater outcomes at the end. Of course, we need data to kind of convince others of that as well, but these pilot studies are certainly giving us some promise.

At this time, there are no more questions. I'd like to turn the call back to -- over to Tom Looby for closing remarks.

Thank you all for joining us today. As we move into the last quarter of 2017, I believe strongly that we are positioned for both near- and long-term success. The recent additions to our leadership team and financial resources are powerful assets for ensuring that we have a strategy in place to achieve our goals and the personnel and capital to execute that strategy with precision and efficiency.

We also have the products, technologies and innovative potential to meet the needs of an aging population here in the United States and in developed countries around the world. Our mission at Ekso Bionics is to innovate with disruptive technologies that allow people to rethink the physical limitations of the human body and achieve the remarkable at home and at work. We look forward to sharing our continued progress in this mission with you in the months ahead.

This concludes today's call. All parties may now disconnect.