Ekso Bionics Holdings Inc (EKSO) 2017 Q4 法說會逐字稿

Greetings, and welcome to the Ekso Bionics Fourth Quarter and Full Year 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 Jack Peurach, President and Chief Executive Officer; and Max Scheder-Bieschin, Chief Financial Officer. Earlier today, Ekso Bionics released financial results for the quarter and 12 months ended December 31, 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 may constitute forward-looking statements. All forward-looking statements, including, without limitation, our examination of historical operating trends and our future financial or operational 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 reliance on these statements. For a list of descriptions 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 or operational projections or other 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, March 13, 2018.

I will now turn the call over to Max.

Thank you, David, and thanks to everyone for participating in today's call. I would like to take a moment to introduce Jack Peurach, who, as we announced on Monday, has been appointed President and CEO of Ekso Bionics. As a cofounder and the first CEO of Ekso Bionics and adviser through Ekso's early stages of development and a member of the board for the past 7 years, Jack has a long and committed relationship with the company, and we are excited to have him back in the position of CEO. Prior to taking the helm of Ekso Bionics, Jack held several executive leadership positions at SunPower, an early innovator that became a leading force in the solar power industry.

With that, I'll turn the call over to Jack.

Thanks, Max, and thanks to all of you for participating in today's call. I'm pleased to once again have the opportunity to lead Ekso Bionics, especially at a time of such exciting opportunity.

In 2017, we increased our footprint in the rehabilitation market, made progress toward establishing Ekso GT as the standard of care for rehabilitation of patients with spinal cord injuries and stroke, and gained significant commercial traction that will serve as a foundation for future growth and success. We also launched a new product in our industrial segment. In addition, we enhanced our operating structure through a cost reduction initiative that has already significantly reduced our cash loss from operations from $9.7 million in the second quarter to $5.7 million in the fourth quarter.

First, I'd like to review the progress we made in the rehabilitation market. In 2017, we achieved a 49% year-over-year increase in Ekso GT units placed, shipping 61 Ekso GT systems, bringing our total units in the field to 277, including 17 rentals. In the fourth quarter alone, we shipped 21 Ekso GT systems, which we believe to be a sign of momentum that we intend to carry forward into 2018.

Broken down by geography, in the U.S., we shipped 34 systems for the year, 11 of which were shipped in Q4. In the EMEA, we shipped 27 systems, 10 of which were shipped in Q4. We believe that these results highlight the early success of the recent changes to our sales execution strategy. And I'm optimistic that we will continue to drive further uptake of the Ekso GT in the rehabilitation market in the quarters ahead. Importantly, we are seeing an increase in the number of rehabilitation facilities that are purchasing multiple Ekso GT units, which is consistent with feedback from our customers who tell us they are increasing utilization of their Ekso GT units as they become integral components of their patients' rehabilitation programs.

We believe that 2017 was also a year of significant progress in achieving our longer-term goal of establishing Ekso GT as the standard of care for stroke and spinal cord injury rehabilitation. A Medtech Innovation Briefing on Ekso GT from the U.K. National Institute for Health and Care Excellence and data from a multi-center Pan-Euro study of Ekso GT in a diverse and representative spinal cord injury population published in Spinal Cord provided important validation of Ekso GT's value in the rehabilitation market.

Also the WISE study, which was expanded to 10 leading centers earlier this year, has the potential to further expand support for Ekso GT as standard-of-care therapy in its approved indications.

We are now seeing enough valid scientific data and sufficient sample sizes that we believe allow us to start making claims surrounding the benefit of using our Ekso GT systems. Highlights include: a significant majority of physical therapists expressed a high satisfaction with Ekso GT and observed high patient satisfaction during Ekso GT sessions. And critical evidence suggests Ekso GT gait training improves locking distance outside of the device for stroke and incomplete spinal cord injury patients. Additional highlights are available on our website.

In December, we announced a partnership with HASOMED to launch functional electrical stimulation, or FES, for the Ekso GT exoskeleton in the EMEA. FES is a technique that uses low-energy electrical pulses to artificially generate body movements in people who have been paralyzed due to injury to the central nervous system. This partnership enables us to incorporate an FES interface capability into the Ekso GT exoskeleton, which we believe results in a more versatile device for a broader range of people, allowing rehabilitation centers throughout EMEA to amortize their investment across a larger number of patients.

Now I'd like to turn to our industrial segment. Overall traction remains lumpy, which we believe is attributable to the fact that most customers are validating efficacy, safety and economics prior to broader adoption. Having said that, we achieved several accomplishments in 2017. We shipped close to 200 industrial products, bringing total shipments to 330 units. We launched the Ekso Vest and now provide the exoskeleton that elevates and supports workers' arms to assist them with overhead tasks. It is lightweight and low profile, making it comfortable to wear in all conditions while enabling freedom of motion. Importantly, we partnered with Ford Motor Company and the UAW to pilot the vest in 2 of their plants.

In 2017, we enhanced our executive team through the additions of Christian Babini as VP of Sales of North America and Chwee Foon Lim as VP of Asia-Pacific. We also welcomed Ted Wang to our Board of Directors. Each of these talented individuals believes in the importance of our mission and our ability to realize it, and we appreciate their expertise, enthusiasm and dedication to our cause. More recently, we also welcomed Dr. Charles Li to the board.

I would like to take the opportunity to thank Tom Looby, my predecessor, for the tremendous progress he made to further Ekso Bionics in our commercialization efforts. He has led the company from FDA clearance to a point in time when we will hit close to 300 units in the field. Thank you, Tom. And lastly, on behalf of the board, I'd like to thank Howard Palefsky and Amy Wendell for their hard work as board members.

At this time, I'll turn the call over to Max.

Thanks, Jack. Total reported revenue was $2.5 million for the fourth quarter ended December 31, 2017. This breaks down to $2 million in Ekso GT revenue; $200,000 in medical license revenue; and $300,000 in industrial sales. Our fourth quarter 2017 medical device revenue is the best quarter we have had since our commercial efforts began.

In addition, our rental programs continue to resonate with customers, which is helping to drive adoption. The 17 rental units in the field at the end of 2017 represent a potential of close to $2 million in backlog.

Gross profit for the quarter was $800,000 compared to a similar level for the fourth quarter 2016 as a result of continued service cost reductions, gross margins for Ekso GT systems continued to improve.

Sales and marketing expenses for the quarter were $3.6 million compared to $2.8 million for the fourth quarter of 2016. This was due to an increase in marketing-related activities in both our medical and industrial applications, along with an increase in clinical research activity as the WISE study scaled.

Research and development expenses for the quarter were $2 million compared to $2.3 million for the fourth quarter of 2016, a decrease primarily due to our reduction in workforce in May 2017.

General and administrative expenses for the quarter were $3.3 million compared to $2.6 million for the fourth quarter 2016. This increase was primarily due to $600,000 associated with our business development-related activities in China.

Net loss applicable to common stockholders for the 3 months ended December 31, 2017, was $9 million or $0.15 per basic and diluted share compared to $5.6 million or $0.29 per basic and diluted share for the 3 months ended December 31, 2016.

Turning to our full year results. Revenues for 2017 was $7.4 million compared to $14.2 million in the prior year. Please note, 2016 revenue includes a onetime recognition of $6.5 million of previously deferred revenue.

Gross profit for the quarter -- for the year was approximately $2 million compared to $2.9 million in the prior year. Again, please note approximately $1.2 million of gross profit in 2016 was a result of a onetime change in revenue recognition. Gross margins continue to improve as we made progress in the areas of service cost and cost of goods reduction for Ekso GT systems. Here, gross margins for the year improved to close to 30%, up from approximately 20% in 2016.

Sales and marketing expenses were $13.1 million for the full year 2017 compared to $11 million for the same period in the prior year, an increase of $2.1 million. Research and development expenses were $9.5 million for the full year compared to $8.9 million in the previous year, an increase of $600,000. General and administrative expenses were $10.7 million for the full year compared to $10.9 million for the prior year, a decrease of $200,000.

Net loss applicable to common stockholders for the full year ended December 31, 2017, was $29.1 million or $0.82 per basic and diluted share compared to $33.8 million or $1.87 per basic share and $2.05 per diluted share for the full year ended December 31, 2016.

Cash on hand at December 31, 2017, was $27.8 million compared to $16.8 million at December 31, 2016. The increase in cash on hand is primarily a result of a fully financed rights offering completed in the third quarter of 2017. Please see our 10-K filed earlier today for further details regarding the quarter and 12 months ended December 31, 2017.

I will now turn the call back to Jack.

Thanks, Max. As we move forward, I intend to work with our leadership team to build on the momentum we've created in the rehabilitation market over the past several quarters and to refine our strategies to better enable us to achieve several key objectives. These include improving our financial performance; increasing our sense of urgency around strategic initiatives, including a potential joint venture in China; and invigorating our industrial business.

We also intend to leverage our technical expertise to help catalyze the innovative capacity on which Ekso Bionics was founded and position us to transform human mobility into compelling product opportunities to improve the lives of patients and workers. I'm proud to be the CEO of a company in which everyone is committed to making Ekso's impactful vision a reality, and I'm confident that we have the team, technology and products to achieve our share of what I believe is a sizable exoskeleton opportunity.

Operator, you may now open the line for questions.

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

This actually Stan Fediuk on the line for Bruce. I guess the first one will be for Jack. Can you just provide more details about your strategic vision for the company going forward? Will there be more emphasis placed on industrial or home mobility? And your outlook for 2018?

Sure. Thanks, Stan. So first, on the forward-looking strategy for the company, we have a tremendous amount of momentum in the rehabilitation segment, and we're going to continue to build on that momentum. We're also going to insert some energy into building the industrial business. So I think what we're doing is really taking what we've really been great at, which has been the industrial business and the rehabilitation business, focusing on that, continue to improve our efficiency, improve our traction with customers, improve the scalability of our operations around that business but also expand into some additional businesses in industrial. I hope that answers the question, Stan.

Will there be any changes in your rehabilitation marketing strategy?

No, not at this time.

Okay. And how many sales reps do you currently have in the U.S.?

I'm looking at Max for some answers here. We currently have 6 sales reps in the United States.

And OUS?

I'm sorry. Pardon me, outside of the U.S.?

Yes, outside the U.S.

Yes. Stan, we have 3 sales-oriented folks in Europe, one covering distributors, one covering direct markets and a third person assisting them. And then in Asia, we have Chwee Foon who started with us recently to develop the Asia-Pacific market.

Just a follow-up on the Asian Pacific market. Has there -- has your -- have your initiatives changed since you mentioned a JV in China potential?

No, the initiatives -- I think at the end of the day, we'd like to be a global leader in exoskeleton rehabilitation, and there are some really fantastic demographic opportunities in selected markets in Asia. China is one very good example where you have an aging population. You have a government that wants to really improve the level of medicine and rehabilitation as well in that country, and you have very few people capable of providing physical therapy. And the -- what we believe will happen there is you'll go from very little physical therapy. You'll skip the manual therapy, and you go to robotic therapy. And we're very well placed to take advantage of that tidal wave, if you will.

And turning to units. There were sequential increase in both medical and industrial units. Can you just provide a little bit of color on what drove that growth and what you're seeing into 1Q?

Yes. I think as our VP of North America Sales so nicely pointed out when he joined us in the fourth quarter, he was very -- Christian was very excited about the pipeline that he saw. There's great interest in what we're doing, and our existing customers are really happy with the product. It's just that we weren't shaking the trees and having the orders drop. And I think what you see in the fourth quarter and hopefully in the next few quarters are that interest starting to drop on a more regular basis. We have better visibility in our pipeline. We're actually shipping units earlier in the quarter. So it's early days, small data points, but I think we're fairly excited what that means for our business. On the industrial side, we -- Stan, we have the mounts which we -- came to market a little bit over 1 year, 1.5 years ago, and then most recently we came out with the vests. The -- again, we have -- because of the time in the market, we're starting to get better visibility with the mounts. And so I think that'll help us plan the business better than we've done in the past. As Jack pointed out, it was very lumpy. And I think you'll see some of that lumpiness with the vests. As folks are interested in trying it out, they might buy 2, 3, 5 units, but then it'll take 1 month, 3 months, 6 months to go through their internal ergonomics and pilot testing. And hopefully, some of those -- not all of them, for sure, but some of them -- will then turn into a sizable order as they go through -- as they use the product throughout their organization.

Okay, great. You previously disclosed the number of demos performed in the quarter. Can you share what that was for 4Q and what you're probably seeing into this quarter?

Stan, I don't have those numbers in front of me, I apologize. And rather than saying something incorrect, I will probably have to get back to you on that.

That's fine. And any updates on the...

Stan, but that gives us a good opportunity to clarify something that Christian has really implemented here. And I think we're seeing it in Europe as well with our -- with Matthias and the distributors, and we call it here market development opportunities. And what we're doing is we're going into local markets where we have one customer or 2 customers already who are -- have high utilization and see good patient growth. And we're going to other centers in the area and reminding them of the benefits of the Ekso, and we have some very good data to show what patients they may be losing or not winning, if you will. And that then invigorates their interests. And I think that's some of the dynamics. And why is that -- why do I mention that around demos, is because what we do is we will then invite a handful or a dozen local hospitals to one event. And it's much more efficient and effective for us than doing individual demos at individual hospitals.

Okay. Got it. Next, I just want to touch upon the WISE study. Any updates on enrollment? And any other investigator-sponsored trials? And timing of any other future data releases?

Yes. So the WISE -- I think you know we originally targeted to have 6 centers. Today, we have 8 centers enrolled. They're obviously all users of the Ekso -- excuse me if I said some other number. It's 10 centers are enrolled today. Apologies for that. Our target is about 150, 160 patients, and we have 20 enrolled today, and we see that starting to accelerate -- started to accelerate in the fourth quarter, and we continue to grow that enrollment in the first quarter. I think -- Stan, I think I've implied with that question was we like to see the enrollment reach 160 sooner rather than later. Naturally, I think the world of rehab is not as far along as advanced as some other areas of medicine when it comes to studies. So Greg and his team spend a lot of time educating Dylan Edwards and the other folks involved in the study and how to best set up the protocols. And so that all took a little bit of time. But now that these agreements are in place and now that 3 or 4 of the centers are -- have the enrollment and are starting to share their progress, this is spurring the other ones to follow soon.

Okay, great. And can you just provide what you think will be the cash burn for next quarter or for the year?

Yes, I -- we don't provide guidance at this point. We still have a little bit of volatility in our pipeline. We worked really hard on that. We were close to $10 million in the second quarter, and we were under $6 million in the fourth quarter. So that is an important metric for us internally. And part of the reason we paused a little bit in saying that, we have obviously our hope to increase our unit placements, but the mix between sales and rentals has shifted a little bit. We find ourselves renting quite a few units at attractive margins. We're not using those to undercut our margins, but that has a working capital or cash demand, and we view it as really just a timing issue. Someone may rent the device today and to buy it in 6, 9, 12 months from now at generally better ASPs because they tend to negotiate the price less and we just have to be able to cover that interim period. For all of 2017, we did not have any rental units returned.

Okay. And for my final question, there was an article about Ford's assembly line pilot trial with the Ekso Vest. Did you get any feedback?

Yes. We've gotten a lot of feedback. We're fortunate to have a company like Ford and then the UAW as well. I mean, they're in it together. I think they've had tremendous success. It's led to other automotive companies and related manufacturers reaching out to us to see how they might be able to benefit from the vest. At the same time, we've worked with Virginia Tech, and they did some ergonomic studies, and it shows decrease in spinal loading. It shows better relief in the shoulder muscle activity. And most importantly, it also showed decrease in task time to completion. And so those are the things that Ford is seeing, and we are cautiously optimistic that we will be doing more work with Ford, supporting them as they deploy more of these units through other plants.

At this time, we have no more questions. I'd like to turn the call back over to Jack Peurach for closing remarks.

Thank you all for joining us today. The steps the company took in 2017 to enhance our financial resources and focus our efforts on maximizing the potential of our current products will help us make 2018 a year of growth and success. We're excited about our opportunities in the year ahead and are committed to using our engineering expertise and innovative capacity to protect and improve physical mobility for people around the world. We look forward to sharing our continued progress in this mission with you in the quarters ahead. Thank you.

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