Ekso Bionics Holdings Inc (EKSO) 2021 Q1 法說會逐字稿

Hello, and welcome to the Ekso Bionics First Quarter 2021 Financial Results Conference Call and Webcast. (Operator Instructions). As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Matt Steinberg with Lazar Finn Partners. Matt, please go ahead.

Thank you, operator, and thank you all for participating in today's call. Joining me from Ekso Bionics are Jack Peurach, President and Chief Executive Officer; Jack Glenn, Chief Financial Officer; and Bill Shaw, Chief Commercial Officer.

Earlier today, Ekso Bionics released financial results for the quarter ended March 31, 2021. 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 the 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 not be deemed to be forward-looking statements.

All forward-looking statements, including our future financial or operational expectations or our expectations of the regulatory landscape governing our products and operations 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 businesses, 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 regulatory outlook 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, April 29, 2021.

I will now turn the call over to Jack Peurach.

Thanks, Matt, and thanks, everybody, for joining us today. We are off to an encouraging start in 2021. During the quarter, our primary objectives were geared towards raising customer engagement levels, expanding physician awareness of our innovative exoskeleton devices in the medical community and sharing with them our new subscription access model. I am pleased that we made great strides across each of these goals, and in doing so, increased the number of multi-unit orders with top network operators globally.

During the quarter, we recorded 16 NR bookings, including 7 units of our new subscription offering, both up on a sequential basis. As we highlighted on previous calls, we transitioned our selling strategy to a subscription model to facilitate faster EksoNR adoption. Although this transition has had an effect on near-term revenues due to the nature of revenue generation, we're extremely pleased with the early results of this model. It has helped us drive faster adoption and earlier success with customers than we received in the past. As Bill will highlight in a moment, the subscription model also led to a higher number of units per order.

For the first quarter, we recorded revenue of $1.9 million, up 30% from the first quarter a year ago. We achieved this while our revenues continue to be impacted by the effects of the COVID-19 pandemic. However, we are seeing business conditions start to normalize as COVID cases and hospitalizations continue to decrease.

On the industrial side, we are pleased with continuing positive customer feedback of our EVO upper body exoskeleton devices. We have a number of customers actively trialing EVO across a variety of diverse industry verticals and believe we can win opportunities in the growing and potentially very large industrial market.

Financially, we achieved record gross margins and continued to manage our expenses prudently, underscoring our lean and efficient operations. Looking ahead, we are well positioned to invest in our growth, supported by our strong cash position from our February financing.

Now I would like to turn the call over to Bill for an update on our medical segment and global commercialization strategy.

Thank you, Jack. The first quarter was a solid start to the year for our commercial team. We increased customer engagement and access levels while making it simpler for them to adopt our leading exoskeleton solutions with our newly launched subscription model. As part of our network strategy, we are focused on launching multisite programs with network operators and are pleased to have closed deals with 3 of the top 5 inpatient rehabilitation operators. This includes completing a pilot program with Vibra Healthcare that was previously delayed due to COVID.

For the first quarter of 2021, we delivered approximately $1.7 million in EksoHealth revenue. Our conversion and renewal rate remained strong at 86%, and we already have more than $700,000 of contracted revenue under our new subscription model. Our subscription offering is allowing our customers to make larger unit commitments in less time, but for the short-term will impact our top line as revenue will be recognized monthly over the turn of the contract, similar to how SaaS companies record revenues.

Capital acquisitions often require more approval levels, including top executive sign off. With our subscription model, we are seeing less approval levels being needed and believe this offering will be the catalyst for accelerating adoption with inpatient rehabilitation centers. Not only are we removing some of the capital barriers, but we're also shortening the sales cycle. For example, in Q1, we closed the deal in 4 days after an in-person validation event. We now have a customizable approach that is working as we are accelerating conversations with our customers, especially with those experiencing budgetary pressures.

This model has also directly led to an increase in the number of units per order. One example of this positive development comes from Kindred Health. Kindred expanded its inpatient service with what was a 4 unit order to a 7 unit commitment based on the subscription offering. We will continue to update our progress with this new offering. Internationally, we are seeing positive momentum throughout our global network. We pieced together 2 strong consecutive quarters in Europe, indicating pent-up demand.

In the APAC region, we expanded our footprint by entering into a partnership with Royal Rehab in Australia. Royal Rehab is a leading provider of rehabilitation and disability support services, and this partnership further solidifies our goal to increase accessibility of our robotic technology in the APAC region.

Educational webinars remain a key component to our strategy in building physician and clinician awareness of our technology. As part of this initiative, we announced a partnership with U.S. Physiatry in March to gain greater recognition of our devices and to educate on how to successfully implement robotics in the rehabilitation centers. U.S. Physiatry is the largest inpatient physician practice in the U.S., focused exclusively on physical medicine and rehabilitation.

As part of the partnership, USP's Physiatrist team of experts will lead a 4-part lecture series that will be open to physicians, clinicians, and other health care leaders across the globe. Earlier this month, we hosted our first webinar of the series focused on EksoNR education that was well attended by many of the industry's top specialists. We look forward to a continued partnership with USP.

In addition to these popular webinar events and the gradual opening of facilities with COVID cases on the decline, we are increasing the number of live in-person interactions at rehab centers. Our on-site demos are getting closer to normal rates, enabling us to enhance customer education. While we remain cautiously optimistic about the current COVID outlook, we are encouraged with heightened customer engagement levels and our existing pipeline opportunities.

Ekso has helped patients take more than 130 million Ekso aided steps in over 300 institutions around the world. And today, we highlight another success story from one of our newest centers in Akron, Ohio. Summa Rehab Hospital, a partner with Vibra Health, which initially designed a 6-month pilot program, elected to proceed with an early capital purchase after only 3 months. We are happy to share a recent patient success story.

Summa Rehab's hospital therapist saw a 70-year-old male, who had a stroke in February and consequently completed 2.5 weeks of inpatient therapy. This patient was excited to try our innovative Ekso technology to help him through the rehab process. The patient made rapid progress initially requiring 2 advanced therapists, but progress quickly with the EksoNR to walk independently, only needing the supervision of one aid. After starting EksoNR training, his therapist noted marked improvements in function, reduced ataxia, improved balance, and more efficient walking. Both physical therapists attributed the patient's quick and significant progress to the use of EksoNR to achieve functional recovery. We are pleased by Vibra's quick adoption of our innovative technology and look forward to continuing our partnership and sharing these success stories.

Looking ahead, we will continue to leverage our new subscription model to shorten the sales cycle, increased predictability of deals and reduce capital barriers for our customers. We believe this strategy, combined with our effort to increase customer education and awareness of our innovative devices, along with our strong clinical training and program support will drive future adoption of EksoNR technology. With more virtual webinar events, increased on-site customer activities and continued market penetration of our network strategy, we are excited to accelerate our commercial success.

At this time, I'd like to turn the call back to our CEO, Jack Peurach.

Thanks, Bill. I'd like to provide an update on the progress with our industrial segment. Our upper body exoskeleton, EVO, continues to receive promising feedback from customers that have incorporated this innovative device into their industrial-related workflows. In the first quarter, we conducted extensive evaluations, gathering feedback at the executive and worker levels. We've heard from most that EVO adds value by mitigating fatigue, making productivity more predictable, and reducing the risk of injury. During our limited and targeted post-launch evaluation period, we added several new customers and have an even greater number of potential customers actively trialing EVO across different applications.

We are pleased with the overwhelmingly positive results thus far, and I would like to highlight a couple of encouraging customer testimonials. One customer's employee who previously was unable to perform his job due to a work related shoulder injury, returned to work earlier than expected primarily due to EVO. This lightweight exoskeleton alleviated stress caused by the overhead work he was performing, enabling him to execute his tasks while reducing further risk of injury. EVO not only helped the employee return to work safely and confidently, but also provided the customer with peace of mind that projects can be completed on time with less risk to their employees.

Another example highlights a drywall installer who had a labor-intensive overhead construction task that had to be conducted repeatedly. EVO supported this grueling work by lowering the time needed to complete each task from 20 minutes to 5 minutes, a 75% productivity improvement. With this remarkable increase in worker efficiency, EVO demonstrated that it can enhance productivity while also making output more predictable.

Today, we are working with customers in the logistics, construction, food processing, aerospace, and solar installation verticals and are targeting the applications primarily where EVO can enhance worker productivity and improve worker safety. Moving forward, our objective is to further accelerate adoption within our targeted segments.

Finally, our subscription model has supported our commercial efforts for EVO. Similar to the EksoNR subscription model, it helps shorten the sales cycle and reduce capital barriers. We intend to continue the sales strategy and driving greater adoption at a faster pace.

Now I will turn the call over to Jack Glenn to review our first quarter financial results.

Thank you, Jack. Ekso generated first quarter revenue of $1.9 million compared to $1.5 million for the first quarter of 2020. Our gross profit for the first quarter was $1.2 million, representing a record gross margin of approximately 65% compared to a gross margin of 60% in the fourth quarter of 2020 and 43% for the same period a year ago. The increase in gross margin was primarily due to higher average selling prices for EksoNR, an increased proportion of medical device sales, lower production cost of the EVO compared to the previous generation best and higher service margins.

Our actions to preserve our cash and align our cost structure enabled us to lower our operating expenses. Operating expenses for the first quarter of 2021 were $4.4 million compared to $5.4 million for the first quarter of 2020, a reduction of approximately 19%. Net operating loss in the first quarter of 2021 fell to $3.2 million from $4.8 million in the prior year period, reflecting our increased revenues and leaner cost structure.

Gain on warrant liabilities for the quarter ended March 31, 2021, was de minimis from the revaluation of warrants issued in 2019, 2020, and 2021 compared to a $2.5 million gain associated with the reevaluation of warrants issued in 2015, 2019, and 2020 for the same period in 2020.

Cash used in operating activities in the first quarter of 2021 was $2 million. As of March 31, 2021, we had a strong cash balance of $49.5 million, which included gross proceeds of approximately $40 million from a public offering, strengthening our cash position and extending our cash runway to execute on our growth strategy.

Please see our 10-Q filed earlier today for the further details regarding the quarter.

Operator, you may now open the line for questions.

(Operator Instructions). Our first question today is coming from RK from H.C. Wainwright.

A few questions from me. To start off on the top line. Certainly, it's good to see that you got 30% increased revenue compared to the first quarter. But however, when you look against the fourth quarter of last year, there's a dip. But on the flip side, you'll place more units. And the increase in the number of units placed is basically coming from the subscription units, which obviously says that the subscription system is working right. So I want to understand your thoughts on, is that because partly it being the first quarter, is there some amount of seasonality involved? And number two, is this going to be the trend in the short-term in the sense as you move into the subscription system, obviously, quarter-to-quarter, the revenues could look a little weak compared to the previous year. But in the long run, the subscription finally should convert into system sales after the subscription period is done?

Yes. Hello, RK, nice to hear from you. Thanks for the question. You're generally spot-on. As we've communicated in the past, we really shifted our focus on to the subscription offering. And as a result of that, a lot of deals, which would otherwise have been capital or not existent, have come in as subscription. So we really think that this is a great offer for both our customers and for the company because it gives us a lot more predictability. And we believe is going to drive a lot faster adoption, but it will have a short-term impact in revenue. And the second thing I want to just maybe correct a little bit on this is that unlike the offer we had in the past that was really a bridge to a capital purchase, we view this subscription offering, certainly, we'll always sell a capital sale, but we view this as something that we would renew over time as being a large majority of what happens versus converting to a capital purchase. We'll see how that plays out, but we're going into it with that expectation.

And Jack Glenn or Bill Shaw, if you want to add anything to that, feel free.

Well, the only thing I would add, RK, is that, again, we really look for the subscription program to really accelerate unit growth, and that's going to be our key. Obviously, as you've mentioned, it's going to have a top line effect in the near term, but it's really about getting units out there and growing the units?

Yes. I mean, it's not a bad thing to have a decline in the sales, but to have a decline in the sales for the right reason is A-okay, at least as far as I'm concerned. And then in terms of talking about multiple unit sales, can you kind of elaborate a little bit more as to what is the appetite, especially when you go the subscription route for some of these centers to subscribe multiple units rather than compared to previous times, where it would have been a little bit of a battle even to get 1 capital sale done.

Yes. Great question. I think we're starting to see evidence of that right now. Our belief is that we will be able to drive more multiunit commitments. We were able to do that in Q1, obviously, with a network operator. And we've been able to have fairly significant discussions with multiple other network operators around more of a programmatic approach to deployment. Everyone is going to do it differently, but it's certainly, from our perspective, a very effective way, and I think we're starting to see on that side, interest in doing more programmatic central decision-making moves. But it will be a combination of one-by-one versus central decision making.

I'm going to ask Bill to fill in a little more color on that.

Yes. The only thing I'd add is just that in the past, right, RK, we would do a rent-to-own kind of pilot program. The customer would still have to budget dollars to be able to convert or acquire that technology over time, right? And with the subscription offering, they seem to be very pleased that they can actually roll this out to multiple sites at one time, whether they want to pilot the technology in different markets or maybe hit one specific market a little bit harder. They don't have to necessarily have this budgeted from a capital perspective because they can just take it out of an operational budget. And then with the success of the program, if they do decide to acquire it, they could do that, but the reality is they would just renew it and extend it. And so that's why we're seeing a lot of interest in multi-units.

So one more question on the EksoNR part of it. In terms of on-site demonstrations, as the pandemic, rather, as more and more people getting vaccinated, I don't know about the status of the pandemic. It can vary from day-to-day, state-to-state. How are you seeing the trends in terms of inviting your folks on to the site to conduct on-site demonstrations? Is that kind of giving you some kind of a clarity and also act as a leading indicator as to the number of units you could place in the coming quarters?

Yes. I'm just going to ask Bill to take that. Go ahead, Bill.

Yes. Well, I talked about being cautiously optimistic. I think we believe that there is a steady recovery starting to emerge, and we're hopeful to see increased spending in the back half of 2021. But engagement levels are definitely much better than they've been in the past. So as we've shared in the past, right in the middle of the pandemic, we had to pivot to a virtual selling strategy, and that really helped us navigate the COVID planet pretty well. But now that we're seeing things start to come back, I'd say, we're executing more of a hybrid approach where we're trying to do as much of our selling process virtually as possible. But the reality is, with this type of technology, getting on-site and doing a validation event or a demo with the right people in the room is really important. And so to answer your question directly, yes, we are seeing centers being open to having us come back on site. But we're being very strategic with where and how we're doing things. We're still doing virtual demos as well, but there's really no better path than being on-site with customers, seeing our technology in real time. So we're going to try to do as much of that as possible going forward.

And so for the last question, regarding EVO, I know you made some comments about some of the industrial verticals that are trying to test EVO. So could you highlight a couple of them? And can you comment on like when this could become a little bit more meaningful as far as revenues go? And from what you have seen, which industrial verticals do you think will be ready to absorb this?

Sure. So I did mention generally some verticals. I'll just highlight like maybe a couple where I think there's really a great match. The first would be in construction, but narrowing it down a little bit to drywall installation. We have a number of customers right now who are doing drywall insulation, and there's a lot of overhead work involved in doing that. Not just placing the sheetrock, but also finishings, mudding and sanding. And we've done some evaluations where we see really great productivity improvements as a result of that, and that's a fairly standard activity that we think is -- our product is very well suited to support. So that would be one. Second area that we're quite optimistic about is, for the same reason as in solar field installations where there's an awful lot of overhead, fastening and wiring associated with that installation. Again, we've got trials running in that area. And again, so quite large appetite for this given that if we can demonstrate productivity improvements. So -- and there are some others, but I think for a couple of highlights, those would be 2 of them. In terms of when it is we really see some traction taking off from a revenue perspective, a couple of things about that. So first, we've been very deliberate about going a little bit slowly to make sure we -- the product was fitting into the application and the economics work out with the customer. I think we've gotten pretty far down that path in -- at least in some of these verticals. So we are now in a position that we can invest a little bit more into driving volume in that and driving more sales. So I think in the second half of this year, we should start to some growth out of that. The second thing I would say about that is that we are also offering that as a subscription. So again, we'll have the same effect from a revenue perspective as revenues would lay unit delivery.

We've reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments.

Thank you all for joining us today. To briefly recap, the first quarter of 2021 was an encouraging start to what we believe will be a solid year. We expect to continue to focus on network operators who realize the benefits of our technology and can help bring it to more patients more quickly. Our subscription model is helping us achieve this goal by breaking down capital barriers, increasing adoption levels and shortening the sales cycle. Although this may impact revenues in the near term, we believe this provides us with inroads to expand our installed base and support our path to sustainable future growth.

We are also pleased with the continuing positive feedback on EVO and the remarkable customer stories and evaluation results that we received to date. We believe there's a large market opportunity for EVO with a number of verticals that we can penetrate. As I've stated in the past, the proceeds received from our February public offering are critical to our success in executing on our growth goals. Our focus remains on expanding our customer base in both the medical and industrial segments and bringing new game-changing technologies that will improve the lives of patients and industrial workers. We look forward to providing updates on our continued progress throughout the year. Thank you, and have a good day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.