Hyperfine Inc (HYPR) 2022 Q4 法說會逐字稿

Thank you for standing by, and welcome to Hyperfine's Fourth Quarter and Full Year 2022 Conference Call. (Operator Instructions) As a reminder, today's call is being recorder. I will now turn the conference to your host, Marissa Bych, of the Gilmartin Group. Please go ahead.

Great. Thank you for joining today's call. Earlier today, Hyperfine, Inc. released financial results for the quarter and year ended December 31, 2022. A copy of the press release is available on the company's website as well as sec.gov.

Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, expense management, expectations for hiring, training and adoption, growth in our organization, market opportunity, commercial and international expansion, regulatory approvals and product development are based upon our 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 refer to the Risk Factors section of our latest periodic filings with the Securities and Exchange Commission. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 21, 2023.

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

And with that, I will turn the call over to Maria Sainz, President and Chief Executive Officer.

Good afternoon, and thank you all for joining us. On the call with me is our Chief Administrative Officer and Incoming Chief Financial Officer, Brett Hale. 2022 was a year of significant technological clinical and commercial progress for Hyperfine. I am pleased to share that we recognized $6.8 million in revenue for the full year, driven by the sale of 35 commercial Swoop systems. We also received multiple clearances for the next-generation hardware and software upgrades, saw our technology highlighted in 15 clinical publications and 50 peer-reviewed presentations at neurology and imaging meetings and strengthens our existing partnerships while establishing new relationships with several (inaudible) and hospital systems.

In addition to these initiatives, we have rightsized our business and implemented spending discipline to extend our cash runway through 2025, including the cessation of the Liminal brain sensing program (inaudible). I am very proud of what the Hyperfine team has accomplished in its first full year as a public company, a year of dynamic change internally and in the marketplace.

Before turning to our 2023 priorities, I would like to provide greater detail on a few of these recent achievements. First, on the R&D side. We continue to advance the field of ultra-low-field MRI and have strengthened image quality through multiple FDA-cleared, AI-powered software upgrade. These software upgrades enable improved image quality, greater consistency and robustness to motion across key brain imaging sequences for neurocritical care applications.

In mid-2022, we also launched a partnership with Viz.ai, a leading AI-powered disease detection and intelligent care coordination platform, to continue enhancing our diagnostic imaging capabilities as we advance our mission to provide transformational, accessible and clinically relevant diagnostic imaging. This partnership will take us to pilot evaluations in a small number of key sites in 2023.

Turning to our recent commercial progress. In 2022, we strengthened several key partnerships and customer relationships, yielding new multiunit contracts. For example, as we shared in the call, we received a purchase order from King's College London for 20 commercial systems in association with the Bill & Melinda Gates Foundation. We began delivering these units in the second half of 2022 and expect to ship the remainder of the units over the next 1 to 2 years. We also announced a signed letter of intent for seventh commercial units from BJC Healthcare in St. Louis, one of the leading hospital systems in the United States. We began placing this unit in 2022 and expect to ship the remainder over the course of 2023.

I am also pleased to share that we have completed a restructuring of our U.S. sales team while reengineering our sales and clinical support processes. We have appointed new leaders in both the sales and the clinical support groups, who are focused on instituting a seamless workflow from (inaudible) purchase order and from purchase order to routine use. We are blazing new trails with the introduction of our Swoop point-of-care MRI system, and we now understand the need for buy-in across multiple stakeholders with complex processes.

Our fourth quarter result of $1.4 million in revenue on 5 commercial Swoop systems, reflects learning and addressing these processes as well as some distraction due to the restructuring and rightsizing of the team and recruiting and onboarding of new talent. Our team is now substantially in place and the strongest it has ever been, lean and hungry with the right experience and determined focus on execution. This team is coming up on the learning curve, continuing to build relationships and driving new contracts. We remain optimistic in our commercial pipeline for the future.

Additionally, as part of our commitment to meeting the highest standards for data protection and information security, we're pleased to announce that our key platforms have achieved the rigorous high-trust, risk-based 2-year certification. We believe this will streamline the information security reviews associated with contracting and hospital implementation. This brings me to our priorities for the year ahead.

As we progress into 2023, we are focused on 3 strategic pillars: innovation, clinical evidence and commercial expansion with a strong focus in the United States. On innovation, we are entering the year with a clear road map of technology iterations and enhancements to continue improving image quality as well as the provider and patient experience with Swoop. For example, we recently announced the receipt of 2 FDA 510(k) clearances for AI-powered software updates to the Swoop system. These upgrades significantly enhance diffusion-weighted imaging or DWI quality and increase the signal to noise ratio, further advancing image quality standards in this new ultra-low-field point-of-care MRI segment. Despite our heightened OpEx discipline and extended cash runway, we remain committed to driving innovation and have allocated a healthy budget in R&D through the next several years across new hardware, software and AI development programs.

Over the course of the year ahead, we expect to receive additional clearances to further advance both image quality and usability of the Swoop system. On clinical evidence, we continue to focus on supporting the adoption of Swoop in the neurocritical care setting with plans to expand into stroke imaging later in 2023. The company is also exploring other areas of both adult and pediatric brain imaging through research collaborations with leading institutions. The volume and breadth of presentations and publications covering Swoop's clinical utility and cost effectiveness data is encouraging, and we are excited to continue building on this momentum.

In the field of stroke, we have seen independent data and presentations that support Swoop value proposition. At the International Stroke Conference in February, we were pleased to see new data showing the potential for Swoop to provide critical brain imaging following thrombectomy in stroke patients. The presentation concluded that Swoop could be used to facilitate a post-treatment baseline for post-thrombectomy stroke patients to evaluate the impact of potential changes in blood pressure and heart rate that may impact ongoing brain injury.

This validation of the value of Swoop is providing imaging where conventional methods may not be available is promising. The major clinical initiative for Hyperfine in 2023 will be the (inaudible) is a global multi-center evaluation that will assess the use of the Swoop system in the acute ischemic stroke use case. And we are fortunate to be working with prominent, experienced and passionate clinical teams in the field of stroke as they set up the foundation for this study. Enrollment is expected to begin in mid-2023, and we are excited to take this important step towards advancing the use of Swoop in stroke imaging.

Shifting to commercial expansion. As I described earlier, we have made several changes within our commercial organization in recent months to optimize our focus towards the greatest growth opportunities for our business. First, we have refocused our team on the core U.S. market opportunity, building relationships and executing contracts with U.S. hospital systems with a specific focus on multisystem placement opportunities. We have also made changes within our sales and clinical support teams, bringing in high-performing experienced capital equipment salespeople and placing greater accountability at the sales leadership level. These teams are coming up the learning curve, working in strong collaboration to ensure increased adoption, successful implementation and to (inaudible) at all of our sites. And they are now aligned and ready to execute. I look forward to seeing the progress that we will drive with existing and new customers this year and beyond.

We will maintain our international footprint, which is currently small through distributors in Canada, Australia, New Zealand and Pakistan. In addition to our global partnership with the Bill & Melinda Gates Foundation. We also see several compelling opportunities to grow our international presence long-term. Related to this, we're excited to have recently received CE Marking, which provides with the opportunity to expand our presence into the European economic area. That said, we are making the choice to launch in Europe later in our commercial life beyond 2023 as we remain focused on the U.S. as our #1 commercial priority in the near- to intermediate-term.

Alongside these initiatives, we remain laser-focused on spending discipline. We continue to operate a lean and implement initiatives in support of cash runway extension, while investing in our 3 key pillars of innovation, clinical evidence and commercial expansion. We currently see a cash runway for the business through 2025.

Now turning to our 2023 revenue outlook. We are initiating revenue guidance for the full year in the range of $10 million to $14 million. In line with our disciplined approach to spending, we are also initiating guidance for cash burn of $40 million to $45 million in the full year 2023. I want to reiterate that our fundamental of Swoop are access and affordability. Through our commercial progress over the past 2 years, we know that our value proposition with customers is strong and that pricing is not a key barrier to Swoop adoption.

As a result, we are continuing to increase pricing for the Swoop system. Our guidance reflects the continued gradual increase in the Swoop average selling price in 2023 relative to 2022.

I will now turn the call over to Brett Hale, our Chief Administrative Officer and incoming Chief Financial Officer, to review our fourth quarter and full year performance and discuss the financial outlook in greater detail.

Thank you, Maria. Turning to our financial results for the fourth quarter of 2022. Revenue for the quarter ended December 31, 2022, was $1.4 million compared to $0.4 million in the fourth quarter of 2021. Gross margin for the fourth quarter of 2022 was $0.3 million compared to a negative $0.5 million in the fourth quarter of 2021. R&D expenses for the fourth quarter of 2022 were $5.2 million compared to $8.9 million in the fourth quarter of 2021. Sales, general and administrative expenses for the fourth quarter of 2022 were $8.7 million compared to $16.7 million in the fourth quarter of 2021. Net loss for the fourth quarter was $13.1 million, equating to a net loss of $0.19 per share as compared to a net loss of $26.1 million or a net loss of $13.79 per share for the same period the prior year.

Now turning to the results for the full year 2022. Revenue for the full year 2022 was $6.8 million compared to $1.5 million in 2021. Gross margin for the full year 2022 was $0.9 million compared to negative $1.2 million in 2021. R&D expenses for the full year 2022 were $28.2 million compared to $25.8 million in 2021. Sales, general and administrative expenses for the full year 2022 were $46.6 million compared to $37.9 million in 2021. Net loss for the full year was $73.2 million, equating to a net loss of $1.04 per share as compared to a net loss of $64.9 million or a net loss of $17.57 per share for the prior year. Cash and cash equivalents totaled $117.5 million as of December 31, 2022.

Turning to our 2023 outlook. Based on our progress and current trends of the business, we are initiating full year expectations for revenue to be in the range of $10 million to $14 million. As Maria mentioned, the Swoop value proposition with customers is strong and increased pricing as the company announced in 2022 has not been (inaudible) barrier to adoption. Going forward, we will not be providing an exact average selling price or unit volume expectation, but our guidance is predicated on the assumption that Swoop system pricing will continue increasing in 2023 relative to 2022.

To help you with modeling, please note that we currently expect our second half of revenue to be stronger than our first half as our new sales team continues to drive the pipeline. For the year, we expect gross margins to be approximately 40%. And lastly, we anticipate total cash burn of $40 million to $45 million for the full year 2023. This incorporates an expectation for continued investment in R&D and substantially streamline investments in SG&A, while maintaining customer-facing resources to continue to drive adoption and growth.

In line with this, we are allocating a greater relative portion of OpEx spending to R&D in 2023 versus prior years at approximately 40% to 50% of total OpEx dollars. We will continue to focus on our 3 strategic pillars and maintain spending discipline as we realize the benefits of our current rightsizing and reorganization. As Maria mentioned, we are laser-focused on U.S. commercial expansion. As I've come on board, it is clear we are completing a substantial reset of how we operate, including the team that we have in place, which has caused a near-term disruption, but presents a worthwhile trade-off for laying the right long-term foundation.

I would like to reiterate that we are excited about the momentum we are building for the remainder of the year and beyond and that we are pleased to have the cash and flexibility to invest in the right areas and afford the business the right runway to execute post reset.

At this point, I would like to turn the call back to Maria for closing comments.

Thank you, Brett. I am immensely excited to be leading Hyperfine into the year ahead. Before wrapping up, I would like to highlight the positive feedback received from one of our customers during the recent educational webinar hosted for our commercial (inaudible). This customer noted increased operational efficiency and improved workflow with Swoop as the system is alleviating the challenge of limited MR capacity and reducing turnaround times at their hospital. He also noted an expectation for the hospital to recognize a positive return on investment in Swoop in a shorter time period than they had anticipated at the time of device acquisition and commented on an improved patient experience.

This commentary supports the immense value of our differentiated technology in improving patient and provider experiences and expanding access to diagnostics for hospital systems by complementing their conventional MRI workflow. With our early success marked by a total global installed base of over 100 Swoop systems to date, we are setting the stage for accessible and affordable point-of-care imaging to transform care delivery and continue to enhance the health care around the world.

With that, I want to thank you for your time and open it up to any questions.

Thank you. (Operator Instructions) Our first question comes from Larry Biegelsen of Wells Fargo.

Maria and Brett, can you hear me okay?

Yes, we can.

So let's start with Q4. It's usually the strongest quarter for capital businesses, but you came in a little bit below, at least on the revenue side, the low end of your guidance range. I think you're at the low end of the capital -- the placement guidance. So you talked a little bit about disruption, Maria, from the sales force organization changes. Could you just talk a little bit more about the trends you saw in Q4 and why we saw come in a little bit below the revenue guidance?

Sure. So as I said, I think there was a little bit of distraction because we made a very significant number of changes in our sales leadership and really our sales team overall. We have about 2/3 of all sales and quota-bearing people now that have either a new role or are brand new to the company, and most of those transitions started in Q4, and that provided some distraction.

I'm also very pleased to say that deals were not lost, deals were just pushed out. So maybe we took our focus a little bit out of just getting the deal closed in the fourth quarter and things have continued to play out over the course of the subsequent weeks. I also would say, Larry, that although it is true that there is a strong push for capital to wrap up the year strong, I'm not sure that I would put us in the same bucket as all other big capital purchases in that we are a brand-new category to most of the administrators and the budget, so we're not at budget line per se. So I think we follow a little bit of our own rhythm in a way and didn't see that need to really get things into the finish line from a hospital perspective before the end of the year.

But I would say, organically, I think we not purposefully, but we created some transition and some disruption to make sure that we were starting the year with the right people in the (inaudible).

That's helpful. And then transitioning to 2023 and the guidance, help us give us -- tell us why you're confident in the $10 million to $14 million given that the Q4 run rate is below that? What needs to happen for you to hit the guidance? What are you assuming for the 2 large orders that you announced that you talked about on this call? And just lastly on the guidance, is my math, Brett, right, that OpEx is going to be about $50 million for 2023 to get to that burn rate, which would be a pretty steep decline from '22?

Sure. So let me take the confidence part of the question. I'll turn it over to Brett for the OpEx commentary. As I said, it started with making sure that we have the right sales structure with the right people in place. Those people very quickly put in the right processes to make sure that the quality of our pipeline of deals, the breadth of our pipeline of deals and then the scrutiny around the deals that they progress through the different gates any of these deals progresses through is very strong.

We do have all positions field now with what I believe is the right profile of people, and I'm starting to see the green shoots of really the amount of deals that are in the pipeline, the distribution of those deals across all of the geographies, the discipline around the execution on the deals. So that gives me the right confidence around how I see this year panning out. It is also true that it does take about 6 months or so for any one of our branding people to come up on the learning curve and to hit their stride. So that is why we expect the second half to be stronger than the first half, but I have a lot of confidence with the leadership we put in place, both at the national level, at the regional level, the quality of the individuals we hired and what I've seen in terms of the quality, the breadth and the depth of the pipeline that is progressing here as the weeks go on, and I'm going to let Brett comment on the OpEx.

Larry, this is Brett. So in regards to the guidance we're giving, we gave guidance regarding the cash burn, which will have $40 million to $45 million. We're going to be managing to our cash burn. Obviously, there's some element of variable spending depending on the range of revenue. But you are correct. The OpEx is going to step down significantly from our Q3 2022 basis into 2023 and that's a direct reduction from the reorganization that we've done as well as our prioritized spending.

Just lastly -- go ahead, I'm sorry.

No, I was going to just comment that, that prioritized spending is an important commentary because I believe we have been able to reduce spending without compromising the must half spending. So the critical projects around innovation, the critical projects like the (inaudible) clinical evaluation and the customer-facing and quota-bearing headcount that are really critical to see those 3 pillars that I feel strongly are the right balance of priorities for our business this year.

And Brett, any color, I know you're not giving (inaudible) guidance. Any color on device versus service split in that $10 million to $14 million?

We're not providing specific guidance, but there is obviously components of our revenue that's split between the device and service portion. We do have different ASPs for different geographies. So we're not breaking that out into detail at this point in time.

I'll let others jump in.

Thank you. One moment, please. Our next question comes from the line of (inaudible) of Evercore ISI.

This is (inaudible) on for Vijay. Just first on your gross margin guidance for the year and just generally, your long-term target of gross margin improvement. Can you provide more color there? How much of this improvement will be driven by the cost-saving initiatives versus increase in ASP?

I think I'm going to let Brett take that.

Yes. So they're -- as reflected in our earnings call, we are going to see a gradual increase in pricing throughout 2023. So we are going to get a (inaudible) benefit from the pricing benefit that we're seeing. Cost is obviously a major focus for the organization, including the manufacturing cost of our products. That would be the third piece that's going to be a variable is just the increase in volumes over time. Obviously, we get efficiency as we scale the business. So those are the 3 levers, but we don't have an exact breakdown of the contribution to that. But those are the 3 things that will lead to the 40% gross margin guidance and then as we continue to grow the business thereafter.

Got it. And on your cash burn for the year, are the savings primarily on the R&D front or SG&A?

So we've commented on our OpEx that we are actually continuing to invest significantly in our R&D. Maria mentioned the clinical evidence, the innovation that continues to be a priority of focus. Most of our -- most of our cost savings has been about running an organization that's very efficient and lean. And that cuts across the whole organization, but a majority of the savings probably come disproportionately from the SG&A side versus R&D given the increased investment we're making in terms of our percentage of OpEx to R&D.

One moment, please. Our next question comes from the line of Neil Chatterji, B. Riley.

Just curious just in terms of the kind of the, I guess, sequential drop here on the installs. Just curious on how much of that was potentially related to that, I think you mentioned the kind of the higher ASP being a potential barrier. So just kind of curious how much of a role that played? And then also if there's potentially any sort of bolus from potential installs in 4Q into the first quarter?

Sure. Neil, so pricing is not a barrier to adoption. I think we've said it a number of times, and I realize that I've been in the job now 5 months, and I'm still convinced that I haven't really heard it at all by now. That is the reason why we decided to start moving pricing up and have started to do that, although, of course, the deals do take a long time, so it will take some transition time until that is fully baked into our actual ASP but that was not the reason for the softer Q4.

I really think that part of the reason was that distraction that we created by the significant reorganization that we crammed into Q4 so that we could get it all done and start the year with the right team in place, the right processes and the right leadership. So I feel it was definitely not pricing. The new pricing is something that we have started to roll out actually at the beginning of this year, so it didn't really even factoring that much into Q4, although, of course, internally, the team knew that, that was the direction we were heading as we were looking into implementing it.

And then as we go forward, so in terms of a bolus, I mean, things continue to progress. And I think I said it, we don't really -- we have not lost deals. Deals get more complicated or just a little bit longer with different paperwork. I can give you some examples where we had a contract in place and all of a sudden, the buying group wanted to be the acquiring organization, and that had a total restart on a contract (inaudible) going to ultimately create multiple placements as well.

So on the other 2 deals that we have spoken about, the order from KCL, the King's College London as well as the BJC, we continue to expect a fairly steady deployment and shipment of those devices over the quarters ahead. So I don't -- there is no bonus associated with that either.

Got it. And I might have misheard on the pricing aspect. And maybe just on the FDA clearances you've had recently. Just curious if you've had any initial feedback on those updates and the enhanced capabilities of Swoop? And then secondly, what other updates we could expect kind of through the balance of '23?

Sure. So yes, we have had feedback, I don't know if you know, but usually, we do a beta release and get about 2 or 3 dozen cases done before we actually submit our 510(k). So we have some input from the beta runs and then we have now a little bit of run time.

Clearly, a lot of positives as to where we've taken DWI, there is a general feel of immense progress in the last 2 years on that level of imaging. As you think forward, continue to do to improve our DWI also because we have that appetite to get into stroke, and that's going to be critical. There are some other things that we can do to continue to strengthen the robustness to motion, the correction for noise through more DL and then some other features around usability. We're looking at software helping with the patient positioning, which is also important and other things like that.

What I would say is that these improvements are getting us closer and closer to feeling really ready to take on the ischemic stroke setting, and as such, it's probably going to be after the next software release probably when we feel ready to start that (inaudible) study that we have discussed.

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Maria Sainz, Chief Executive Officer for any closing remarks.

Thank you. We remain very bullish about the Hyperfine opportunity, and we feel we have taken the measures necessary to establish a strong foundation to deliver on the 3 pillars that I have outlined. I want to thank you for your interest in Hyperfine, and look forward to updating all of you again in May. Thank you.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.