Hyperfine Inc (HYPR) 2023 Q1 法說會逐字稿

Thank you for standing by, and welcome to the Hyperfine First Quarter 2023 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. It is now my pleasure to introduce Marissa Bych from Investor Relations.

Great. Thanks for joining today's call. Earlier today, Hyperfine Inc. released financial results for the quarter ended March 31, 2023. 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 opportunities, 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 listing 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, May 11, 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.

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 today is our Chief Administrative Officer and Chief Financial Officer, Brett Hale. We achieved measurable growth in the first quarter of 2023 with an all-time record revenue of $2.6 million, driven by the sale of 10 commercial Swoop systems. In addition, we have continued to execute with the financial discipline that allows our cash runway to extend through the end of 2025. I am pleased with our progress this quarter, and I am confident that we are poised to execute our plan in 2023. As we mentioned in March, we are focused on 3 strategic pillars: innovation, clinical evidence, and commercial expansion with a strong focus in the U.S. On innovation, we continue to lead and advance ultra-low-field MRI with technology iterations and enhancements that further improve image quality as well as the provider and patient experience with Swoop. In February, we announced the receipt of 2 FDA, a 10-K clearances for AI-powered software update to the Swoop system.

The latest AI power software has now been installed in the units in the field, and the feedback from existing users have been very positive, especially on the diffusion-weighted imaging or DWI sequence. Our commercial team is now using images and cases with our latest software in their discussions and demos with prospective accounts and feedback has been very positive from prospective users as well. Despite our heightened OpEx discipline, we remain committed to investing in innovation and evidence and we have allocated a healthy budget to R&D through the next several years. We have active development programs working on next-generation hardware, additional upgrades to software and AI for our current critical care application and future stroke, pediatric and neurodegenerative disease use cases.

Furthermore, our partnership with the Bill & Melinda Gates Foundation provides access to a network of leading experts in the field of MRI across the globe who works in a collaborative manner with our development and clinical site. On clinical evidence, we are pleased to see abstracts, papers and symposia focusing on ultra-low-field MRI and the use of our Swoop system at major scientific conferences like the International Stroke Conference, IFC, and the American Society of Neuroradiology, ASNR. At IFC in February, we were pleased to see new clinical research data from Yale showing the potential pursuit to provide critical brain imaging following thrombectomy in stroke patients.

At ASNR in Chicago last week, we had an interactive case review session with a panel of 6 leading neuroradiologists, evaluating patients based on Swoop images with our latest software. This interactive session brought nearly 300 attendees, and there was a strong good traffic at the comfort. We also have strong witness partnerships with leading institutions working on other applications of the Swoop system in adult and pediatric brain imaging. Our major clinical initiative in 2023 is the action PMR project. Action PMR is a global multicenter evaluation that will assess the use of the Swoop system in the acute ischemic stroke use case, and we're fortunate to be working with prominent experience and passionate and clinical team in the field of stroke.

As a reminder, this is an exciting project for us as it represents the first step in pursuing the use of Swoop systems in acute stroke limiting. We look forward to beginning action PMR enrollment midyear and sharing our progress on upcoming calls. Turning to commercial expansion. We're pleased with the pipeline of deals driven by our commercial team for 2023 and beyond. The commercial team has also begun implementing our higher pricing, and we are encouraged by the solid momentum across multiple territories in the U.S.

As we shared in the fall of 2022, we received the purchase order from King College London for 20 commercial systems in association with the Bill & Melinda Gates Foundation and a signed letter of intent for 7 commercial units from BJC HealthCare in St. Louis is one of the leading opto systems in the U.S. We continue to execute the delivery of this commercial systems in 2023. We're very pleased with our new key leadership and commercial structure. Our sales in clinical support teams are in place, and we feel this combination of an experienced capital sales team and a clinical and MR Expert clinical support team is the right approach to drive adoption. The team remains focused on the core U.S. market opportunity, building relationships and executing contracts with U.S. hospital systems with a specific focus on multisystem placements opportunities.

Clinically, our PL team remains focused on selling subsystems within the broad critical care opportunity for new imaging while our innovation and clinical evidence teams are setting the stage for much broader use in the future. Internationally, we maintain our small commercial footprint but see compelling opportunities for future expansion into new markets. We remain excited about CE Marking, which we received in February of this year. We also see the immense long-term opportunity in low and medium-income countries through the work that hospitals affiliated with the Bill & Melinda Gates Foundation are undertaken with soon in Africa and Asia.

And lastly, we continue to explore the potential to enter the regulatory process in China. All of that said, we remain focused on the U.S. as our #1 commercial priority for this year. Finally, as it relates to our commercial process, our commitment to meeting the highest standards for data protection and information security for our customers, we were pleased that in the first quarter of this year, our key platforms 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.

Now turning to our first quarter results. I'm pleased to announce that we achieved record revenue of $2.6 million and 10 commercial Swoop system placements in the first quarter of 2023, driven in large part by placements to new U.S. customers. I am incredibly proud of our team and remain optimistic in our commercial pipeline for the future. Alongside our 3 strategic pillars, we remain laser-focused on spending discipline. We continue to operate lean and implement initiatives in support our cash runway extension while investing in innovation, clinical evidence and commercial expansion. We continue to see a cash runway for the business through 2025.

Now turning to our 2023 revenue outlook. We are maintaining our revenue guidance for the full year in the range of $10 million to $14 million. In line with our disciplined approach to spending, we're also maintaining guidance for cash burn of $40 million to $45 million for the full year 2023. I want to reiterate on the fundamentals of Swoop our access and affordability. Through our commercial progress over the last 2 years, we know that our clinical value proposition with customers is strong. As mentioned in our last earnings call, we have implemented a new crisis for the Swoop system in early 2023. Our guidance reflects a gradual continued increase in the Swoop fabric selling price in 2023 relative to 2022.

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

Thank you, Maria. Turning to our financial results for the first quarter of 2023. Revenue for the quarter ended March 31, 2023, was $2.6 million compared to $1.5 million in the first quarter of 2022. Gross profit for the first quarter of 2023 was $1.2 million compared to $0.1 million in the first quarter of 2022 and reflecting a 44% gross margin. R&D expenses for the first quarter of 2023 were $5.5 million compared to $8.3 million in the first quarter of 2022. Sales, general and administrative expenses for the first quarter of 2023 were $8.7 million compared to $15.5 million in the first quarter of 2022.

Net loss for the first quarter was $12.2 million, equating to a net loss of $0.17 per share as compared to a net loss of $23.8 million or a net loss of $0.34 per share for the same period of the prior year. Our cash burn in the first quarter was $13.4 million, and we ended the first quarter of 2023 with $104 million in cash and cash equivalents. Turning to our 2023 outlook. Based on the progress and current trends of the business, we are maintaining full-year expectations for revenue to be in the range of $10 million to $14 million. As Maria mentioned, the Swoop clinical value proposition with customers is strong. The new pricing is now in effect.

As we mentioned last quarter, we will not be providing an exact average selling price or unit volume expectation, but our guidance is predicated on the assumption that the Swoop system pricing will continue increasing in 2023 relative to 2022. And based on our position in the market today, we remain confident in that steady race improvement. To help you with modeling, please note we still expect our second half to be stronger than our first half as our new sales team gains experience and continues to drive the pipeline. For the year, we now expect gross margins to be approximately 40% to 50% as we began recognizing scale and average food pricing moves gradually higher.

And lastly, we are maintaining expectations for 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 streamlined investments in SG&A while maintaining customer-facing resources to continue to drive the adoption of growth. In line with this, we have allocated a greater relative portion of OpEx spending to R&D in 2023 versus prior year 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 recent rightsizing and reorganization. As we shared in March, we are excited about the momentum we are building for the remainder of the year and beyond, and 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'd like to turn the call back to Maria for closing comments.

Thank you, Brett. I'm proud of the progress the Hyperfine team has made in recent months, and I am very bullish as to what the team can deliver. Just a week ago, I attended ASNR in Chicago and was able to witness firsthand the interest that our Swoop system is drawing from clinicians as well as the patient care conversations that continue to open opportunities for Swoop where conventional MRI is not practical or not available. The opportunity for Hyperfine is increasingly compelling as we develop use cases for ultra-low MRI and expand geographically. And I'm confident that we will have exciting progress to discuss with you all on calls to come.

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

(Operator Instructions) And our first question comes from the line of Larry Biegelsen with Wells Fargo.

Congrats on a good start to the year. Just a few for me here. First, you beat consensus, and I know there are only a few estimates by about $0.5 million, and you're on a run rate now of over $10 million. So why not raise the low end of the guidance range? Was there anything one-time or one-time benefit in Q1? Then I had a couple of follow-ups.

Sure. Thanks for the question, and good afternoon. I think it is really about being prudent. As we said last call, we have just put in place new sales leadership. We have also hired a relatively new sales team. So we are very -- I am particularly very, very pleased with the momentum I am seeing with the new reps, but I want to make sure that they have a little bit more run time before we start feeling really confident in how they're predicting quarters to come. There was not anything there that was onetime.

We have those 2 orders that we continue to deliver a little bit every quarter, and that just continued on the same pattern. So it was strong from the U.S. It had a little bit of contribution from international with a little bit of contributions from gate. I just want to make sure that we give our new leadership and sales professionals a little bit more run time until we can be more confident about where we're going to land the plane at the end of the year.

That's fair. And a couple of follow-ups. One, the Action PMR trial, how long do you think that will take to enroll? What's the follow-up there? How long before we potentially see data?

Okay. So it's a little hard to predict. We are doing this as we continue to also improve what I would call our offering on the stroke side. So our first order of business with that evaluation is to make sure that our latest software, which is going to be one more than the one that is commercially available is able to detect as clinicians want the stroke in the acute setting. We have to do a little bit more work to shorten the time that it takes to gather those sequences, those images. So we need to shorten the length of the sequences.

So we will be continuing on that development work and want to actually include faster sequences at some point in time also in the action PMR. There really is no follow-up to the study. All of it is really in the acute setting, the ability to really detect stroke and be able to get to a clinical decision about what is best for that patient in this evaluation. So no time to wait for follow-up data but I want to be a little bit prudent that our involvement may take a little longer as I want to make sure that we have the opportunity to put in the study, the latest software, which is now embedded testing, but also faster sequences, which are currently in development and available later in the year.

That's fair. And just one more for me. There are 2 Alzheimer's drugs that have shown positive data recently and I think the reimbursement requires for MRIs per year. So my question is, first, are you seeing increased interest in your technology because of that? And what are you doing to capitalize on that opportunity? Do you need to do an equivalent study with standard MRI? Do you need to partner with the company? I'd love to hear your thoughts on that.

Excellent question. Thank you, Larry. It definitely is a phenomenal opportunity that has presented in front of us. And you are right, there is a Biogen drug that got conditional approval a few months ago, should get reimbursed and infusion should start in the fall, and there are even more attractive therapies coming behind them, I believe from Lilly for one, and I believe it is Roche the third one. We have gotten ourselves deep in the debate that is right now in the clinical community. We have some current users of our system that believe that we can play a role in that initial triaging of those patients as they are monitored with multiple scans. The numbers sometimes are even higher than 4 a year. So we're working at the individual center level.

There is also an ASNR working group that has actually focused on this topic. They had a meeting last week and big magnet people were there and somewhere we. Learning how the field from a clinical perspective is not fully aligned as to whether an ultra-low field scanner is going to be as effective as a 15 or a 3G, but we are not watching the movie from a distance. We are right in the movie. We have started to try to reach out to the companies to see if there's an opportunity to partner.

And last but not least, we are at the company working to really put together what I would call an Alzheimer's package that may include 2 things: one, maybe a package of sequences, we develop sequences separately, and then we also combine them into the protocols that allow people to use them in clinical conditions. So that would be one. The other one is that one of the clear trends where there is more alignment from the technical community is that a lot of these scanners are going to be used or read by physicians that are not necessarily your traditional rads or neuro rad. They are going to be a little bit more in the hands of dementia clinics professionals, memory loss clinic professionals, geriatric physicians.

So there is a number of software companies that are looking to standardize trend reports, monitoring reports to really understand how these patients evolve over the course of subsequent fusions or subsequent doses of the drug. The short of it is, hopefully, I've given you a sense that we are sticking to everything that is happening. I don't know yet, and I can't quite paint the picture as to how big the opportunity is for us and how near-term it is. But it's definitely something that we're going to put really hard to play a role in. And in a few months or short quarters, I hope I can give you more clarity as to the size of the opportunity and the timing of it.

Our next question comes from the line of Vijay Kumar with Evercore ISI.

This is Kevin, on for Vijay. Just following on gross margin, 43% in the quarter. Can you talk to the drivers behind that number? I know in the past, you pointed to price volume and cost as the overall driver. But how about from a device versus services perspective? Is there any color you can provide there? And is the about 50% device margin and about 20% service margin, a good base to follow and build upon a new profession?

I think I'm going to let Brett address that. Your line was a little hard to understand. So I'll pass it over to Brett.

Yes. I'll walk through this and clarify if I don't capture the full essence of the question. But I think the question was effectively on margins and the drivers and were there any subcomponents to that. So if you look from a progressive basis, we talked about the increase in ASP. If you go back to early 2022, we put new pricing in place that followed into the pricing we had in 2021. We put new pricing in place here in 2023.

Really, most of the margin increase that we've seen sequentially in year-over-year is a real direct result of the pricing that we've been able to realize as a business. We do break out the margin or the device and the service component that may vary over time. But really, I think the vast majority of our revenue is coming from device. And you can think about the ASP playing a very heavy role on that. And then I think from a guide margin, we've guided to the 40% to 50% range for the full year. So we landed kind of in the middle of that here for Q1.

Thank you. One moment please for our next question. And our next question comes from the line of Neil Chatterji with B. Riley.

I might have just missed this, but just quickly just on the sales funnel and installs for the quarter. I know there was some that slipped from fourth quarter. Do we say if any of those hit in first quarter? And what expectations for those?

Sorry, I'm not sure I caught your question. You were talking about whether things to lift from Q4 and made it into Q1. Maybe repeat it, sorry.

Yes, that and then and if not, how that's tracking?

Okay. There were some deals that took a little longer. It didn't close in Q4 and ended up actually materializing in Q1. That's a little bit of the nature of the beast, which are our deal flow is strong, but the deals do take long, and we estimate an average of 6 months. But sometimes they end up taking lumber through MR safety, scrutiny or cyber scrutiny. I think overall, the quarter was healthy. We also had, as you remember, the putting in place of the full sales team. So there was a little bit of a topic quarter in a way with territories with brand-new people versus other territories opened for a few weeks.

So I overall feel that the results in Q1 were very good. And I feel really good about the pipeline that I see. I don't see the deals taking shorter, but I do see a robust pipeline, and I'm encouraged that it is, as I said before, well distributed across all of our U.S. territories and in some cases, very positive green shoots from some of the newer reps that have hit the ground running. Although for the most part, we need to give them their 6 months to get totally comfortable with the sales process, implementation process, customer knowledge, customer acquisition and all of the different subfunctions within their new role.

Got it. Right. And again, sorry, I might have missed this. But on the gross margin guidance, the $40 million to $50 million, just curious on the cadence, how to think about that after this first quarter. Is that going to be sequentially stronger through the year? Or what -- how do you think about that?

Yes, I'll take that, Neil. This is Brett. So we talked about, I think, in our prepared remarks about a gradual increase in pricing throughout the year. And so I think you can think about margin going along with that. With one thing that we've talked about, I think, previously, mix does have an impact in terms of any individual quarter. We have 3 different channels. We've got the U.S. direct to commercial. We've got our international distributors, and then we have the units that are part of the KCL King's College. So any individual quarter may have some variability based on mix. But the general trend in pricing, we talked about being sequentially stronger and gradually increasing given the price increases that we've taken in the U.S.

Great. And then just one last one for me. Curious if there's any update, it sounded like there was maybe some of them prepared. But just on the -- sorry, this AI partnership, just any progress there?

We continue to make the progress that we expected. Again, we're gearing towards starting pilot evaluations in accounts with the technology development, which has been around the integration of our images into their workflow and making sure that they can actually use the VCI platform to manage their patients with the use of our images. So I can't give you an exact time frame as to when we will see it go live at the couple of accounts that have been identified, but that continues to move along well.

Thank you. I would now like to hand the call back over to Hyperfine CEO, Maria Sainz, for any closing remarks.

Well, thank you very much for your interest in Hyperfine. I look forward to updating you again in a quarter. Talk to you soon. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.