Lifeward Ltd (LFWD) 2014 Q4 法說會逐字稿

Good day ladies and gentlemen, and welcome to the ReWalk Robotics Q4 2014 conference call.

At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions)

As a reminder, today's conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Lisa Wilson, Investor Relations for ReWalk. You may begin, ma'am.

Thank you. Good morning and welcome to the ReWalk Robotics fourth-quarter 2014 earnings call. This is Lisa Wilson, Investor Relations for ReWalk. With me on today's call are Larry Jasinski, Chief Executive Officer; Kevin Hershberger, Chief Financial Officer of ReWalk; and Ami Kraft, General Manager of ReWalk Israel.

This morning the Company issued a press release detailing financial results for the 3 and 12 months ended December 31st, 2014. This can be accessed through the Investor Relations section of the ReWalk website at rewalk.com and you can also access the webcast of this call from there.

Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the Company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act.

These forward-looking statements are based on information available to ReWalk management as of today and involve risks and uncertainties including those noted in this morning's press release and ReWalk's filings with the SEC.

Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. ReWalk specifically disclaims any intent or obligation to update these forward-looking statements except as required by law.

A telephone replay of the call will be available shortly after completion of this call for the next two weeks. You'll find dial-in information in today's press release. The archived webcast will be available for one year on the Company's website rewalk.com.

For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on February 12, 2014. Since then, ReWalk may have made announcements related to the topics discussed, so please reference the Company's most recent press releases and SEC filings.

And with that, I'll turn the call over to ReWalk's CEO, Larry Jasinski.

Thank you, Lisa. Good morning everyone. Thank you for joining us.

Despite having over four feet of snow here in Boston, we are very excited to speak about ReWalk. I am pleased to report that we continue to build strong worldwide demand for ReWalk systems.

Total revenue for the fourth quarter was $1.5 million, up 283% compared to the fourth quarter last year. It mirrored the solid results in Q3 and represented a mix of sales for personal use and rehab centers.

Revenue for the full year was $4.0 million. We placed 31 ReWalk systems globally during Q4 and 74 systems total during 2014, up substantially from the 6 systems placed during Q4 last year and 25 systems in all of 2013.

The ReWalk geographic footprint continues to grow as we expand the reach of ReWalk systems within existing markets and into new locations around the world. We added 15 new training centers in Q4 and we had 57 new placements worldwide since receiving US FDA clearance in June 2014.

In parallel, we have made substantial progress in strengthening our internal reimbursement organization in the US and Germany. With this internal team, we can help individuals successfully navigate the reimbursement landscape to gain coverage.

Notably, in the first few weeks with this team, two US private insurers approved personal systems. And the BG in Germany announced their payment of a personal system.

Organizationally, in Q4, we were fortunate to expand the talent of our management team with the addition of Kevin Hershberger as our new Chief Financial Officer. Kevin brings more than 25 years of hands-on experience in the medical device and manufacturing fields. His public company financial leadership experience at NxStage and Boston Scientific Corporation will serve our Company and shareholders well as ReWalk executes its growth initiatives.

I am also pleased that we retain the talents of Ami Kraft who has transitioned to the role of General Manager of ReWalk's operations in Israel. Here, he will focus ReWalk's efforts on new product launches and margin improvement. Ami's leadership was instrumental in establishing ReWalk's solid financial foundation and we look forward to his ongoing contribution.

I would like now to turn the call over to Kevin to discuss our fourth quarter and full year financials. Kevin?

Thank you, Larry. As Larry just stated, our revenue was up 283% to $1.5 million for the fourth quarter of 2014 compared with $400,000 in the fourth quarter of 2013 with higher sales and placements of ReWalk systems. Total revenue for the full year grew to $4 million compared with $1.6 million in 2013.

During Q4, we placed 31 systems, 40% of the 74 total units placed during the year, an increase of 11% from Q3 and significantly more than the 6 devices placed during Q4 2013. Of the total units placed since FDA clearance, more than half were placed for personal use with the remaining balance to be used in rehabilitation centers around the world to continue to grow this market.

We are particularly excited about the strong performance in the US market where we saw an increase versus Q3 and continue to see strong interest for both personal and rehabilitation use.

During Q4, we recorded a gross loss of $500,000 which included a one-time charge for early repayment at a discount of a BIRD Foundation grant which will improve gross margins in 2015. Most importantly, as part of our efforts to seed additional trainee centers as we expanded our geographic reach, our gross margin rate was impacted by lower average selling prices outside of the US.

Additionally, in the quarter, we saw higher manufacturing cost related to product improvements and the increased quality testing which will improve efficiencies in the future.

For the full year, gross loss was $600,000, or $100,000 excluding the one-time repayment of the BIRD Foundation grant. We made good progress in gross margin during the year with our full transition of manufacturing operations to Sanmina completed in Q3 and believe we are well positioned to support growth and margin improvement in 2015.

R&D expenses increased to $1.2 million for the fourth quarter of 2014 and $8.6 million for the full year which included a one-time expense for non-cash stock-based compensation of $4.2 million in Q3. We continue to invest in building our R&D team, advancing improvements to our existing device and the development of the next generation of ReWalk devices.

SG&A expense doubled to $3.5 million and $10.7 million during the fourth-quarter and full-year 2014 respectively. We continue to invest in our sales and marketing organization as we focus on our direct markets in the United States and Germany, and expand our distribution reach in other countries across the world.

Net loss was $5.5 million for the fourth quarter and $21.7 million for the full-year 2014. This compares to a net loss of $3.5 million in the fourth-quarter and $12.2 million in the full-year 2013.

On a non-GAAP basis, adjusted for non-cash stock-based compensation expense and the early repayment of the BIRD Foundation grant, net loss for the fourth quarter of 2014 was $4.6 million, compared with a net loss of $2.7 million in the prior-year quarter, and full year non-GAAP net loss of $14.7 million compared to a net loss of $8.7 million in 2013.

As of December 31st, 2014, our balance sheet remains strong, with $43.5 million in cash, cash equivalents and short-term deposits and no debt.

And with that, I'll turn the call back over to Larry.

Thank you, Kevin. 2014 was a year of milestones for ReWalk. We solidified our foundation both organizationally and financially. Today, we have a strong platform from which to grow the Company and we continue to make great strides in building demand, expanding the ReWalk footprint globally and assisting ReWalker secure favorable third-party reimbursement.

ReWalk is a wearable exoskeleton that allows independent controlled walking while simulating the natural walking gait. The technology was designed with the independence of the ReWalker in mind. The ability to use our device at home and in the community sets us apart from other exoskeleton systems which were designed for either assisted use in a rehabilitation facility or for low speed use that has limited functionality in the community.

In the United States, ReWalk is the only exoskeleton cleared by the FDA for rehabilitation use. It is also the only exoskeleton that has a clearance for home and community use. This provides us with a clear advantage relative to competing technologies.

ReWalk is the most used, most studied exoskeleton technology of its kind. Our ReWalkers have done extraordinary things with the system, including completing marathons. More importantly, it has become routine for many ReWalkers to use the system while performing their daily activities, such as washing dishes, cooking or in the workplace.

ReWalkers also use the system when shopping, attending church, hosting a party by walking to the door to greet each visitor, or even walking with their children while trick or treating on Halloween. ReWalk is truly becoming a part of everyday life. ReWalk is more than walking, it is fundamentally changing the health and life experiences of individuals with spinal cord injury.

Recently, a non-Company sponsored study was conducted at the University of Hull, England to study the effects of using the ReWalk device on a range of motion in lower limb joints in patients with spinal cord injuries between C3 and T12. Significant increases in range of motion for the hip and ankle joints were observed. This study was published in the International Journal of Physical Therapy and Rehabilitation, in November of 2014. This demonstrates successful use of the product in higher level injuries.

In November, results from two independent clinical studies conducted by the James J. Peters VA hospital were presented at a scientific session at AAPMR. These demonstrated the medical benefits of using the ReWalk system. These studies showed improvements in quality of life measurements, for pain reduction, fatigue and improved sleep. Restoration of physiological loading to the legs was also measured. Improvements in bowel function, seated balance and reduction in fat mass were documented.

Use of the ReWalk can help minimize the extensive secondary medical consequences of paralysis which include difficulty with bowel and urinary tract function, loss of lean muscle tissue and bone mass and gain of fat mass. Potential benefits of these physiological changes include reduction in the incidence of diabetes and heart disease.

The second peer-reviewed publication from these studies was accepted for publication in the Journal of Rehabilitation Research and Development in December of 2014. We anticipate additional publications from these studies that will complete the peer review process in the first half of this year. ReWalk is the only exoskeleton system that has these types of independently generated supporting data.

Last quarter, we grew the number of training centers and placed an additional 15 systems for training with 7 placed outside the US, and 8 placed in the US. In the United States, Spaulding Rehabilitation Hospital in Boston, one of the top 10 rehabilitation centers in the US, was a key new training center addition.

The Spaulding team has completed our training program, and will begin enrolling qualified SCI patients in a ReWalk training program in early-2015. We are very excited to have them join our expanding community of training centers across the country.

Outside the United States, we recently extended the global reach of ReWalk systems to four centers in Europe and one center each in Australia, New Zealand, and Taiwan. As an example, we already have eight trained users at Making Strides in Australia that may be able to move to personal systems in the months ahead. These training centers are the key source in building a global base for training users, and in sending these systems into the community for everyday use.

I am proud to say that ReWalk systems are active and available to more individuals in more countries than ever before. Today, we have 84 units in use in rehabilitation centers, and 54 units in home environments. Since we gained US FDA clearance last June, we have placed 57 systems, 35 for personal use and 22 for rehab and training use.

In addition to building demand around the world, we are focused on honing our internal core competencies on the reimbursement front in the US and in Germany.

In Q4, we successfully recruited and added four individuals to support reimbursement management for users who want the system. Our goal is to help every user obtain a system for use in their everyday life, starting from the point where they're initially interested, through qualifying and training them on a ReWalk system, and ultimately helping them manage their reimbursement claim process.

And we have seen many of these users already receive coverage for training. The next major effort is to achieve coverage for home and community use. In the first few weeks, our new team was able to successfully achieve full payment coverage for personal exoskeleton systems with two private US insurers.

These reimbursement wins marked the first private insurance and workman's compensation payments for personal exoskeleton systems in the United States. They follow the James J. Peters VA Medical Center decision last July.

Importantly, they further indicate that the acceptance of exoskeletons is growing. We believe this positive momentum will continue to pave the way for additional coverage wins. Globally, we now have reimbursement approval from three US insurers and four German insurers, as well as several claims pending review.

On the sales generation front, we believe the momentum remains strong and continue to add new field personnel to manage the growing pipeline of leads. And we are very confident about building this market.

As an example of activities, we recently became a sponsor of the National Wheelchair Basketball Association. We have found these sports-orientated groups to be remarkable individuals who have demonstrated great interest and very encouraging results as they start their use of the ReWalk. These are wonderful groups to be able to sponsor and to be able to work with.

Our milestones in 2014 were significant. We established and had a successful IPO that strengthened our financial foundation. We established an extremely high quality manufacturing center with Sanmina Corporation that can meet our capacity requirements. We achieved the first and only FDA clearance for a rehabilitation system. We achieved the only FDA clearance for an exoskeleton personal system which will allow the first large scale use of exoskeletons in everyday life.

We achieved the completion and ongoing publication of scientific data that supports the clinical benefits of the specific ReWalk design. We have 54 individuals using the ReWalk in their communities. We have demonstrated reimbursement success in the US and Germany, including two key wins with US private insurers and the BG in Germany. We have the addition of experienced reimbursement managers that makes our exoskeleton accessible to more people. And we have partnerships around the world now that will continue to build demand.

Looking to the future, we see even more opportunities for ReWalk to continue as the market leader in exoskeletons. We have increased our R&D resources and plan to bring new generations of ReWalk to market in the near term. We have also initiated efforts to build products and collect supporting scientific data for additional applications beyond spinal cord injury. We have only touched the surface of possibilities for ReWalk around the world.

We look forward to update you on our progress. We thank you for your ongoing support. And with that, I'd like to open the call for questions. And operator, if you can please go ahead with instructions.

(Operator Instructions)

William Plovanic, Canaccord Genuity.

So a couple of questions here. Just as we look at this, I mean you're obviously in the very early stages of commercialization of this product. And looking at the pricing per unit, it's a little lower than I think what you've seen historically. And my question is, is this a strategic decision to seed the market for the rehab centers or I'm just wondering what's driving that, both domestically and globally?

So there are three comments I'll give on that. First, the US ASP was strong and we're very happy with that. And we are seeding the market. As you see, we placed a good number of units in other countries where we did give some lower pricing to get it going. And we also have some rental units in there as factors that affect it. But we believe that the ASP will follow the pattern we're seeing in the United States.

I think if we do the math, it was about $60,000 a unit in the United States, down from the like the $75,000-$80,000 historically. Is that just a mix shift or is that the worker's comp payer or what is that exactly?

The workman's comp one was at regular price, so there was no discounting in any of the insurance or the institutional payments. The difference primarily outside the US was driven by the new units. In the US, it was a little bit of a mix as the P product, which was a bigger percentage of our sales, was a lower ASP than the rehab product.

Bill, the other factor that came to that is we do have a couple of rental units in the US as Larry indicated.

So are you shifting the strategy to a sales to a rental program and that's going to change how you recognize the revenues and how the pricing will show up?

No, we're not shifting it but we're open to listening to users because we also could consider long term that a properly priced rental or lease program may be attractive to us as a Company. So we are willing to look at that and so we've done it in two cases here in this last quarter.

Okay. And then just I think you gave us great granularity on the number of personal rehab, what have you, but encouraged by the training centers added, you mentioned eight in the US. Where did you end 2014 in terms of training centers ready to go and where do you think that will be in 2015?

We ended the year with 84 training centers on a global basis. And we anticipate that we will see growth in several regions that are new but then in the US we'll see the same kind of percentage increase. But I can't give you specific guidance right now on number of training centers.

And do you know of the 84 how many of those were US?

Little better -- about half.

About half, so about 40. Okay, so that's --

Yes.

You've been very successful in getting them out there. And then just the last question from me and I'll jump into queue. You're working, you've talked about the next generation device. What do you think timing will be, at least when do you think that will be ready for a 510(k) submission potentially and when can we see that hit the market and what type of features and benefits would that have? Thank you.

Okay, well, first, we're really excited about the multiple next generation products we're working on. But we're not going to give our timing out just yet on the products. So you will be able to see more of that as they develop into the market. And the levels of improvements with these products, the best examples I can give you are things like the cell phone industry. You saw great strides made from system to system. And even the current product right now that we have out is about our fifth generation product.

So we'll just continue to advance it, but we won't telegraph the timing until we're ready to give it to customers.

And then, Larry, just to kind of press you a bit on that, I mean as we think about how you iterate the product, could we see a) an improvement in 2015 or is it more 2016-2017 timeframe, not to put a point on the day but just kind of the year that we could expect to see something?

I think I'll use again the cell phone analogy. You're going to see improvements probably on a routine basis and occasionally a leap. So you'll probably see some improvements this year and leaps in the years ahead.

Thank you.

Okay.

Imron Zafar, Jefferies.

Thank you very much for taking my question. Can you just talk about the outlook for 2015 first relative to units? Maybe you can just give us some qualitative trends on how we should be modeling the cadence throughout the year in terms of units.

Well, right now we are not giving formal guidance for 2015. But our expectations are that we'll continue to see sequential quarter-to-quarter growth. And if I have to characterize this, we're in the early innings and we've got good traction and demand is building and we're still learning about this.

Okay. And then I guess on the expense side and the budgeting side, can you just talk about OpEx levels for the year and then cash burn expectations for 2015?

Yes, again we haven't given guidance and at this point in time, we're not giving guidance. We continue -- as I said before, we continue to invest in our sales and marketing and our R&D organizations, and we feel good about where we are.

Okay. And then just in terms of the early experience with the launch, can you just talk about any surprises you have encountered, any changes to your investment plans relative to the experience you had to date on the commercial side?

Well, I think there's a range of things. My surprises are how much someone tells when they love washing the dishes, which wasn?t one of my favorite tasks, but for a ReWalker to stand and do it at home and the stories they tell us about everyday life, it makes you appreciate the things that we are able to change with this product. So that's sort of a nice surprise.

I think for us, we are learning that we just have to provide a lot of education to everybody in the market, whether that's the insurers or the users to have all expectations right to get this through. I wouldn't necessarily consider it a surprise but it's a key learning and that's where the new reimbursement team that we brought in has been particularly helpful because they are adept at educating the payers which is really the most important next step.

Okay. That's it for me. Thank you very much.

Matt Taylor, Barclays.

This is actually Young Lee in for Matt. First question is on the reimbursement front, regarding the VA reimbursement procedure, can you provide some additional colors or details around that? Are you comfortable with maybe like a mid-2015 timeline? Do you have any updates on that?

Yes, well, there're two elements. First, the James J. Peters VA is active. They bought three units in the second half of the last year. And they have a policy and full training program in place. So if you are a veteran, you can get a unit provided for you if you qualify at the James J. Peters VA.

On the national front for the VA, we don't have control of their timeline. They have been asking us for a lot of just background information on how to set up training and programs. And they are considering I think what they'll do for a program. But they have given us no specific timeline as to when they will make a decision.

Okay. Great, thanks. And I guess another question on the competitive front, there's been some I guess recent news from other companies sending out press releases regarding their progress with exoskeleton, mainly with studies. Are you seeing anything in the field or hearing anything?

Well, we're the only product that can be legally marketed in the US. So we're not seeing as much in this country. But our observations are we're each going on particular paths and our device is the one that is most functional in the community, in terms of walking speed and things that it can do for everyday life, and that's demonstrated now with, let's say, 57 users out there around the world.

Until they get FDA decisions on what their claims are allowed, I think we're a little more limited on information and we haven't seen that much in the US. So at the moment, we have a good lead and we've also focused quite a bit. Our effort on R&D, although we're not putting out dates, is we're going to continue to add features at a rate that we believe will lead the market.

Young Lee Okay, great. Thanks for the color.

And I am not showing any further questions at this time. I would like to hand the conference back over to Larry.

Okay, if there are no further questions, I would like to thank everybody for their questions and their time, and we look forward to giving you advice on the progress of the Company in the quarters ahead.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.