Lifeward Ltd (LFWD) 2021 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Q3 2021 ReWalk Robotics Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference call over to your host, Mr. Ori Gon. Please go ahead.

Thank you, Christie. Good morning, and welcome to ReWalk Robotics Third Quarter 2021 Earnings Call. This is Ori Gon, ReWalk Chief Financial Officer. And with me on today's call is Larry Jasinski, our Chief Executive Officer.

Yesterday, the company issued a press release detailing financial results for the 3 and 9 months ended September 30, 2021. This press release and a webcast of this call can be accessed through the Investor Relations section of the ReWalk website at www.rewalk.com.

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 our 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. You will find the dial-in information in today's press release. The archived webcast will be available on the company's website at www.rewalk.com. For the benefit of those who may be listening to the replay or the archived webcast, this call was held and recorded on November 11, 2021. 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. Larry?

Thank you, Ori. Good morning, everyone. ReWalk had an excellent Q3 with sales growth and progress on key strategic initiatives to build our business long term. We remain on track to meet our 2021 goals and are optimistic about the future with fundamental signals coming from our submissions and efforts.

Even though a headwind existed with COVID, we still found a path to reach our targets. Our revenue reached its highest level in 4 years with sales of $1.972 million, an increase of 37% compared to $1.436 million in Q2, and increased by 164% compared to the prior year quarter of $747,000. The growth came from increased placements in both the U.S. and Germany. The gross margin also increased from 51% in the previous quarter to 58% as almost all placements were in our direct markets which carry a higher ASP.

The highlights of this quarter include: First, increasing VA activity for the first time since the pandemic as we've been able to restart training in some centers and have initiated training for a veteran under the VA Choice Program where the VA is training in a private center near their home. We are thrilled to see this progress with the VA, but also found that the Delta variant of COVID once again, reduced the access and delayed starts in training for many veterans.

Second, we are starting to experience resupply of new systems from some of our original customers. As the system has an expected life of about 5 years, or 1 million steps, we had insurers in both the U.S. and in Germany, replace systems for their high-level users who have benefited from their system over many years. As an example, the cycle time for a resupply with a German payer took only 4 days as the value and need for the system was well understood by all.

Third, we had the initiation of a full exoskeletal system training curriculum with a renowned physical therapist training university. This will support the future needs for fully trained students entering the clinics with a solid academic understanding and experience in the training of exoskeleton users. They will know how to properly and effectively incorporate these systems as a meaningful element of their everyday life.

Fourth, we completed an additional capital raise of $32.5 million on September 27. This increase in capital positions us with $91.2 million of cash on hand as of September 30, 2021. This cash will allow us to have the infrastructure and products we need in place as we expand our coverage over 2022 and 2023. We will also consider strategic acquisitions that can shorten our pathway to profitability.

We identified our key milestones for 2021 at the start of the year and have updated our progress in each quarter. Here is a summary after 3 quarters. Number one, German court decision regarding direct compensation for disability supply. The Federal Social Court ruling has not yet been concluded. However, we have moved up the docket of published cases. We are not in any control over the timing, and anticipate having a ruling this year or in the coming months. A positive ruling will have a significant impact on access to exoskeletons.

Number two, German insurance coverage expansion. We have expanded discussions with private health insurers that are among the largest in Germany. We encourage to see this additional interest and expect the court case will enable us to add multiple groups to the formal contract process in the period after the case is concluded.

Number three, progress with CMS. We announced via press release the addition of significant and experienced leadership added to ReWalk to lead this effort for our company and the industry. Over the last 10 weeks, our planning, infrastructure and strategic contacts have been expanded. We are focused on determining coverage, coding and reimbursement pathways for key payers and to reduce the acquisition cycle time for our ReWalk system so appropriate individuals will have timely access to the benefits of walking.

And number four, national accounts. Our active trials in the U.K. and U.S. have moved slowly as the Delta variant of COVID slowed utilization and action. Tactically, we have modified our efforts to include more of our product offering by including additional product lines to broaden our reach. We do not anticipate these national accounts will reach decisions and conclusions in 2021 at this stage.

I'd now like to turn the call over to Ori, who will review our financial details.

Thanks, Larry. ReWalk reported revenues for the third quarter were $2 million compared to $747,000 in the third quarter of 2020. For the 9 months period, ended September 30, 2021, we have recorded revenues of $4.7 million compared to $3.2 million in the previous year, which represents 49% year-over-year growth. The increase this quarter was mainly due to higher number of our SCI device sold to personal users as well as to clinics, including a multiple unit order to PT university.

Our insurance performance this quarter was also very positive, with five new insurance decisions to place a device for a new rental or a direct purchase and 10 conversions of previously rented devices, which represents our highest number of previously rented devices converted in a single quarter. Our current pipeline of active rentals consists of 13 cases, representing a total revenue potential of $1.3 million. And our overall insurance cases is currently at 84, with 66 of them in Germany and 18 in the U.S.

Turning into our gross margin. In the third quarter of 2021, our gross margin was 58% compared to 52% in the prior year quarter. The increase is mainly due to increased number of our SCI units sold in higher ASP, offset with some increased service expenses.

As we look into our operating expenses, our 2021 third quarter OpEx were $3.8 million compared to $3.5 million in the prior year quarter. This increase is mainly attributed to our SG&A as we had higher labor and sales-related expenses. The lower R&D that offset this increase is mainly due to lower employee spend as well as reduced professional services.

To recap the quarterly results, our net loss for the third quarter of 2021 was $2.7 million compared to a net loss of $3.3 million in the third quarter of 2020. Our non-GAAP net loss for the third quarter of 2021 was $2 million compared to $3 million in the third quarter of 2020. We ended the quarter with $91.2 million in cash, as we closed the registered direct offering in the amount of $32.5 million in gross proceeds during September 2021.

With that, I'd like to turn the call back to Larry for additional remarks.

Thank you, Ori. As we are establishing our key objectives for 2022 and beyond, I'd highlight recent milestones as part of our strategy.

First, we received a breakthrough designation for ReWalk's ReBoot technology. This is a home and community-based walking system for individuals with impaired gait after stroke and potentially can be used for other neuro conditions, such as multiple sclerosis. The determination of this design is innovative and is a breakthrough technology by the FDA is meaningful.

The simple goal is putting the device on one hand, like putting on a boot, turning it on and having a combination mechanical and sensor-based system that promotes improved walking. The goal is a low-cost system that both enhances the treatment started in the rehab setting and also acts as a longer-term aid to walking and accessing the community. The key goal for the system is to be calibrated for each user, and for the system to have the capacity to match the conditions and the situations where the person's walking.

The current prevalence flow for stroke is 7 million people in the United States and 9.6 million in Europe. The incident rates are about 800,000 people in the U.S. and 1.1 million in Europe. This design is intended to support a substantial subset of these groups that require lower limb assistance in the years ahead.

The ReWalk ReBoot is based on intellectual property licensed from Harvard University, which is exclusive to ReWalk for medical applications involving products that help restore more normal gait patterns for individuals with gait impairments. The intellectual property includes a number of patent application families, originally filed between 2013 and 2016, of which a number of patents have issued in the U.S., Europe and China. Together, the issued patents and pending applications cover aspects of systems and methods for human motion control, including use of flexible components such as wires, cables, straps and records.

ReWalk and Harvard University are pursuing further related to visual and continuation applications from the early filings to seek out further protection as well as new additional intellectual property based on ongoing research and development that further strengthens the portfolio. We believe that this IP protects use of this innovative and unique design.

The initial systems were developed over the last 3 years and are presently being utilized in clinical studies with Harvard University. The transfer for the FDA breakthrough applications completed during Q3 and the process of expanding development and market analysis, conducting further clinical studies, completing the subsequent FDA and CE processes and preparing for commercialization are the next stages of focus for this innovative design.

Second, strategic initiative. ReWalk 6.0 experience, as the most utilized exoskeleton design, has provided the knowledge to develop new features to improve the user's experience. Our goal is to provide these designs to the market in 2022 with new systems and programs that can also support existing systems.

Third, as an element of expanding our health economic science for access and coverage, we have funded and supported analysis of data examining the medical expenses and effectiveness of exoskeletal walking compared to the period prior to exoskeleton use. The study is in the late stages of the analysis, and the investigators will seek to publish these results in 2022. We believe this will be very helpful to payers and to the industry in considering these devices as a standard of care.

To summarize, this was a very good quarter despite the limits caused by the COVID variants. Our key products are growing and progressing. Coverage activities are progressing in a deliberate -- and our financial position allows us to consider opportunities to build the value of our franchise. I look forward to -- the year in our next session.

Thank you, everyone, for your time and interest today. I'd like to turn the call over to questions at this stage. Operator, please go ahead with the instructions.

(Operator Instructions) Our first question will come from the line of Swayampakula Ramakanth.

This is RK from H.C. Wainwright. Fantastic quarter, Really, glad to see the top line growth there. And you're also talking about a couple of initiatives that we have not heard from you folks before.

So talking about initiatives, let's start with the PT university -- the prominent PT university that you are talking about. Obviously, this is a very interesting entry into teaching hospitals or teaching universities, which have large PT programs.

What are your ongoing efforts? Obviously, this does not happen overnight. So this has been going on for a while. So what has been your efforts so far? How do you see this as a market segment for you folks? I just want to understand what's the market potential to start with?

I think, Ori and I can both provide some guidance here. First, the recognition, I think, at the university level that this is going to become a standard of care, drove them to making this a part of their curriculum, and it really helps us and our end goal of having people at centers competent and trained to recognize when this can help patients and obviously, to provide the system. So this is a very important initiative. It's been in process for about a year. There will be some press. We believe, the university will choose to put -- to approve sometime in the coming weeks.

But as it stands at present, we have focused on training. They have acquired a number of systems from us. That was part of these sales for the quarter. And we have done the initial training. And they are developing the curriculum now, and we'll be sending those students out on internships and other things as time goes on.

Market segment, we didn't focus on this as much as a market segment for just sales of units. We viewed it as an enabler for our personal sales. So we have more and more trained therapists that we're going to recommend and be involved with the product. So the number of institutions that have training centers in the United States, we'd have to actually go back and spend some time on that. We have certainly made our efforts to educate, but I would say, our focus was the later part of the game that we can take care of patients. So that has really been the real focus on it.

Ori, is there anything you'd add on this one?

Yes, I think that we also had, in the past, some sales to university with also a clinic, right, a clinic that is supporting the students. But also, I believe we are also potentially looking to, at least with this organization, to try and see if they might be interested in other products, again, to include in their -- within the quarterly students learning how to use devices and incorporate them in their physiotherapy school.

Okay. Then going to the resupply replacement that's happening in -- I believe it was in Germany, if I got that correctly. So understanding that some of your units have been out in the market for a while now, do you have an idea as to, in general, how many units are out there with such -- so many others on the systems that they need to be replaced and resupply so that we can kind of get an idea as to what that drift is going to be, not just in the first quarter, but in general, over the next, say, year or 2?

Yes. We -- for both regulatory and business reasons, we know exactly where every unit is and status. So we will target them as they come due. I think structurally, when you're thinking of the revenue side, how well will the insurers -- just like they do with the wheelchairs or other medical equipment put this in their policy.

In our German contracts -- we actually had one in the U.S. and one in Germany in the quarter. But the German contracts have a segment on how we manage resupply. So they specifically have already contracted that as an element for their patients, assuming the patient's medical condition is still there. The U.S., that is developing a little more. And I think if we look back where we were 5 years ago, and you go through our quarterly numbers, we could start to kind of work at least the individual ones forward.

We have seen that mostly through workman's comp so far as they, I think, have had greater visibility on the impact on their patients. So we're in the early workman's comp cases. There's a one that we just replaced in the past quarter. And I think that's sort of a summary.

To give you a sort of a forward-looking forecast, we haven't provided that publicly yet. I think it's something we can provide some guidance on as it develops. We can all go back and look at our quarterly numbers year-over-year, which is what we're doing now as a routine, as products reach that point.

Ori, any additions?

Yes, I think we also had -- not this quarter, but in the past, also VA -- veterans that received a second unit or replace their older unit. Some has also replaced a [P50] design to a P6. But that's -- this quarter was really done quickly. So it was a very good outcome for us.

Perfect. Then, it is interesting that this quarter happened really quickly, as you said. How -- I'm just trying to understand the mechanics of that. Is that because some of these organizations have had some kind of pent-up demand, has had some currency still left on their books that if there's news they're going to lose big, and so they probably jumped on it so that they just can provide better service to their patient clients? Or is it more -- it just so happened?

It's more natural growth. I mean, there's -- obviously, the university, we have been working with them for a while, so we saw that one coming. And all the patients are the ones that we have looked at in our quarterly pipeline that we were able to process them more this quarter. And this is with the partial reopening that things became a little more predictable for us. And despite the slowdown in what maybe we would have expected, we're seeing the same thing in the coming quarter or current quarter. Users are processing needs for the same names and people that we had hoped we would have supplied to earlier. So natural growth is really where we are.

Okay. Very good. The last question for me is on the VA activities. So you said there is some increased training going on in certain centers. And certain centers, obviously, are going through the laborings of COVID-19. So in general, what are your comments as far as -- some of these training centers are -- they kind of processing acquisition of devices as well, exoskeletons as well? Or is it just the gaming -- they're starting training with the exoskeletons that they have on board?

Well, the VA has essentially were shut for the last 2 years. So our last sale prior to what we've got going on now was Q4 2019. And we now have about 10 users that are currently in the pipeline with the VA. But we have a much larger number, over 40, that we'd like to see it. And I think we're going to have to do some work with the VA to help this move along because some centers are not active. In many cases, it's harder for the patient to travel. Still, they don't like going either into the city or into places that are an hour or more way for training.

We will increase our effort on the Choice Program to support that in any way that we can, which the real value of that is you can do it at the place that's closest to your house. And that may be a way to get past some bottlenecks where VA is maybe short on staff or are limiting things still due to COVID. So that is our first strategic initiative is now that we have one choice going to try to get some more. And beyond that, we see them opening up. We hope they will open up on a more national scale because it's very regional right now.

(Operator Instructions) I am showing no further questions at this time. I would now like to turn the conference back over to Larry Jasinski for any closing remarks.

Thank you, Christie. Thank you very much for everyone for joining us today. Please stay tuned to our developments, and we look forward to presenting to you again in the next quarter as we believe this progress will continue. Thank you.

Ladies and gentlemen, thank you for participating. You may now disconnect.