Ekso Bionics Holdings, Inc. (EKSO) Q4 2020 Earnings Report, Transcript and Summary

Greetings, and welcome to Ekso Bionics' Fourth Quarter 2020 Financial Results Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Matt Steinberg, of Lazar Finn Partners. Thank you. You may begin.

Thank you, operator, and thank you all for participating in today's call. Joining me from Ekso Bionics are Jack Peurach, President and Chief Executive Officer; Jack Glenn, Chief Financial Officer; and Bill Shaw, Chief Commercial Officer. Earlier today, Ekso Bionics released financial results for the quarter and full year ended December 31, 2020. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including our future financial or operational expectations or our expectations of the regulatory landscape governing our products and operations, are based upon management's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list of description of the risks and uncertainties associated with our businesses, please see our filings with the Securities and Exchange Commission. Ekso disclaims any intention or obligation, except as required by law, to update or revise any financial or operational projections, our regulatory outlook or other forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the broadcast today, February 25, 2021. I will now turn the call over to Jack Peurach.

Thanks, Matt. And thanks everybody for joining us today. To start I'd like to acknowledge the dedication of our entire team across our organization. Their commitment allowed us to continue serving our customers and bring meaningful solutions to patients recovering from stroke, and spinal cord and traumatic brain injuries. Our unique technology has enabled tens of thousands of patients to take over 130 million steps to date. And we are proud to see a growing number of physicians recognize that Ekso elevates the standard of care for neuro rehabilitation. Now turning to a review of our fourth quarter performance, our commercial and clinical teams continued their strong execution in raising customer engagement levels and expanding physician awareness of our innovative exoskeleton devices in the medical community. The introduction of our subscription selling model is getting solid traction among our hospital and long-term care facility customers whose capital budgets remained under pressure. By creating more opportunities using the EksoNR as part of the patient rehabilitation process, we are facilitating relationships that we expect will result in long-term subscriptions or future capital purchases. Bill will discuss this in more detail shortly, but we are pleased with the early progress. For the fourth quarter we recorded revenue of $2.3 million in line with our preliminary announcement. While, we saw initial signs of recovery in the rehabilitation space beginning in the second quarter and accelerating into the third quarter, rising global COVID cases and hospitalizations in the fourth quarter created a challenging selling environment. During the quarter we recorded 14 total EksoNR bookings, including for subscription units. For the full year 2020 we generated a total of 61 bookings, which included 19 subscription units and nine rentals converted to sales. On the industrial front, we are pleased with the early customer interest and excitement of our EVO upper body exoskeleton devices following its first full quarter on the market. We believe EVO has a broad range of applications across a variety of industry verticals that look forward to penetrating this surgical market. Operationally, by taking action at the onset of the pandemic, we could quickly adapt to the changing market conditions, dramatically liner operations with current business expectations, as a result, we are now a leaner, more efficient organization. Supported by the proceeds from our recent financial offering, we are well positioned to invest in our growth moving forward. Now we'd like to turn the call over to Bill for an update on our medical segment and global commercialization strategy.

All right, thank you, Jack. Our commercial team has been resilient in overcoming challenges related to the pandemic by remaining engaged and increasing access with customers, as well as making it simpler for them to adopt their leading exoskeleton solutions. In spite of the persistent COVID challenges, we undertook a series of actions to showcase the benefits of an exo program to our virtual selling solutions and educational webinars. We are also exploring strategic partnerships to make these webinars more widely available for physicians and clinicians, who are building a platform to further illustrate the benefits of a robotic gait therapy program. We are hopeful that COVID cases and hospitalizations will continue to decrease. And now that our clinical team is fully vaccinated and are active on site at rehab centers, we expect to see an uptick in live in-person interactions going forward. In fact, we are now close to the number of onsite demos in the first quarter of 2021 compared to the previous three quarters combined. We've also experienced an increase in web visits, demo requests and social media engagement from potential customers. While we are cautiously optimistic about the current COVID outlook, the successful completion of our first virtual training sessions, leave us well positioned to address existing pipeline opportunities, mitigating the effects of future COVID-related lockdowns or travel restrictions. In addition to engaging with customers, our focus is to make sure their adoption decisions are easier as they face increased budgetary pressures. The introduction of our subscription model helps remove capital barriers while creating greater access to our technology. Well, this has led to faster adoption and shorter sales cycles. Not only does this model facilitate more sales conversions and strengthen our long-term customer relationships, it also helps Ekso to develop a stable and predictable base of recurring revenue. Moreover, we are seeing added interest from network partners. And this is of particular importance since roughly one third of our users have more than one device on site. Our continued focus on network operators is proving successful as we position our new subscription program. In the past, we would pilot with one site and then add additional sites after successful pilot. But now, supported by our subscription offering, we are working toward multi-site pilots with these network operators. We look forward to sharing more information on this in the month to come. Internationally, we generated strength throughout our global network, especially in the EMEA region. I'm pleased to report we made progress with one of the largest health systems in Germany, BG Hospital Group. We executed to successful pilots, and look to grow our partnership with BGH in 2021. For the fourth quarter of 2020, we delivered approximately $2.1 million in Ekso health revenue. Our conversion and renewal rate remained strong at 87%. The increase in COVID cases and hospitalizations throughout the quarter resulted in a delay of several orders into 2021. However, no orders have been cancelled. Today, we share an exciting customer milestone as the Quality of Life Institute, or QLI, in Omaha, Nebraska, achieved their one million step with their Ekso device. The one million staff at QLI was taken by Tyler Brock, a 28-year-old spinal cord injury patient with QLI’s physical rehabilitation lab. Tyler received a tremendous ovation for hitting that milestone step as he was surrounded by QLI’s clinical team associates. Tyler followed that remarkable occasion up with an announcement that he completed his Ekso rehab training, an encouraging sign for his recovery as he relearns how to walk independently. QLI’s partnership with Ekso began in early 2013, with the first exoskeleton introduced at their facility. They have since acquired multiple devices and have helped many patients like Tyler recover from stroke, and traumatic brain and spinal cord injuries. We are proud to support to QLI on their mission in providing life-changing rehab and look forward to continuing our relationship for many years to come. Going forward, we will continue to closely monitor COVID cases and its regional impact on hospitals and rehab facilities, so that we can remain engaged with current and prospective customers. We exited the year as a much more agile organization that can quickly adapt to a rapidly changing selling environment. Our commercial team is highly motivated and committed to driving adoption of our EksoNR or providing more patients access to our advance platform. We expect to achieve this by leveraging our virtual engagement strategy, conducting more onsite activities and building on the momentum of our network strategy. At this time, I'd like to turn the call back to our CEO, Jack Peurach.

Thank you, Bill. I’d like to provide an update on the progress with our industrial segment. We view the industrial market opportunity across our targeted industry verticals as greater than $5 billion annually. Our initial target segments include construction and food processing, where we have already seen promising early order trends for our EVO devices. EVO was specifically designed to address productivity and health risk challenges faced by industrial workers. We are encouraged by the customer feedback around usability, durability, and strength augmentation so far. Challenges of the pandemic notwithstanding, we are pleased with the launch are seeing a high level of customer interest. Given the budget challenges facing so many businesses, our subscription model provides flexible purchasing and utilization options designed to meet customer needs. Going forward, we look to bring our game changing technology, not just to those verticals, but also to warehousing, logistics utilities, and mining verticals. Now, I will turn the call over to Jack Glenn to review our fourth quarter and full year financial results.

Thank you, Jack. Ekso generated fourth quarter revenues of $2.3 million, compared to $3.7 million for the fourth quarter of 2019. Our gross profit for the fourth quarter was $1.4 million, representing gross margin of approximately 60% compared to gross profit of $1.9 million and gross margin of 50% [ph] for the same period a year ago. The increase in gross margin was primarily due to higher average selling prices and lower production costs of the company's EksoNR devices coupled with the introduction of EVO. Our actions to preserve our cash and align our cost structure enabled us to lower our operating expenses. Operating expenses for the fourth quarter of 2020 were $4.4 million, compared to $4.7 million for the fourth quarter of 2019, a reduction of approximately 7%. For the three months ended December 31, 2020, we recorded a loss on warrant liabilities of $1.5 million due to the revaluation of warrants issued in 2019 and 2020, compared to a $300,000 gain associated with reevaluation of warrants issued in 2015 and 2019 for the same period in 2019. Net loss for the fourth quarter of 2020 was $4 million or $0.48 per basic and diluted share, compared to a net loss of $2.7 million or $0.53 per basic and diluted share in the fourth quarter of 2019. Turning to year-to-date results. Revenue for the full year 2020 was $8.9 million compared to $13.9 million for the same period in 2019. Gross profit for the full year 2020 was $5.1 million, compared to gross profit of $6.8 million for the same period in 2019. Gross margin for the full year of 2020 increased 57% from 49% for the full year of 2019. Operating expenses for the full year 2020 were $18.4 million, a decrease of $5 million or about 22% compared to $23.4 million for the prior year period. For the full year 2020, we recorded a loss on warrant liabilities of $3.1 million due to the revaluation of warrants issued in 2015, 2019 and 2020, compared to a $6.4 million gain associated with the revaluation of warrants issued in 2015 and 2019 for the same period in 2019. Net loss for full year 2020 was $15.8 million or $2.21 per basic and diluted share compared to $12.1 million or $2.53 per basic and diluted share in the same period in 2019. We made significant progress throughout the year to reduce our use of cash. Cash used in operating activities for full year 2020 was $8.8 million, a decrease of $7 million or about 45% compared to $15.8 million for the prior year period. As of December 31, 2020, we had a strong cash balance of $12.9 million, which included net proceeds of $3.3 million from the exercise of warrants in 2020. Earlier this month, we received gross proceeds of approximately $40 million from a public offering that strengthens our cash position and gives us the cash runway to execute on our growth strategy. Please see our 10-K filed earlier today for further details regarding the quarter and full year. Operator, you may now open the line for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our questions come from the line of Sean Kang with H.C. Wainwright. Please proceed with your question.

Hi, thank you for taking my question. I just have a couple of questions on the EVO side. So how many pilot programs are ongoing right now and also is there any additional discussion that could lead to pilot programs or EVO?

Hey, Sean. Let me make sure, I got understood the second part of your question. Can you just repeat the second part? Are there any – just repeat it?

Just I was wondering like, is there – so the first question was how many pilot programs are there ongoing. And the second one is, is there any additional discussion that could lead to pilot programs or EVO?

Got it. Okay. So, we have several pilot programs going. We haven't disclosed exactly how many yet, but we have a number of them. Each of them are roughly so – less than 10, but each of them have about between 20 and 30 units on hand. And that's kind of shared between those two industries and we have conversations going with the number of additional companies in those industries to start additional pilot programs [indiscernible] second question, right.

Yes. Just follow-up to that. Is there any cross selling opportunity for other EksoWorks [ph] products including I think you also have ZeroG?

Yes. There is actually – there's a portion of that customers that are customers of both products. But there's actually a decent number of ZeroG customers who are not yet customers of EVO and they're in the same holds true for EVO. So, we don't sell them as a package. We pursue opportunities for both, but we're seeing in somewhat organically that there are customers who use both.

I see. Sounds good. That's helpful. Thank you.

Thank you. There are no further questions at this time. I'd like to hand the call back over to management for any closing comments.

Thank you for joining us today. To summarize, our commercial team has proven to be flexible in adapting to the rapidly changing market conditions. We are continuously engaging with our customers with the goals of increasing their adoption and education of our EksoNR devices. With the implementation of our subscription model, we are focused on further expanding our install base and supporting our path to sustainable future growth. Moreover, we are encouraged by EVO’s growing customer excitement and solve adoption trends following its initial launch. Looking ahead, the proceeds received from our latest public offering are critical to our success in executing our growth goals. I'd like to thank all of our new shareholders. We intend to focus on expanding our customer base in both the medical and industrial segments will continually innovating, which is a hallmark of our company. Ultimately, we are determined to improve patient outcomes, bring solutions to the industrial workforce and deliver long-term value for our shareholders. We look forward to providing updates on our continued progress throughout the year. Thank you and have a good day.

Thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines at this time. Have a great evening.