Ekso Bionics Holdings, Inc. (EKSO) Q1 2022 Earnings Report, Transcript and Summary

00:06 Greetings. Welcome to the Ekso Bionics First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded. 00:25 I will now turn the call over to your host, Andrew Blazier of Finn Partners. Thank you. You may begin.

00:31 Thank you, Devin and thank you all for participating in today's call. Joining me from Ekso Bionics are Steven Sherman, Chairman and Chief Executive Officer; Scott Davis, President and Chief operating Officer; and Jack Glenn, Chief Financial Officer. Earlier today, Ekso Bionics released financial results for the quarter ended March 31, 2022. A copy of the press release is available on the company's website. 00:58 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 just to be forward-looking statements. 01:22 All forward-looking statements, including statements regarding our business strategy, 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. 01:55 For a list and 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, April 28, 2022. 02:35 I will now turn the call over to Ekso Bionics' Chairman and CEO, Steven Sherman.

02:41 Thank you, Andrew and thank you everyone for joining us today. We’re off to a strong start in 2022. Revenues in the first quarter were up by more than 30% year-over-year and we are seeing momentum in both our EksoHealth and our EksoWorks business segments. Our customers recognize the value and benefits that wearable exoskeletons bring to both patients and essential workers. 03:09 Our balance sheet remains strong. We are focused. We have a cohesive team of professionals and our products continue to be leading edge and innovative. We are executing our strategy of deepening relationships with network operators, expanding our presence in industrial markets and strengthening the foundation of the business to drive shareholders' value. 03:34 Now I will turn the call over to our President and Chief Operating Officer, Scott Davis.

03:40 Thank you, Steven. After coming off a record fourth quarter, we begin 2022 with a strong first quarter, supported by a solid focus in execution on our commercial strategy, we achieved year-over-year revenue growth of 34%. During the quarter, EksoHealth delivered $1.9 million of revenue, as we continue to gain traction with network operators. We booked several multi-unit orders for our Ekso in our exoskeleton devices, including our largest order in company history as network operators are choosing to make EksoNR their standard of care in neurological rehabilitation. 04:19 This was a noteworthy achievement for the EksoHealth team and clearly demonstrates the value our customers see in the EksoNR in rehabilitating patients from stroke, spinal cord and traumatic brain injury. We recorded 23 EksoNR bookings in the quarter, with most being capital purchases, ten of which are included in our second quarter backlog. This in combination with our existing EksoHealth orders is estimated to contribute to revenues over the next several months. 04:50 Our cumulative conversion in renewal rate is 82% and we now have more than $1.5 million of contracted unrecognized revenue under our subscription model. We are seeing a strong rebound in post-COVID capital purchases. In addition, customers continue to utilize our flexible commercial offerings. For example, another top tier network operator adopted a new subscription program which opens up opportunities for the placement of additional units in the future. 05:19 In the international market, Europe continues to perform well. Increased proficiencies in our sales process are driving more opportunities. In APAC, we are building a healthy pipeline that should contribute to future revenue growth. We are optimistic about both Europe and APAC, which we expect to be important growth drivers throughout the year. The global supply chain remains a challenge impacting product delivery times and adding cost pressure. Our operations team continues to navigate these obstacles to ensure consistent product shipments, still we experienced delays in the first quarter and as a result, some orders were pushed to the second quarter. 06:01 Today, we'd like to share a story of one of our newest customers. The first facility to bring EksoNR to the Island of Maui. Venture physical therapy is renowned in the medical community of Maui for its expertise in complex cases, including severe stroke and acquired brain injury. Venture PT was gifted EksoNR from the local patient Sharon, who was first able to use Ekso at Craig Hospital in Colorado and QLI in Nebraska after sustaining a dramatic brain injury related to an accident. After seeing success with Ekso in inpatient rehab, she wanted to continue using the technology and outpatient care in our home state of Hawaii. Now, thanks to Sharon and her family more patients and now, we will have access to our life-changing technology. 06:48 Turning to an update on progress with our industrial segment EksoWorks. Increasing numbers of employers are realizing the workplace productivity and safety benefits of EVO, our upper body exoskeleton. EksoWorks delivered approximately $700,000 of revenue during the quarter. This included a number of new and repeat orders, primarily in the automotive and aerospace verticals. In addition to this positive momentum, we are encouraged by increasing interest from both construction and general manufacturing markets. All told, our target industrial verticals represent a vast opportunity. We are working to deepen adoption within this still nascent $5 billion addressable market. 07:33 As we look ahead, we remain cautiously optimistic, but are monitoring global events as pockets of increases in COVID cases have been reported recently, particularly in areas of Europe and Asia. Nevertheless, we're making great progress with customer engagement, thanks to our excellent commercial team. We look forward to additional successes in the coming months. 07:54 At this time, I'd like to turn the call over to our CFO, Jack Glenn to review our first quarter financial results.

08:00 Thank you, Scott. Ekso generated first quarter 2022 revenue of $2.6 million compared to $1.9 million for the first quarter of 2021, a 34% increase. The increase in revenue was primarily driven by higher EVO sales and recognition of prepaid royalties associated with the license and distribution agreement. Our gross profit for the first quarter was $1.2 million, representing a gross margin of approximately 47% compared to gross margin of 65% for the same period a year ago. The overall decrease in gross margin was primarily due to an increase in EksoHealth service costs, changes in product mix, and an increase in material costs due to supply chain pressure, partially offset by the aforementioned recognition of prepaid royalties. As we've noted on previous calls, gross margin tends to fluctuate from quarter-to-quarter based on channel and product mix, as was the case this quarter. 09:01 Operating expenses for the first quarter of 2022 were $5.4 million compared to $4.4 million for the first quarter of 2021. During the first quarter of 2022, the company incurred increased general and administrative expenses related to higher cash and non-cash compensation expenses and severance expense. Research and development expenses increased in the first quarter due to an increase in product development activities. Net operating loss in the first quarter of 2022 was $4.2 million compared with a net operating loss of $3.1 million in the prior year period. Loss on warrant liabilities for the quarter ended March 31, 2022 was $100,000 from the revaluation of warrants issued in 2019, 2020 and 2021 compared to a de minimis gain associated with the revaluation of warrants issued in 2019, 2020 and 2021 for the same period in 2021. 10:05 Cash used in operating activities in the first quarter of 2022 was $4.2 million. As of March 31, 2022, the company had a strong cash balance of $36.2 million. Please see our 10-Q filed earlier today for further details regarding the quarter. 10:22 Operator, you may now open the line for questions.

10:27 Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of RK with H.C. Wainwright. Please proceed with your question.

10:59 Thank you. Good afternoon, folks. Thanks for -- during the call, and I'm glad to see that continued growth in both segments of the business. My two questions today are specifically on the EksoHealth business. So for the first quarter, you recorded $1.9 million, which is quite close to the numbers that we saw in the second quarter of ’21? And can you help us understand your enthusiasm for this segment? And also the potential growth that you're seeing because, you made some commentary regarding, how we are strategy is working? So I just want to understand, if you can expand and help us understand what you mean by that statement?

12:05 RK, thank you. This is Scott Davis. Certainly, appreciate the question and you joining today. With our global health business, we are continuing to see growth as more and more larger network operators are adopting Ekso as part of their programs. They're using this and we're seeing many multi-unit orders that are coming in as they are using this as a more of a standard of care program. The work of our commercial team, as well as our clinical team in offering the training and support to these organizations is really causing a significant growth. Additionally, we are seeing some of the capital budgets open up that have been previously restricted by COVID. So we are definitely seeing a strong increase in the demand both for our capital purchases as well as in the uptake of our subscription program.

13:20 Okay. And then you stated 23 NR’s being booked, being booked in the first quarter. So what went into the mix for that $1.9 million of those -- of that 23? And also you stated that one point -- I believe this is the right moment please correct me if I'm wrong 1.3 million potential sales are out there based on the number of units, which are under subscription at this point. So over what period are you thinking about in terms of recognition of this 1.3 million potential? And are these -- the recent subscriptions or the recent units that came on to subscription, let's say, within the last three months or six months and I'm just trying to figure out how would I think about this 1.3 million potential?

14:17 Yeah. I think your question maybe relates to the mix between capital and subscription and then further, the revenue recognition on those, on those placed orders.

14:30 Yeah.

14:35 Okay. So with respect to that, we are -- the mix on the 23 orders was really a good blend. We were close to a balance between and close to a 50-50 match between subscription and capital purchases in Q1. Again, this is driven backlog for us and we expect to be shipping on those units throughout Q2. And as we continue to sell, we expect also -- continue a small backlog as we move into Q3.

15:25 Okay. And then what were the number of units that were really placed during the Q1?

15:36 I'm sorry, number of units that were?

15:42 The subscription model or capital purchases, yeah.

15:46 Total shipments was 9 units for the quarter.

15:51 Okay.

15:54 As Scott mentioned, we have a significant based off of that again fairly significant backlog, as we've talked about going forward for Q2 as well as…

16:05 Okay. Sorry, I got it. So it's 9 units placed and 14 units yet to be placed, is that the way to think about it.

16:14 That’s right. That were carried over and we also came into Q1 with an existing backlog as well. So as we continue to work through these supply chain challenges. We expect a significant increase in the number of units that will be shipping going through Q2 and into Q3.

16:41 Perfect. Thank you very much for that.

16:44 Thank you.

16:47 Thank you. We have no further questions at this time, I'd like to turn the floor back over to management for closing comments.

16:56 Thank you, Devin and thanks to everyone for joining us today. Our first quarter revenue performance reflects the positive strides we've made to increase customer engagement for our innovative products. We're excited about the progress we are making at Ekso Bionics as a commercial strategy continues to reward in the form of increased bookings, resulting in strong revenue growth. We are successfully meeting and selling -- meeting ahead of the supply chain challenges of our current environment by delivering to our customers and patients. 17:30 Looking ahead, we will continue to execute on our strategy of strengthening relationships with our top network operators, increasing order flow through a strong pipeline and expanding EVO sales by capturing new customers across the variety of industry verticals. We are grateful for the continued contributions of the entire Ekso team and we look forward to providing additional updates throughout the year. Thank you and have a great day.

17:57 This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.