Ekso Bionics Holdings, Inc. (EKSO) Q2 2024 Earnings Report, Transcript and Summary

Greetings, and welcome to the Ekso Bionics' Q2 2024 Financial Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt Steinberg with Finn Partners. Thank you, Matt. You may begin.

Thank you, operator, and thank you all for participating in today's call. Joining me from Ekso Bionics are Scott Davis, Chief Executive Officer; and Jerome Wong, Chief Financial Officer. Earlier today, Ekso Bionics released financial results for the quarter ended June 30, 2024. 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 made during this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including statements regarding our business strategy, future financial or operating 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 and description of the risks and uncertainties associated with EXO's businesses, please see its filings with the Securities and Exchange Commission. Esko's businesses, please see its filings with the Securities and Exchange Commission. Esko's disclaims any obligation, except as required by law, to update or revise any financial or operational projections, its regulatory outlook or other forward-looking statements, whether because of new information, future events or otherwise. Any forward-looking statements made on this call speak only as of the date of this call. I will now turn the call over to Ekso Bionic's Chief Executive Officer, Scott Davis.

Thank you, Matt. We kicked off the second quarter on a positive note with our at home Ekso Indego Personal device receiving a payment decision from CMS for lump sum Medicare reimbursement and continued the momentum throughout the quarter by generating record quarterly sales in our EksoHealth segment. We're pleased with our progress and even more excited about the potential of bringing our innovative robotic exoskeleton devices to more patients across the continuum of care from the clinic to the home. As initial claims for reimbursement have been submitted for the Ekso Indego Personal and as we have gained momentum in working with our current customer base to make this potentially life-changing technology available to more individuals living with an SCI, we remain encouraged by the possibility of meeting this multibillion-dollar personal mobility health addressable market in the U.S. I will touch more on this major development shortly, but first, I'll share an overview of our second quarter performance. We generated record quarterly sales of $5 million and sold 37 EksoHealth devices in the second quarter of 2024. The performance in the quarter was driven by continued growth within our Enterprise Health business, which is comprised of our EksoNR and our Ekso therapy devices. We believe our growing worldwide network of leading neurorehabilitation centers continues to recognize the clinical and economic value of our innovative EksoNR. Today, there are EksoNR devices that 9 of the top 10 rehab centers in the U.S., which we believe is an indicator that EksoNR is becoming the standard of care for lower extremity neurorehabilitation. We believe we are well positioned to build upon this momentum and drive growth for both our EksoNR and our Ekso Indego therapy devices as we continue to strengthen our distribution network and deepen our pipeline of opportunities. While we're pleased with the quarterly sales volume of the EksoHealth devices, U.S. sales were slightly affected by typical fluctuations in procurement cycles for our larger integrated delivery network, or IDN customers. We anticipate these cycles leveling out later this year. In spite of these challenges, we maintained strong sales to individual clinics and hospitals and expanded our global customer base, which is a testament to the dedicated effort of our global commercial teams. Internationally, demand remained strong, mirroring our robust performance in the first quarter. Notably, uptake in the EMEA region was driven by adoption of robotics within neurorehabilitation programs by the French public health system. Sales in Asia also contributed to our international growth with multiple orders for Ekso Indego therapy as neurorehabilitation centers in the region are adopting our potentially life-changing technology for individuals with lower extremity impairments. Not only did we place more devices globally, but we also expanded our international distribution network, which enabled us to gain greater operating leverage abroad. Looking ahead, we remain focused on continued development of our relationships with IDNs to secure larger multiunit capital deals across North America as an initiative that is integral to our ongoing commercial strategy aimed at expanding our market footprint. We are optimistic about future prospects and our pipeline of potential deals. Now turning to an Ekso Indego Personal update. We previously announced CMS confirmation that health care common procedure coding system, or HCPC code K1007 falls under Medicare's brace benefit category and should be used to build Medicare for the Ekso Indego Personal. At the start of the second quarter, CMS established a Medicare reimbursement level of $91.031 [ph] with pricing determination in place and initial claims pending reimbursement, we have achieved an important milestone that we expect will now enable us to significantly expand access to the thousands of Medicare and Medicaid covered individuals living with a spinal cord injury. We believe these individuals now have the potential to achieve improved health and new levels of independence through the use of our Ekso Indego Personal in their daily lives. This is just the beginning of what we view as a possible inflection point in expanding access to our potentially transformative technology for individuals who can most benefit from its daily use. As part of our scalable go-to-market strategy to drive patient engagement, we have been collaborating with our large network of neurorehabilitation centers throughout the country to facilitate patient screening and begin training and onboarding individuals so they can use the Ekso Indego Personal at home and in community settings. Additionally, we are conducting educational webinars featuring end users who showcase how they integrate the Ekso Indego Personal into their daily lives. We invite you to view these inspiring stories on our social media channels, including Facebook, LinkedIn and X. Early demand trends resulting from Medicare CMS reimbursement of the Ekso Indego Personal are promising as evidenced by the increasing traffic through our website and growing pipeline of interest from individuals currently living with an SCI. These potential users are learning firsthand about the Ekso Indego Personal purposeful design and how it can offer them potentially life-changing benefits in their daily lives. Moving forward, we are increasing our content marketing efforts, leveraging patient testimonials and continuing to educate potential users, therapists and clinicians on the devices potentially life-changing mobility benefits. We believe these initiatives have been crucial in driving further interest and adoption in the market, and we are thrilled that our differentiated exoskeleton devices are now accessible to a larger patient population. We are committed to ensuring that more qualified individuals can gain access to the Indego Personal and are bullish on the potentially robust growth opportunity. We look forward to providing updates on our continued work with the SCI community and future possibilities of adoption from individuals with neurologic conditions who could potentially benefit from our technology. Now I'd like to turn to an update on our Industrial segment, EksoWorks. During the quarter, device revenue increased by approximately $150,000 from the same period a year ago as we shipped the bulk of EVOs internationally. These shipments include a large paint supplier in Germany and a distribution partner in Korea. We are working to continue to raise awareness of the benefits that EVO provides for workers with strenuous overhead jobs, such as reduced fatigue, increased productivity and a lower frequency of workplace injuries. EVO fits into a variety of industries, including automotive, aerospace, construction and renewable energy with multiple additional vertical segments possible where overhead work is required. As we look ahead, we believe that EXO is a pioneer in this nascent market and that we are poised to take greater share by continuing to target customers who can drive potentially large volumes of EVO devices in their various industrial segments. Turning to our operations. We remain focused on achieving positive cash flow through scaling our top line growth while continually gaining operating efficiencies. Over the past year, under the leadership of Jason Jones, our Chief Operating Officer, we have worked to bolster our operating leverage while enhancing our inventory management. As Jerome will detail shortly, these initiatives helped us increase our gross margins in the second quarter by 500 basis points compared to the second quarter of 2023. We believe that our disciplined approach to spending, combined with our improved operating efficiencies and scalable strategy, have us on the right path as we work to generate positive cash flow. In summary, it was a significant quarter for Ekso Bionics, highlighted by key CMS accomplishments for our Ekso Indego Personal device and continued execution of our commercial strategy that resulted in a record sales quarter. With a product portfolio that now potentially offers a broad reach to a significantly larger addressable market across the continuum of patient care, we believe we are well positioned for future growth. At this time, I'd like to turn the call over to our Chief Financial Officer, Jerome Wong, to review our second quarter financial results.

Thank you, Scott. We generated record quarterly sales of $5 million in the second quarter of 2024 compared to $4.7 million for the second quarter of 2023. Gross profit for the second quarter of 2024 was $2.6 million, representing a gross margin of approximately 53% compared to gross profit of $2.3 million in the second quarter of 2023, representing a gross margin of 48%. The increase in gross margin was primarily due to an increase in the average selling price for the EksoNR and lower EksoHealth device and service costs. Operating expenses for the second quarter of 2024 were $5 million compared to $6.5 million for the second quarter of 2023. The decrease was primarily due to lower general and administrative expenses due to lower headcount, discretionary payroll, consultant and labor costs. Net loss applicable to common stockholders for the second quarter was $2.4 million or $0.13 per basic and diluted share compared to a net loss of $4.2 million or $0.31 per basic and diluted share for the same period of 2023. Now turning to our financial results for the first half of 2024. Revenue was $8.7 million for the 6 months ended June 30, 2024, compared to $8.8 million for the same period in 2023. We sold a total of 66 EksoHealth devices in the first half of 2024. Gross profit for the 6 months ended June 30, 2024, was $4.6 million, representing a gross margin of approximately 53% compared to gross profit of $4.3 million for the same period in 2023, representing a gross margin of 48%. The increase in gross margin was primarily due to an increase in the average selling price for the EksoNR and lower EksoHealth device and service costs. Operating expenses for the first half of 2024 were $10.2 million compared to $13 million for the same period of 2023. The decrease was primarily due to the absence of costs associated with the acquisition and integration of the Human Motion Control business unit from Parker Hannifin in the comparable period and lower discretionary payroll, consultant and labor costs. Net loss applicable to common stockholders for the 6 months ended June 30, 2024, was $5.8 million or $0.33 per basic and diluted share compared to a net loss of $8.6 million or $0.64 per basic and diluted share for the same period in 2023. Cash and restricted cash as of June 30, 2024, was $5.9 million compared to $8.6 million as of December 31, 2023. Please see our quarterly report on our Form 10-Q filed earlier today for further details regarding the quarter. Operator, you may now open the line for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Ben Haynor with Lake Street Capital Markets. Please proceed with your question.

Good day, gentlemen. Thanks for taking the questions. First off for me, just on the interest pipeline that you're getting from -- for Indego Personal, where is that materializing from? Is that mostly individuals contacting you guys directly? Is the clinic pushing patients your way [ph] Where is that coming from?

So good afternoon, Ben. Thank you for your question. So it's coming from a variety of places. We have individuals who are coming directly to our website, who have either seen our social media or have found information about this technology through their physicians or clinics. They will come to us and ask questions and find out about it directly. So we see a constant flow of individuals living with the spinal cord injury who are asking those questions of us. In addition to that, we have had numerous individuals that have come through clinics or existing customers that we work with already. We have had calls directly from either the centers themselves or from physicians who have contacted us for additional information as they have patients who are interested in this technology. So the summary is we're seeing interest coming in directly from individuals with the spinal cord injury from PTs and clinics that are associated with our -- NR programs and also through physicians.

And is there - proportionally, is it 50-50, 70 individuals, 30% clinic. Is there any way you could characterize that sort of proportionality.

Yes. I think today, we're seeing - it's really a relatively even mix across it. I don't have in front of me the details on exactly what the mix is. But to me, looking at it, it feels like it's about a 50-50 mix to us, give or take.

Okay. Fair enough. And do you expect that to change over time? I know you mentioned some of the investments in content marketing in our existing patient webinars and such. Are there changes that you expect to develop or...

Yes, there's almost a direct correlation. As we go out and we do a webinar, we get a significant amount of interest through the webinar, both from the health care community as well as from individuals who may have joined the webinar as we do individual campaigns with centers that we're working with, again, that pulls individuals. Typically, they'll end up either contacting us or the center depending on how we've set up the marketing for it. But generally speaking, every time we put some information out, we get - we tend to get an influx of leads based on that campaign or webinar. So today, it's really following that. I think longer term, as there's more individuals who are familiar with the technology, we're starting to see a little bit of a grassroots effort through social media that is ramping up.

Okay. Got it. That's helpful color. And then it looks like you made some nice progress on expenses, both gross margin-wise and operating expense-wise. Was there any drag in the quarter from Indego Personal units that you shipped out and had to recognize the COGS, but weren't able to recognize the revenue during the quarter?

No. No. They were - we were able to - all the devices that we shipped in the quarter, we were able to recognize revenue on.

Okay. Got it. And how many Indego Personal units have been delivered since the CMS decision?

So as of today, we're not reporting that specifically or recording that information. But we - I can tell you that our first handful of claims were submitted in Q2 and have advanced through the process to a pending status. We've also had an increase in our pipeline and of individuals who are in varying stages of the process with new claims being submitted on a semi-regular basis.

Okay. Got it. Well, thanks for taking the questions, gentlemen, and congrats on the progress.

Really appreciate it, Ben. Thank you.

Thank you. Our next question comes from the line of Li Chen with H.C. Wainwright. Please proceed with your question.

Hello. This is Li Chen in for RK. I have one question regarding the Indego product. So based on your visibility of the current volume of inquiries from patients and centers, can you give us a sense of when the revenue in this stream can become meaningful? Just you're - curious about your thoughts. Thank you.

Yes. Li Chen, thank you very much. I appreciate your question. So this is a new program, new process. Payment determination was granted on April 11 of this year, and we've been hard at work ramping up a scalable process that allows us to reach more individuals with spinal cord injuries and do this through a methodology that leverages our 260-plus neuro rehab clinics around the U.S. for onboarding and training. So we are - we have been hard at work in this process within Q2, which is, again, this past quarter was the first quarter that reimbursement was possible. We were able to get our first handful of claims submitted and are progressing through the program. The way that we look at any new program starting up, remember, we had - our basis has really been in - on the enterprise health side of the business and the bulk of our revenue has historically been generated from that. However, that being said, we are expecting and have belief that in the coming quarters, we'll see an increasing number of Indego Personal devices coming through the CMS reimbursement process. So starting with a handful in Q2, as we expand into Q3, we have a belief in pipeline to support a significant increase in the number that we have. So going from a handful to a couple of handfuls to doubling that again as we move into Q4 and in 2025, we believe that there will be a significant - that the Indego -- the Ekso Indego Personal will have a significant positive impact on our revenue in 2025 and growing beyond that. This segment represents approximately a $2 billion funded addressable market, and we're building a scalable process to be able to access that and find an efficient way to get this technology in the hands of the individuals who can use it.

Got it. Thank you for the color.

Thank you, Li Chen.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Scott Davis for closing comments.

Thank you, Alicia, and thank you to everyone joining us today. Since our acquisition of the Indego product line, we've made advancements in bringing our innovative wearable robotics to more patients and individuals who can potentially benefit from them. Now with CMS coding and payment in place for the Ekso Indego Personal and with the first claims having been submitted, we're excited at the prospect of bringing this technology to a larger SCI patient population. We believe our scalable go-to-market strategy will further establish Ekso as a major presence at leading neurorehabilitation centers, thereby elevating engagement levels with more individuals in need. At the same time, we've built a strong foundation for our EksoNR and our Ekso Indego therapy devices at post-acute care and outpatient neuro rehab centers, respectively. As a result of our scalable commercial strategy, we closed the quarter with record sales and created a strong pipeline of future placements. Moving forward, we are enthusiastic about building upon these achievements and maintaining our commercial growth momentum. We look forward to providing updates on our continued progress. Thank you, and have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.