Thank you for standing by, and welcome to the Hyperfine Fourth Quarter 2023 and Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now, I would like to introduce your host for today's program, Marissa Bych from the Gilmartin Group. Please go ahead.

Thank you for joining today's call. Earlier today, Hyperfine, Inc. released financial results for the quarter and year ended December 31, 2023. A copy of the press release is available on the company's website as well as sec.gov. 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 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 relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, expense management, expectations for hiring, training, and adoption, growth in our organization, market opportunities, commercial and international expansion, regulatory approvals, and product development are based upon our 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 our business, please refer to the Risk Factors section of our latest periodic filings with the Securities and Exchange Commission. This conference call contains time-sensitive information, and is accurate only as of the live broadcast today, March 21, 2024. Hyperfine, Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events, or otherwise. And with that, I will turn the call over to Maria Sainz, President and Chief Executive Officer.

Good afternoon, and thank you all for joining us. On the call with me today is our Chief Administrative Officer and Chief Financial Officer, Brett Hale. In the fourth quarter, we achieved revenue of $2.7 million, up 89% compared to the same period last year. For the full-year 2023, we achieved revenue of $11 million, up 62% compared to 2022. I am pleased with the growth we delivered as we continue to lead the development of this new category of ultra-low field grade MRI with our unique portable Swoop system. We drove adoption in our beachhead markets inside the hospital, which are critical care and pediatrics. And we have made significant progress to expand our use cases through clinical evidence and innovation. In the fourth quarter, we sold seven Swoop systems, predominantly U.S. direct sales and once again, recognized a record average selling price. As we have highlighted in previous calls, our deals require alignment with multiple constituents, and can often demand long and variable sales cycle. I am pleased with the deal traction we have seen so far in 2024, many of [which] (ph) started and were cultivated in 2023. We're exiting 2023 with many commercial accomplishments. We have now sold Swoop systems into flagship institutions such as Weill Cornell in New York, Stanford, and Children's Hospital of Philadelphia. Further, our Swoop implementation programs run by our clinical support team are yielding strong user advocates and champions across different departments inside the hospital setting. We now have two pioneers across multiple settings inside the hospital, such as the operating room, critical care unit, neurology clinic, emergency department, and pediatric wards. We entered 2024 with a stable of reference sites and a deeper understanding of how to target and build strong Swoop programs which positions us well for further expansion.…

Thank you, Maria. Turning to our financial results for the fourth quarter 2023, revenue for the quarter ended on December 31, 2023, with $2.7 million, up 89% compared to the fourth quarter of 2022. For the full-year 2023, we generated $11.0 million in revenue, up 62% from the prior year. Gross profit for the fourth quarter of 2023 was $1.0 million, compared to $0.3 million in the fourth quarter of 2022. For the full-year, we generated $4.8 million in gross profit, compared to $0.9 million in the prior year 2022. For the full-year, gross margin was 43.1%, up 30 percentage points from the prior year. R&D expenses for the fourth quarter of 2023 were $6.0 million compared to $5.2 million in the fourth quarter of 2022. Sales, general, and administrative expenses for the fourth quarter of 2023 were $4.2 million compared to $5.8 million in the fourth quarter of 2022. For the full-year, R&D expenses were $22.5 million, down from $28.2 million in the prior year, representing a 20% reduction. For the full-year, SG&A expenses were $20.3 million, down from $32.4 million in the prior year, representing a 35% reduction. Net loss for the fourth quarter was $10.7 million, equating to a net loss of $0.15 per share as compared to a net loss of $13.1 million or a net loss of $0.19 per share for the same period of the prior year. For the full-year net loss of $44.3 million is down 39.5% from $73.2 million in the prior year. Our cash burn in the fourth quarter was $10.2 million, and as of December 31, 2023, we have $75.2 million in cash and cash equivalents on our balance sheet. Our full-year cash burn of $42 million is down 40% from $71 million in 2022. Now turning to our financial…

Thank you, Brett. I'm proud of the progress the Hyperfine team made in 2023 and I remain very optimistic as to what we see can deliver. I look forward to seeing many of you at upcoming industry as well as investor conferences, providing updates across our three pillars and the Alzheimer's program. Given the immense excitement we have and the potential we see for our system in the use case of Alzheimer's, I would also like to share that we are working to plan an analyst and investor webinar with a spotlight on this topic. We intend to host this webinar mid-year. We look forward to sharing more details with you over the coming months and accepting more of your questions at that time. With that, I want to thank you for your time and we'll open up the line for questions.

Certainly. One moment for our first question. And our first question comes from the line of Larry Biegelsen from Wells Fargo. Your question please.

Hi, Maria. Hi, Brett. This is [Simran] (ph) on for Larry. Thanks for taking the questions here. Maybe just starting off with Q4, it's usually the strongest quarter for capital businesses, but you did come in a little bit below at least on the revenue side, the low-end of your guidance range. So, could you talk a little bit more about the trends you saw in Q4, and what led you to deliver at the low-end of the revenue guide? And just following up there, I appreciate the Q1 color, so maybe just talk about some of the trends that you've specifically seen on the systems side in Q1 thus far?

Sure. So, I'll start by addressing the Q4 question and then talk a little bit about the early 2024 traction. We do not fall exactly under the traditional capital budget, where you do see a little bit of that bolus at the end of the year. More often than not, given our price point in that $400,000 range for MSRP, we are funded through strategic funds, donor funds, or some other mechanism that has more variability throughout the year, but also more availability throughout the year. I still believe that we have to continue to work towards higher predictability and less variability in our deal flow. So, I'm very confident in telling you that we do not lose deals, that we end up with a very strong and predictable process to what we call the clinical yes from the initial pitch, but we do go into a relatively variable phase still in the administrative section of deals all the way to closing, which sometimes goes into quiet mode for a bit and coming back up. So, it was more around the variability on deal closure that hurt us a little bit, and coming a little shy on Q4, and that is why we were also stating here in our prepared remarks that some of those deals have taken a little longer, but now have come to fruition, and that's why we were confident in providing more color than we usually do, and that you should expect going forward around where we're tracking in the Q1 time frame.

Understood. That's very helpful. And then, maybe just looking at the 2024 guidance, $12 million to $15 million, I think the Street was modeling around $18 million adding into the print. So, maybe help us to bridge the gap there. Can you just walk through key puts and takes to consider, what gets you to the low-end versus the high-end of the guide? And Brett, it appears that you should continue to see OpEx growth step down nicely to get to that burn rate in 2024. So, is that the right way to think about it?

Okay. So, maybe I'll lead and turn it over to Brett. I like to think ourselves a little bit as a hybrid stage company with one half of our activity around what I would call, the early commercial stage kind of company, but the other half of our activity being more of a late-stage field developmental company. There's only 130 of us. So, we're trying to be balanced in how we're allocating our bandwidth to continue to make steady progress on our today's business. But definitely invest in what we believe are incredibly compelling and very large, near-term, not very future, but near-term new opportunities, Alzheimer's and stroke being two really big ones. So, when I think about our priorities, there is a steady progress on adoption and commercialization, which continues to drive very healthy growth, but that's not the only thing on our board to do. We are heavily investing in R&D and clinical evidence, and we are also investing in programs really to flush out these brand-new opportunities, which are likely going to take us into customer targets, sites of service, potentially business models that might be different and incremental for where we are today. So, I'd rather be balanced and moderate in our expectations, so that we can keep doing all of the above, which I think is the right way of thinking about the kind of business we want to build.

Yes, on the question regarding cash burn, as commented in the earlier remarks, we are giving guidance of approximately $40 million, which is down from 2023. We continue to be very laser focused in our spending discipline. In terms of the mechanics of getting to that number, as I highlighted, we have a margin guidance of 45 to 50, so an improvement from where we have been in 2023 and we'll be continued to be very laser disciplined in our spending, but continue to fund the innovation and growth opportunities that we see going forward.

Got it. That's very helpful. And sorry, last question for me. But I know you're not giving placement guidance, but any color on device versus service split in that $12 million to $15 million?

Yes, we don't provide specific guidance, but I think you have seen perhaps in the postings of our service revenue, you can think about that as kind of a steady and predictable and kind of consistently increasing over time line item in our P&L. So, I think you can think about that in 2024 very similar to the probably the trend rate you've seen in prior quarters.

Got it. Thank you.

Thank you. One moment for our next question. And our next question comes from the line of Yuan Zhi from B. Riley. Your question, please.

Thank you for taking our questions. I think some of those have been addressed, but maybe we can talk about the cash flow. So, the cash flow from operation was negative $42 million in 2023 and then the current 2024 guidance of cash burn is about $40 million while we have increased revenue and potentially lower cost. Brett, can you help us reconcile this? I understand you have completed the reorganization in early 2023.

Yes, thank you Yuan for the question. So, you're correct. Our guidance is increased revenue from '23 to '24. And as I highlighted in the previous question, we're improving margin from we posted 43% gross margin in 2023 and our guidance is 45% to 50% for 2024. And then, we will have continued investments in the growth drivers, but we'll be keeping our spending very laser focused and really tied to our growth initiatives. So, we feel comfortable with the approximately 40% or excuse me or $40 million of net cash burn for the year.

Got it. I'm also curious about the visibility in 2024, given the performance in 4Q of 2023. Maybe another way to ask about this question is regarding the 2024 guidance, how confident are you guys to convert the current lease into revenue in 2024? Any pushback you are hearing from the customer right now?

Thank you, Yuan. I feel confident in the guidance we have provided. We are executing 2023 with important accomplishments that feed my confidence. They are our ability to really land deals in flagship institutions and then translate those into very powerful initial successes with their use of our device in patients that otherwise would have had a very different prognosis or outcome or time frame. Some of those have actually been public from the likes of the Weill Cornell accounts that we implemented just a few weeks ago. So, I feel really good about the kind of names that are now potentially reference sites for other sites to follow. I feel very confident in the way our customer success team is implementing programs. I'm also incredibly enthusiastic by this international expansion that we have mentioned, which is not a peanut butter approach. We are definitely selecting markets to really put in incremental effort to draw commercial success from them. We're bringing the product that we're commercializing today in the U.S. and we have a lot of inbound interest from clinicians that I think are going to contribute to the revenue profile for 2024, and that actually allowed me to feel that, that guidance is reasonable, even where we're tracking on U.S. plus the select international opportunities.

Got it. Maybe on the last point, a follow-up question there, how are you guys standing on the direct-to-consumer approach versus distributor approach in the international footprint, considering the need to preserve the cash and invest on where it matters the most?

Excellent question. Thank you, Yuan. I would consider our international expansion to be a light investment as we are primarily going to operate international through third-party distributors. We are very fortunate that we have been in the background working to give ourselves the international optionality as we have made a lot of progress on regulatory clearances with the CE mark under NDR, not the old NDD, and the UKCA certification, which is now of course, required after Brexit. So, that gives us a bit of a readiness point in CE and UK geographies. But again we will operate through third-party distributors. You will see that affects our OpEx very marginally. However, as we go forward, we've been very proud of sort of record ASPs. We're going to be posting more of a blended ASP, where the distributor pricing is, of course, going to be a different price point than direct to the customer sales that we do in the U.S. with the two sort of pricing increases that we've had over the last couple of years.

Yes, I would add to the other point is that going back to the, I guess, confidence in the guidance. So, our international expansion is included in our guidance. So, I think that's kind of further gives us confidence in the range that we provided here at the beginning of the year.

Got it. Thanks for the additional help and color.

Thank you.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Maria Sainz for any further remarks.

Thank you, Operator. Thank you, everyone, for listening into our call today. I've remained incredibly optimistic about what we're building and the future of our business. I look forward to providing additional reports and updates to all of you in the coming weeks.

Thank you, ladies, and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.