Good day, and welcome to the Second Quarter 2024 Lifeward, Inc. Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mike Lawless, Chief Financial Officer. Please go ahead.

Thank you, Megan. Good morning, and welcome to Lifeward second quarter 2024 earnings call. I'm Mike Lawless, Lifeward's Chief Financial Officer. And with me on today's call is Larry Jasinski, our Chief Executive Officer; and Almog Adar, our Vice President of Finance. Earlier this morning, Lifeward issued a press release detailing financial results for the three and six months ended June 30, 2024. The press release and a webcast of this call can be accessed through the Investor Relations section of Lifeward website at golifeward.com. Before we get started, I'd 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 within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Lifeward management as of today and involve risks and uncertainties, including those noted in our press release and our 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. Lifeward specifically disclaims any intent or obligation to update these forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. A replay will be available shortly after the completion of the call, accessible from the dial-in information in today's press release. The archived webcast will be available in the Investor Relations section of our website. For the benefit of those who may be listening to the replay or the archived webcast, this call was held and recorded on August 15, 2024. Since that date, Lifeward may have made subsequent announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings for the most up-to-date information. With that, I'll turn the call over to Lifeward's CEO, Larry Jasinski.

Thank you, Mike. Welcome, everybody, and I appreciate you joining us today. Q2 was entirely a proof of execution quarter. After years of strategic efforts to gain coverage and access to build an infrastructure and scale to operate, and essentially leading our company and our industry through a door that enables us to create an enduring operating entity, we are succeeding. Revenue has grown to $6.7 million in Q2, an increase of 402% over Q2 2023. We achieved record revenue with 20 ReWalk placements in the quarter. We have now received over $600,000 of our Medicare receivables as the payment system has started flowing. In the first half of 2024, we sold more ReWalk systems than we have in any other prior full year. Our operating losses stayed level year-over-year with a much larger commercial footprint in place this year, and multiple waves of cost efficiency will begin to flow into our expense results in the next few quarters to reduce our cash burn. Part one, revenue. Revenue was driven by the successful placement of the ReWalk systems and the addition of anti-gravity technology in Q2. The gate to Lifeward's growth was simple achievement of Medicare approvals. We expect another record quarter for ReWalk in Q3 due to the successful efforts in advocating and establishing a government policy. The anti-gravity technology grew from an -- from improved execution as our newly combined sales team gained their footing over Q2 with a significant increase in deliveries. This segment also had some headwinds with high interest rates and consolidation of clinics, which impacted the pace of AlterG placements. Our new product, launched in June, is expected to increase our growth as it offers features at a price point that will allow more clinics access to this innovative technology. Part two, ReWalk record…

Thank you, Larry. Before I review the financial results of the quarter, I want to remind everyone that our GAAP results for the three and six months ended June 30, 2024, contain financial elements that can obscure investors visibility into the underlying operational performance of Lifeward. In order to facilitate the understanding of both the GAAP results and the operational results of Lifeward, I'm going to show the -- I'm going to discuss the results of the second quarter on both a standard GAAP basis as well as a non-GAAP basis, which excludes the items listed in the reconciliation tables provided in today's earnings release. I encourage you to reference the GAAP results and the reconciliation tables as I discuss the financials. Lifeward reported revenue of $6.7 million in the second quarter compared to $1.3 million in the second quarter of 2023, up $5.4 million or approximately 400%. Revenue from the sale of our traditional products and services, including ReWalk Exoskeletons and MyoCycle, was $3.1 million in the second quarter of 2024, up $1.8 million or 72% from the second quarter of 2023, driven primarily by an increase in ReWalk system revenue from the expansion of access through Medicare coverage. Revenue from AlterG products was $3.6 million in the second quarter, which was a sequential increase of $0.8 million from the first quarter of 2024. We're encouraged with the improvement of AlterG sales as compared to the first quarter, and we expect further sequential improvement of revenue in the third and fourth quarters as our sales effectiveness continues to improve from the integration of our commercial resources. Our pipeline metrics continue to show healthy activity in the second quarter across our two major product lines. For ReWalk systems, at the end of the second quarter, our overall number of ReWalk…

Thank you, Mike. I'd now like to provide more detail on our market development and financial goals that I have laid out for the year in our Q1 call. Our stated goals were: number one, execution with sales; number two, organizational implementation of infrastructure to support Medicare claims submission to successfully penetrate this new emerging market; number three, market development in terms of filling the funnel with appropriate potential users of ReWalk system; number four, managing the reduction in our operating loss Q-over-Q to demonstrate a path to breakeven operations; and number five, launch of the new AlterG product in about midyear and preparation for the launch of the latest generation of the ReWalk post-FDA clearance. Let me expand on each of these five objectives for the year. First, sales, a record ReWalk quarter and another one on the horizon. Demand is building from our digital communication programs. The education occurring with physicians with our field-based team and the spinal cord injury centers that are beginning to implement exoskeleton supply programs based on our support program. We have presented our supplier program to over 50 centers so far in 2024, and our target for the year is to increase our placements to 100 or more systems. Second, capacity to implement. The Medicare requirements are extraordinarily complex and require extensive infrastructure with skills to process volume and get paid. We have supported our active spinal cord injury centers in multiple ways. They include: a dedicated ReWalk clinical screening group to properly qualify ReWalk users; next, as patients are qualified, we provide ReWalk trial systems with our direct physical therapists to determine whether a user is fully ready for delivery of a personal system; if successful, we then mobilize our reimbursement team to guide the process of completing the comprehensive Medicare submissions.…

[Operator Instructions] Our first question comes from RK with H.C. Wainwright. Please go ahead.

Thank you. Good morning, Larry and Mike. Congratulations on a very positive quarter. So, let's start with the receivables. Mike, you said that after closing the second quarter, you did receive -- part of the receivables, about $600,000 has been taken -- has been recognized. And based on your conversations or your dealings with the CMS, how long do you think it will take for normalization in terms of time? And it looks like there's another $2 million worth of receivables left. And do you think most of it would come through in the third and the fourth quarter, or some of that could spill into '25?

Hi, RK. Good morning. That's a good question. We have limited visibility to that, but our expectation is that there should be the majority that gets paid during the calendar year 2024. So through Q3 and Q4.

Okay. And then, on the AlterG business, it's nice to see that growth of almost $1 million in the third quarter compared to the previous quarter. How much of that AlterG is pent-up business because of the change of ownership? And how much of it is organic? And how should we think about sustenance of that growth from here onwards?

RK, it's Larry. I'll answer this one. This is really all organic growth. We have begun to build with the team we had in place. Mike noted what we have seen in our backlog that we've gone from the -- I forgot where we ended last year at, but we've gone more recently from the mid-60s to over 100 in our backlog, and this is from our field team knocking on doors and doing their job.

Perfect. And my last question is on -- regarding Germany. I would like to understand how business is progressing in Germany since the court case settlement that you received last year. And is that a slow growth business? Or how are the insurers responding to those decisions?

Germany is having a good year. It's the best way I can measure it, including Barmer, who is in the court case, who has processed a good number of cases. So, we're progressing equally well, frankly, in both Germany and United States. The United States are bigger numbers just because of the size of our insurance group and size of our country, but we are seeing growth in both markets that we're quite happy about.

Thank you. Thanks for taking my questions.

[Operator Instructions] Our next question comes from Ben Haynor with Lake Street Capital Markets. Please go ahead.

Good day, gentlemen. Thanks for taking the questions. First off for me, just on gross margin, it was quite a bit ahead of where we were looking at. It doesn't sound like there was a lot of accounts receivable from Medicare patients that came through during the quarter where the COGS would have been realized in the previous quarter revenue in this quarter. Was there any kind of one-time-ish impact on anything there, or is this just straight up improvement in gross margin sequentially?

No. Hi, Ben. How are you? Good morning. This is Mike. No, that's a good question. It was -- there were no one-time items, nothing unusual in the quarter. I would say that part of that is indicative of the higher volumes we were generating on the AlterG side that -- we have a factory in California where we manufacture, and we were able to leverage all of those production costs much more effectively with the top-line that we generated in the second quarter relative to what we did in the first quarter.

Okay. That's helpful. Makes sense. So, just generally speaking, we probably should expect gross margin doing -- continue to improve through the balance of the year as some of the Medicare payments begin flowing through and with the NEO launch and hopefully, more AlterG revenue?

That's correct. Yes. As I mentioned, by Q4, we expect our gross margins to reach 50%.

Okay. Great. And then, on the R&D expenses, what should we expect there now that you've submitted the seventh generation version and launched NEO?

I think that we expect that -- I would expect them to be roughly flat to maybe slightly down a little bit. I mean there's still ongoing activity that we're -- we have -- taking place. So -- but I would expect that it would be sort of flat to down slightly over the next couple of quarters relative to the Q2 levels.

Okay. Got it. That's helpful. And just curious, any more color you can kind of share on the reaction to NEO in the early days here?

Well, we launched it on June 25. So, you got about six weeks. We sold the model right on the floor at the trade show. We took that as a very good reaction. It is resonating as intended, at least in the early results.

Okay. Fair enough. And then, on the seventh generation, can you kind of refresh our memories on what the enhancements are there? And is there -- is it more COGS enhancements, is it product enhancements, just refresh our memories there, please?

This is a very user-based improved design. We've got the experience with hundreds of users of what they'd like and not like and wanted to see the device offer. So, what we've done is add in features that came from our customers, and I'll give you a few examples. One is having multiple speeds. So, if you're walking down a busy street, you've got to go slower because the people in front of you aren't going fast enough, you could slow your ReWalk down. And we've done other real fundamental things to bring more up-to-date off-the-shelf battery systems that you can use now to power the system as opposed to the custom batteries that we had before. We've added a lot of data components and connectivity to the system through a smartwatch, and that is really important, we believe, for the users to communicate for us to know about utilization. So, those are just examples of some of the features. Our customers told us what they like, we did it. That's basically what the ReWalk 7 is.

Okay. Great. We're looking forward to that. That's all I have for now, gentlemen. Thank you very much.

Thank you, Ben.

This concludes our question-and-answer session. I would now like to turn the conference back over to Larry Jasinski, CEO, for any closing remarks.

Well, first, I appreciate everyone's attendance today, and I'd encourage you to come to us if you have other questions about the business. I closed the scripted part of the session with talking about the magnitude of this market. Now that we see real execution and we've achieved it, and it's growing, thinking about the ultimate size of this market is something that I would encourage all of us to think about because we've talked about it in tens and twenties. It is not unreasonable given the total addressable market for this to be 1,000 systems a year. Now that takes time to build. It's not easily done, but it's a value that the vision of our company with our founders started with, [widespread] (ph) ability for people to walk again. And that's what this industry now has in front of it proven out, I think, by the success we've had in this first 90 days after gaining United States coverage with Medicare. So thank you, everybody, for your time today, and we look forward to speaking to you in the future.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.