Q4 2023 Ekso Bionics Holdings Inc Earnings Call

Participants

Matt Steinberg; IR; Lazar FINN Partners

Scott Davis; CEO; Ekso Bionics Holdings Inc

Jason Jones; COO; Ekso Bionics Holdings Inc

Jerome Wong; CFO; Ekso Bionics Holdings Inc

Ben Haynor; Analyst; Alliance Global Partners

Presentation

Operator

Greetings, and welcome to the XL bionics Fourth Quarter 2023 financial results conference call. At this time, all participants are in a listen only mode. A brief question-and-answer session will follow a formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt Steinberg, Finn parks Thank you. You may be.

Matt Steinberg

Thank you, operator, and thank you all for participating in today's call. Joining me from Ekso Bionics are Scott Davis, Chief Executive Officer, Jerome Wong, Chief Financial Officer, and Jason Jones, Chief Operating Officer.
Earlier today, Ekso Bionics 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.
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 fact should be deemed to be forward-looking statements. 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, our 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 our businesses please see our filings with the Securities and Exchange Commission. Xo 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 XL by U.S. Chief Executive Officer, Scott Davis.

Scott Davis

Thank you, Matt. We're excited to have closed out 2023 on a positive note, highlighted by record annual revenues of $18.3 million, an increase of 42% from the prior year period. Our solid results reflect continued improvements and consistency of returns from our scalable commercial strategy in addition to the early contributions of our Indigo product lines that we acquired in late 2022.
On today's call, I'll briefly review our fourth quarter 2023 results and share other business updates. Starting with our Q4 results, we generated revenue of $4.8 million in the fourth quarter of 2023 at 36% increase from the same period in 2022. During the quarter, we sold 38 XO. health devices throughout our enterprise Exo health segment. Inpatient rehabilitation facilities continue to leverage our advanced exoskeleton technology. It stroke traumatic brain injury, multiple sclerosis and spinal cord injury patients on the road to recovery. Our clinically proven patient improvements in functional outcomes, support our efforts to elevate the standard of care for neuro rehabilitation. Additionally, the economic value proposition for neuro rehab providers implement our XONR. and XO. Indigo therapy devices into the programs have been shown to increase patient throughput and drive higher patient volumes. Altogether, we continue to translate these compelling data points into our commercial strategy by selling both multiunit orders and multiunit renewals to our vast network of operators. The output from our commercial team led to a record year of XO health devices sold for the full year 2023. We sold 151 XO. health devices, up 51% from 2022 levels. We believe we are well positioned to build upon this momentum to drive sustained growth for our XO Health Enterprise devices as we continue to strengthen our distribution network and expand our pipeline of opportunities.
Earlier this year, we were pleased to have launched our gate Coach software for XL in our gate coaches. Our next generation gait therapy software for excellent aren't that simplifies the use of robotics in tension is to improve user trust and technology, provide impactful dynamic feedback and offer specific guidance. I think as an extra set clinical lives, we believe gate Coach will reduce training demands and increase utilization, making the device more intuitive and easier to use for both patients and physical therapists and marking a milestone in improvement of our product portfolio. Users of XL in our recently introduced the gate Coach through initial survey results have exhibited support for the software upgrade with nearly all users finding it to be intuitive. Feedback. Also indicated guidance from gate Coach makes XO. and are easier to use is useful for new or less experienced therapists at the clinic and is believed to further help patients achieve their clinical goals. A demonstration of this exciting new software can be found on our website.
Now turning to an update on our XL Indigo personal advice. On February 29, CMS announced that a deferred payment determination for personal exoskeletons, including the extra Indigo personal as part of its communication, CMS requested additional examples of non-Medicare payer data that would support the payment determination for products qualify under his fixed code K. one zero zero seven, such as our Indigo personal. We intend to provide materials to CMS to help provide additional commercial details supporting a reimbursement rate until the reimbursement rate has been established. We will provide relevant support to help our customers process Medicare claims on a case-by-case basis. As we have done throughout 2023, we will continue to offer our Indigo personal device to veterans through the VA established reimbursement program. Lightweight pack-and-hold modular design of this device allows individuals living with spinal cord injury to more easily bring it along with them for use in their communities and the advanced gate feature allows them to achieve average walking speed. An important consideration if navigating cross walks, XL is committed to delivering well-built affordable products and to have help enable this potentially life-changing technology reach a higher number of individuals living with spinal cord injury. We look forward to our continued work with CMS and the SDI. community.
On the international front, we achieved solid performance across EMEA and A-Pac regions as we generated an increase in sales volume built on the strength of our distribution network, not only are we getting more placements, but our network enables us to gain operating leverage abroad. Notably in the fourth quarter, we generated multi-unit extra in our sales across Eastern Europe.
Looking ahead, we continue to focus on building relationships with larger customers in these regions as we invest in our international footprint to support Xcel's ongoing growth across the globe.
Now I'd like to turn to an update on our industrial segment, Pixelworks in 2023, we drove notable progress in our industrial product line, especially on the operational side with the implementation and initial supply of iDose from our new high volume contract manufacturer by reducing supply constraints and substantially lowering costs through our contract manufacturer relationship, we believe we'll be able to better meet the supply and pricing demands of a potentially high volume industrial customer pipeline. Based on this, we feel we are poised for continued growth and market expansion, while revenue contributions from our industrial segment have recently been at modest levels. We remain steadfast in our commitment to maximize iDose placement in large industrial settings, leveraging a significant emerging market opportunity. Overall, I'm enthusiastic with our record-breaking revenue performance in 2023. We're focused on building out the market across the continuum of care for pioneering XO. health devices and believe we are well-positioned to deliver on our objectives. Now I will turn the call over to Jason Jones, our Chief Operating Officer, for an operational update.

Jason Jones

Thank you, Scott.
I'm pleased to report several key achievements and developments within active operations in 2023. First, we bolster our operating leverage, reflecting a more efficient and scalable operational model. While our revenues grew by 42% year over year. In 2023, our operating expenses increased by only 11%. We believe this is indicative of the operating leverage we are able to achieve going forward as we continue to manage expenses further, our efforts in inventory management have allowed us to reduce our inventory on hand by 3% as of the end of 2023 compared to the prior year. Despite strong revenue growth, we believe there is still room to improve on inventory efficiency.
In Q4, we also completed the transition for our Ohio team from Parker Hannifin IT system to a new electronic quality management and product lifecycle management system. This new business is expected to be the foundation of our product development and quality processes going forward with the entire Company plan to transition over throughout 2024. We believe that consolidating our teams onto a single system will improve collaboration across our sites and once fully implemented will reduce audit and compliance costs.
At this time, I'd like to turn over the call to our Chief Financial Officer, Jearld long to review our fourth quarter and full year financial results.

Jerome Wong

Thank you, Jason, we generated an increase in the fourth quarter of 2023 revenues by 36% to $4.8 million compared to $3.6 million for the fourth quarter of 2022. Increase in revenue is primarily due to an increase in the volume of XOLAIR and Indigo device sales. Gross profit for the fourth quarter was $2.4 million, representing a gross margin of approximately 49% compared to a gross profit of $1.7 million and a gross margin of 47% for the same period of 2022 to 41% increase in gross profit was primarily driven by an increase in Eco Health device sales. Margin expansion was primarily due to lower until health device and service costs.
Operating expenses for the fourth quarter of 2023 were $5.8 million compared to $6.1 million for the fourth quarter of 2022. The 5% decrease was primarily due to a decrease in general and administrative expenses stemming from lower legal expenses. Net loss applicable to common stockholders for the fourth quarter was $3.2 million or $0.22 per basic and diluted share compared to a net loss of $3.2 million or $0.24 per basic and diluted share for the same period of 2022. Operating cash burn for the fourth quarter was $1.6 million compared to $3.7 million in the fourth quarter of 2022.
Turning to our full year 2023 results. Revenue increased by 42% to $18.3 million compared to $12.9 million for the same period in 2022. The increase in revenue was primarily driven by an increase in actual health device sales of $5.9 million. Gross profit for the full year ended December 31, 2023 was $9.1 million, representing a gross margin of approximately 50% compared to a gross profit of $6.2 million for the same period in 2022, representing a gross margin of 48%. The increase in gross profit was a result of lower device and service costs and product mix.
Operating expenses for the 2023 full year were $24.2 million compared with $21.8 million for the prior year. Period increase in operating expenses was primarily related to the acquisition and integration of agents. The net loss applicable to common stockholders for the 2023 full year was $15.2 million or $1.10 per basic and diluted share compared to a net loss of $15.1 million or $1.16 per basic and diluted share for the 2022 full year. Cash used in operating activities in the 2023 fiscal year was $12.1 million as of December 31, 2023 the company had cash on hand of $8.6 million subsequent to year end as we closed on a registered direct offering. But certain institutional investors resulting in total net proceeds to the Company of approximately $3.9 million. Please see our Form 10-K filed earlier today for further details regarding the quarter and full year operating, you may now open the line for questions.

Question and Answer Session

Operator

Thank you. And ladies and gentlemen, at this time we will conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two, if you would like to remove your question from the queue For participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. Once again, ask a question, press star one on your touchtone phone standby while we poll for question first question comes from RK with H.C. Wainwright. Please state your question.

Thank you and good afternoon, but then own them Blocket. First question is on Indigo pricing on. So and I did hear that you're still in discussions with CMS on the final pricing on up until they come up with a number. It's a case by case. And so what do you need to do in terms of helping CMS compare decision so that we have a price that will become effective on April first it's just not too far from clear.

Scott Davis

Yes.
Thank you, RK. So with CMS' recent announcement, have they have requested additional commercial pricing evidence. And back when this meeting took place in November XO was on it's provided commercial pricing information to CMS. However, at into November timeframe, we were not officially approved through PTAC. for our Indigo personal device, which was done on December ninth. As a result, it appears that CMS did not include this pricing information in their evaluation. So we plan to provide this information to CMS along with any additional details that they require. And in the interim, we'll continue to work with our customers to provide commercial pricing information to support their Medicare claims on a case-by-case basis.

Okay.
So so does this mean we might have to wait for the next cycle to start, which is November first for a final pricing? Or there is a possibility that things can get resolved before come before April first?

Scott Davis

Yes, there's a we spoke with our consulting experts who are in this area, and CMS typically has biannual meetings where they publish their pricing determinations. However, we are told that it's possible they could issue a correction prior to that biannual meeting. We'll certainly know more as we work through this process in the time being we're going to continue to support CMS by providing requested additional pricing detail to support this final payment determination.

Okay, thanks for that. And then and two are thinking through and the growth in sales, especially in the fourth quarter and also for the for the entire year and 36% growth year-over-year in the fourth quarter. Is there something to be proud of how poorly or how much of this sales increase it's sustainable? And I'm just trying to understand, did you open up new areas new and newer areas where the sales are happening or how do you have some some new accounts where you expect to see more of this multi-unit sales slash multiunit route them on leases to happen going into '24 and beyond.

Scott Davis

Great question. One of the things that we've been hard at work on is building a strong pipeline and a scalable go-to-market strategy inside of our organization. So And much of that relates to our enterprise health customers, customers who are using our and our Indigo therapy to treat patients in clinics. We have been saying quarter over quarter that we have an increased number of multi-unit orders coming in as we become more of a standard of care inside of these IDNs. And what we are seeing are a combination of new IDNs who are who are coming online with their programs and rolling them out to additional hospitals. And in addition to that, and we've been doing this now for a couple of years. So we also have renewals of programs with them with existing IDN customers. So we continue to grow our pipeline and with these larger operators in North America, in addition to that we are seeing significant growth in Europe and we have distribution relationships in Europe that are continuing to grow and evolve and expand geographically. So between the geographic expansion, the scalable go-to-market strategies and the work with the integrated delivery networks. We are seeing this this growth, and we believe that this growth will continue going forward.

And then the last question from me is none on the operating expenses. And our in addition to what you're doing at our Ohio plant, are there additional cost containment programs in place and on should we expect some operating margin expansion in '24?

Scott Davis

Yes, this is something that we continually work on in our K. We did a lot of work on this in 2023 and we really saw the positive effects of that in the back half of the year. We had a lot of costs in the early part of 2023 that were associated with our agency, our agency acquisition, we had legal and accounting costs that were associated with that, that you saw in the first half that you didn't see in the back half so again, those costs down one-time costs. We don't we don't anticipate those going into this year, but we have some we are doing all we can to maintain the upmost and operating efficiencies in terms of cost control in terms of inventory management that we have, we continue to work on that as well as work on cost improvements and to help keep the margin trend line going in the right direction.

Okay.
Thank you.
Thanks for taking all my questions.

Scott Davis

Thank you, RK.

Operator

Thank you.
And a reminder to the audience ask a question press star one.
Our next question comes from Ben Haynor with Alliance Global Partners. Please state your question.

Ben Haynor

Good afternoon, gentlemen. Thanks for taking my questions. Can you hear me okay?

Scott Davis

Yes.
We can hear you fine, Ben.

Ben Haynor

Okay, great. Just a couple of big picture ones for me. On kind of the referral path for the personal units, how do you see that changing versus kind of what's in place now on as the CMS kind of made the decisions that they've made and deferred the decision on pricing, what's the right way to for investors to think about how those referral pathways happen? What are docs do in terms of if there's reimbursement in place? Are they more likely to write prescription or anything? Any color on that on how you see that developing would be helpful.

Scott Davis

Yes.
Yes, understood. So I think from your two parts to back to this question, one on one, important and clear indicator is that the the Hexvix code K. one zero zero seven as has been approved, so doctors can prescribe against this code that that hasn't that has changed. That was announced back in November timeframe. And what we're waiting for is final payment determination on a fixed amount in the interim, what will happen along with any Medicare submission that comes through there will need to be some backup of it, commercial pricing documentation, not historical commercial pricing documentation. So along with the approval request from the doctors will be a package that also includes recent purchases, it could be of the equipment. And again, the extra We have several years of of documentation that we can provide them supporting a a a reimbursement rate that the it could be viewed by the by CMS. So in general, in general, the process is there and it's really considered a case-by-case until our final price determination has been has been set. But in the interim, for those who are putting claims and now they will need to be accompanied by that by commercial pricing information.

Ben Haynor

Okay.
And so do you have any thoughts on potential reluctance to tour directorships as if there's a payouts under a case by case basis? Or do you think that really has an impact?

Scott Davis

Yes.
So So in general, we're not anticipating a reluctance per se. Again, this is from the reimbursement of an exoskeleton as a brace through a lump sum is a is a new program through CMS to begin with so early on in the process of XOS as spent a decade building strong relationships with our health care provider network that's out there. We will continue to work with them to ensure they have the information they need for the best opportunity to have a claim reimbursed. And again, generally speaking, we have had a very positive reaction by by our health community regarding this program.

Ben Haynor

Okay, got it. So basically early adopters are early adopters regardless of whether it's on a case-by-case basis or not for the most part, is that fair.

Scott Davis

That is fair, correct.

Ben Haynor

Okay.
Got it. That's very helpful. And then I think you talked about this in your deck. We, you know, I think you mentioned on your last conference call, you had 160 odd thousand Medicare patients that have SCI. What's your thoughts on the goals that are truly addressable on and sort of subpopulations that may be particularly addressable and how easy those are to go after any color there would be helpful.

Scott Davis

Your and I think there's a there's a certain level of physicality and there's a screening process that individuals go through to ensure that they are good candidates for the technology. I think the way to look at any program in its infancy like this is that early on. And we anticipate as a smaller percentage of individuals will go through the process, maybe 5%. And then longer term, we see this as a in the 10% range. As a general rule of thumb around this. There's some it will be a field. Certainly, it will reveal itself more as we start to work through the through the program.

Ben Haynor

Okay. And is that kind of 5% to 10% driven by more by new SCIA.'s happening and more of the patients getting in the personal access to Delta and shortly after their injury rather than maybe they've had an SCR for 25 years or 10 years, whatever might be.

Scott Davis

It's really a combination of, you know, there are things like that, bone density and and cardiovascular health. And there's a there's a number of elements that actually go into with and no two individuals with spinal cord injuries are like I mean, you could have someone who's had an injury for a long period of time, but they've also done a lot to stay active. It, dumb. It really is it is driven on a on a case-by-case basis, but we have some in working with our healthcare providers. We provided good guidelines on net that can be used to help determine who's a who's a candidate for the technology?

Ben Haynor

What makes it a lot less fluid? Just a follow-up on that. On those swaps, the may not fit the bill in terms of cardiovascular health and bone density. Is that kind of a set number of new occurrences where, you know, 20% just right off the top, they're never going to qualify? Or is there some certain X percent that there just absolutely no shout out.

Scott Davis

Well, you know, again, I think, Ben, I'm not I'm not a medical expert in terms of that, but the guidance that the that the general information that we've received over the years is that yes, I mean, there is a certain portion of the BSCI. population that that absolutely this is where the technology is just are not dumb are not candidates for for any, but we need to make sure that whomever is doing this, that there is not a chance that it's going to enter them in any way. Patient safety is first and foremost in our minds and the minds of their health care providers. So again, are arduous screening processes that have been developed and we develop these through the VA program that's been around for multiple years on this has managed to get quite a number of bets into the technology and also maintain a high degree of safety. So we are from we're really relying on our on the healthcare providers and this and to ensure that we're maintaining that high level of safety, but putting the most people possible into the program where this technology could potentially help them.

Ben Haynor

Okay. Makes sense. Turn up. That's it for me. Thanks for taking the questions, gentlemen, and good luck with CMS.

Scott Davis

Appreciate it. Thank you.

Operator

Thank you. There are no further questions at this time. I'll turn the floor back to Scott Davis for closing remarks.

Scott Davis

Right. Thank you, Diego, and thanks to everyone joining us today. Overall, 2023 was a momentous year for XL Bionics, highlighted by record revenue growth for our XO health business our go-to market strategy enabled us to drive more multiunit orders from network operators that helped us achieve our strong revenue growth and improve our operating leverage. Now that we've added gate code software to XO. in our devices. You're addressing patient rehab needs by bringing these latest innovations through our exoskeleton devices.
From an operations perspective, we continue to optimize our expense and inventory management processes, which are being designed to enable us to scale our business and grow more efficiently.
Looking forward, we're optimistic about our 2024 business outlook and are excited as we build up the momentum generated as we build upon the momentum that we've generated in 2023. We're looking forward to providing updates on our continued progress and we thank you all for joining us today and have a great day.

Operator

Thank you. This concludes today's conference. All parties may disconnect.