Greetings. Welcome to the Ekso Bionics Second Quarter 2021 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. Please note, this conference is being recorded. I will now turn the conference over to your host, Matt Steinberg. Thank you. You may begin.

Thank you, operator, and thank you all for participating in today's call. Joining me from Ekso Bionics are Jack Peurach, President and Chief Executive Officer; Jack Glenn, Chief Financial Officer; and Bill Shaw, Chief Commercial Officer. Earlier today, Ekso Bionics released financial results for the quarter ended June 30, 2021. 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 contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including our 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. 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, July 29, 2021. I will now turn the call over to Jack Peurach.

Thanks, Matt, and thanks everybody for joining today. We're pleased with the progress we made in the second quarter, which extended our solid start to 2021. During the quarter, we focused on building momentum with network operators and driving adoption of our subscription access model. Through these combined initiatives, we closed several multi-unit orders with top network operators globally. During the quarter, we recorded 20 EksoNR bookings including 11 subscription bookings worldwide, both up from the first quarter. For the second quarter, we generated revenue of $2.2 million, up 16% from the first quarter. We are pleased that onsite demos are now back to pre-COVID levels, as business conditions gradually improve. However, we are closely monitoring the very fluid landscape as the spread of COVID variants may potentially affect in-person interactions. Our ability to be flexible with our virtual selling solutions and online educational webinars has us well prepared in the event of any sudden changes. On the industrial side, we are pleased to see a continued high level of customer interest and an increase in onsite evaluations and pilot programs. As I will discuss later, we are building awareness for EVO, which has generated positive feedback to date in several market verticals. Financially, we achieved solid gross margins as we continue to see the benefits of the cost initiatives we put in place last year. Now, I'd like to turn the call over to Bill for an update on our medical segment and global commercial strategy.

Alright, thank you, Jack. Our commercial team made excellent progress during the second quarter. Our efforts in meeting with and educating customers resulted in successful execution in our direct and partner markets. Our subscription model accelerated the speed and size of new orders. As a reminder, within our network strategy, we are focused on launching multi-site programs with network operators. We've opened up more doors with this market and we now continue to execute orders with a number of leading inpatient rehabilitation operators. For the second quarter of 2021, we delivered approximately $1.9 million in EksoHealth revenue. Our rolling 12-month renewal rate is a healthy 80%. We now have more than $1.3 million of contracted unrecognized revenue under our new subscription model, up sequentially from approximately $700,000. We have discussed in previous calls the benefits of moving to a subscription model. As we previously mentioned, this offering encourages multi-unit orders and lowers customer capital barriers. It also shortens our sales cycle, accelerating sales conversations with both new and existing customers. We are generating greater inroads with our target customers more quickly under this new model and it sets us up well to increase order flow. Importantly, while subscriptions differ revenues across the life of a contract, the faster adoption rate and resulting recurring revenue stream should accelerate revenue growth in the longer term. We're most excited that our customers can realize increased access to our EksoNR devices, which bring meaningful outcomes to more patients. On that note, we are proud to say that not only is EksoNR the standard-of-care to all Kindred inpatient rehabilitation hospitals, we also expanded our partnership with Kindred Healthcare into a long-term acute care business with a multi-unit order at four of their Florida locations. We also continue to expand our presence with skilled nursing facilities or SNFs. For example, Excelsior Care Group, a rapidly expanding premier healthcare consulting firm that provides consulting services to sub-acute rehabilitation and nursing centers in the New York City's Tri-state area has partnered with Ekso Bionics to introduce EksoNR to multiple locations within their network. Excelsior’s member facilities are offering our technology to provide advanced neuro rehabilitation options to their patients, differentiate themselves from other skilled nursing facilities in the region, and attract more patients to the referring hospitals and communities they serve. We're excited to work with Excelsior and hope to further grow our partnership in the coming years. Increasing penetration with national and regional network operators is a key initiative for Ekso Bionics and these announcements demonstrate our encouraging results. From an international perspective, our EMEA business has been gaining strength and had a strong performance through our partner network. One of the highlights includes a multi-unit order executed by our Benelux partner from an existing customer. We are pleased that EMEA has placed more EksoNR devices in the first half of 2021 than in all of 2020. In tandem with in-person interactions, educational webinars are a key component of our strategy to build physician and clinician awareness. One such example of how we have driven success on this front is demonstrated by our strong partnership with U.S. Physiatry. Together, we have generated greater recognition of our devices and education on successful implementation of robotics in the rehabilitation centers. Earlier this month, we held the second of a four-part webinar series, which discussed the clinical and economic benefits of exoskeleton technology. We look forward to our next webinar event alongside U.S. Physiatry in September. Ekso has helped patients take millions of accelerated steps including one of our customers in Poland, ERGO Hestia, who reached 4 million steps on July 23rd. Today we highlight another success story. With the Olympics happening now and the Paralympics beginning at the end of August, we thought it was a perfect time to share Margaret McIntosh's story. Margaret is a lifelong equestrian who sustained a spinal cord injury in 2000. But that didn't stop her from continuing with her passion and excelling in the sport. Margaret went on to compete in the 2016 Paralympics, which in her words was a culmination of her equestrian dreams. Margaret started using the EksoNR as part of her rehabilitation and even 20 years post-injury continues to improve function and mobility with the assistance of her therapist at Good Shepherd Rehabilitation. Looking to the second half of the year, we are quite optimistic about the traction we are gaining with our subscription offering, both in accelerating sales cycle and increasing the number and size of each order. We will continue to educate our customers on the beneficial impact of our innovative devices, clinical training, and program support. We look forward to further acceleration of our progress based on the strategy in the coming months. At this time, I'd like to turn the call back to our CEO, Jack Peurach.

Thanks, Bill. I'd like to provide an update on progress with our industrial segment, which we call EksoWorks. We generated solid order growth in the second quarter with our EksoWorks business revenue increasing 91% sequentially. We are focused on expanding awareness of EVO and EksoZeroG across several new market verticals. EVO is gaining traction with prominent large industrial companies as employers are incorporating these cutting-edge devices into their industrial-related workflows to mitigate employee fatigue, regulate productivity, increase worker retention, and reduce the risk of injury. We continue to add new customers while conversations with potential customers have picked up across a diverse set of industry verticals. Currently, our primary EksoWorks markets include aerospace, automotive, construction, and logistics and distribution as we are targeting applications where EVO enhances worker productivity and improves worker safety. I will now turn the call over to Jack Glenn to review our second quarter financial results.

Thank you, Jack. Ekso generated second quarter revenue of $2.2 million, compared to $2.3 million for the second quarter of 2020, reflecting a continued shift to our subscription model which defers revenues to future periods. Our gross profit for the second quarter was $1.3 million, representing a gross margin of approximately 58% compared to a gross margin of 56% for the same period a year ago. The increase in gross margin was primarily due to our manufacturing efficiency improvements, and a better cost profile of EVO compared to the prior generation product. Gross margin tends to fluctuate quarter to quarter based on geographic and channel mix. Operating expenses for the second quarter of 2021 were $4.6 million compared to $4.4 million for the second quarter of 2020. Net operating loss in the second quarter of 2021 was $3.3 million, compared with a net operating loss of $3.1 million in the prior year period. The increase in net operating loss is primarily a result of higher research and development expenses and the previously noted revenue shift to subscription. Gain on warrant liabilities for the quarter ended June 30, 2021 was $0.9 million from the revaluation of warrants issued in 2019, 2020 and 2021 compared to $8.6 million loss associated with the revaluation of warrants issued in 2015, 2019 and 2020 for the same period in 2020. Turning to year-to-date results, revenue for the first six months of 2021 was $4.1 million, compared to $3.7 million for the same period in 2020. Gross profit for the first six months of 2021 was $2.5 million, an increase of 33% compared to gross profit of $1.9 million for the same period in 2020. Gross margin for the year-to-date period increased to 61% from 51% for the first six months of 2020. Operating expenses for the first six months of 2021 were $9 million, a decrease of $0.8 million or about 8% compared to $9.8 million for the prior year period. Net operating loss in the first half of 2021 fell to $6.5 million from $7.9 million in the first half of 2020, reflecting higher year-to-date revenue and a linear cost structure. For the first six months of 2021, we recorded a gain on warrant liabilities of $0.9 million due to the revaluation of warrants issued in 2019, 2020, and 2021, compared to a $6.1 million loss associated with the revaluation of warrants issued in 2015, 2019, and 2020 for the same period in 2020. Cash used in operating activities for the first six months of 2021 was $5.6 million. As of June 30, 2021, we had a strong cash balance of $45.9 million. Please see our 10-Q filed earlier today for further details regarding the quarter.

Thank you. At this time, we will be conducting a question-and-answer session. Our first question is from RK Ramakanth from H.C. Wainwright.

We see that the subscription model is working. To gain more insight into placement, you mentioned there is not only an increase in numbers but also in the size of the orders. Before diving into that detail, could you provide an idea of how many units are placed, whether they are under subscription or owned? In total, how many are placed, and what are the implications for recurring revenue that can come after placement?

RK, this is Jack. Thanks for the question. I think I understand your question. How many units are currently in our subscription? At least, I'll try to answer the question this way, there are 26 units currently in our subscription fleet.

Could you provide details on the size and number of orders, specifically what the figures were in the first quarter and late last year, as well as the current numbers for the second quarter? This information will help us understand how effective the model is.

Yes, I'll introduce this and then pass it over to Bill. We had a very strong quarter with network operators. The main factor behind the increase in units per order is the shift towards network operators. Most of our orders this quarter were from network operators. Bill, do you have the number?

Yes, roughly it is 88% of the order here, give some idea in that. RK just I guess to answer your first question….

Can’t hear you, Bill.

Bill, something is wrong on your side.

Okay, to address your first question, regarding the size of the orders and their increase, if we are dealing with a multi-unit order, that leads to more revenue over the contracted period. We consider not just the increase in the number of units but also the revenue generated. We have structured our subscriptions for both 12 and 24 months. In the recent quarter, we had two subscriptions, translating to 24 units a month.

Okay. The rest of them are all 12 months?

Correct.

I think I will follow up offline as I have some additional questions. However, I would like to ask a couple more questions about other topics first. I noticed there was an increase in both R&D and marketing activities. Are we going to see a gradual increase in marketing, anticipating that the world will stay open and not face further shutdowns? Additionally, regarding product development, what exactly do you mean by new products? Are we focusing on health-related products or industrial ones?

Thanks RK. So first on the marketing expenses, and then I'd say overall expense structure of the company, we’ve been extremely cautious. We have seen our business come back. And we are making some selective investments, at least starting to come back making some selective investments in some areas. Those would be customer facing and then operation-oriented investments, along with some investments in R&D. So I don't believe that's going to scale significantly in most areas right now. I think we're pretty stable on the marketing side. Most of those investments are variable investments. We’re not investing in infrastructure. So those are things we can turn on or stop as we need. On R&D side, we've invested in and started to invest in and we'll continue to invest in developing products, both on the medical and on the industrial side. And so I think there's activity going on in both sides. I think we're starting to get a lot of feedback on the EVO side, both in terms of additional features people would like to see in EVO, but also other solutions. So we’re getting a lot of, I think ideas and opportunities to pursue. And then on the medical side, we're just really continuing to refine our offering and so make the product better and better to meet the customers. That's where I’d say about where our R&D investment is going.

And then the last question to Jack Glenn. Any commentary on what sort of revenue run we would see? I know, you're not giving guidance, but I'm just trying to understand how we should think of it for the second half of the year?

We don’t provide guidance, but I would say that from what we're observing, things are starting to open up, and we are engaging with customers, which we hope will contribute to a strong second half of the year. However, there are always uncertainties. Bill, do you want to add anything further to that?

Yes. I’d just add that we definitely had our strongest quarter in probably the last 18 months. It's just overall commercial activities. So we performed more technology events or demos than we did all of last year, on this past quarter. So I think that's a positive and obviously, we're feeling good about that in-person activity. However, we do have to monitor the uptake rate now closely. So we have to return to a hybrid model; we will be prepared to do that.

I would just add to that too. Just to note that the nice part about the subscription model is, as we build those units in that fleet over time, we get some more consistency in revenue and being able to forecast better results.

We have reached the end of the question-and-answer session. I will now turn the call over to Jack Peurach for closing remarks.

Thank you, operator, and thanks to everyone for joining us today. To recap, we are pleased with the progress we made in the second quarter, and with what is shaping up to be a solid 2021. First, we're targeting and gaining traction with top inpatient rehabilitation operators, who recognize the value that EksoNR can bring to their patients. Activity in the U.S. and Europe has increased significantly this year, and we are cautiously optimistic heading into the second half of the year. Second, our subscription model is playing an important role in increasing order flow, especially driving multi-unit orders. This model helps establish the foundation for us to create predictable and sustainable future growth making it a critical part of our strategy. Third, we are encouraged by the strong sequential revenue growth on the industrial side. We continue to add new customers and conversations with potential customers have really picked up across a diverse set of industry verticals. As we head into the second half of the year, we remain focused on building sales momentum by facilitating faster EksoNR adoption through our subscription model targeting network operators. We look forward to providing updates on our continued progress throughout the year. Thank you and have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.