Earnings Call Transcript - EKSO Q1 2024

Operator, Operator

Greetings, and welcome to the Ekso Bionics First Quarter 2024 Financial Results Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Matt Steinberg with Finn Partners. Thank you. You may begin.

Matt Steinberg, Investor Relations

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 ended March 31, 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 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 Ekso's businesses, please see its filings with the Securities and Exchange Commission. Ekso 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 Bionics' Chief Executive Officer, Scott Davis.

Scott Davis, CEO

Thank you, Matt. We closed out the first quarter and started the second quarter of 2024 with positive momentum as we're pleased to receive final payment determination for Medicare reimbursement of our Ekso Indego Personal. Additionally, our results for the quarter reflect continued improvements from both our scalable commercial strategy and operations. I'll touch on both of these developments shortly. But first, I'll share an overview of our first quarter performance. We generated revenue of $3.8 million and sold 29 EksoHealth devices in the first quarter of 2024. Sales of the EksoHealth devices for the quarter were slightly more affected by typical seasonality due primarily to fluctuations in larger integrated delivery network, or IDN, procurement cycles. We remain focused on executing upon our commercial strategy and growing our IDN network. We continue to deploy resources to develop new IDN relationships that will help us secure larger and more multiunit capital deals across our North American network. In doing so, we aim to convey the clear, clinical and economic benefits of our EksoNR and our Ekso Indego Therapy devices with the right decision makers. Our pipeline of potential deals remains solid with approximately $1 million of backlog generated in Q1 to be recognized over the course of 2024, and we remain confident that our commercial team will succeed in driving larger unit order growth. Now turning to an Ekso Indego Personal update. As previously announced, CMS approved the use of the health care common procedure coding system, K1007, and to bill Medicare for the Ekso Indego Personal. On April 11, CMS established a reimbursement level of $91,031 for Medicare reimbursement under this code for the Ekso Indego Personal, effective retroactively beginning April 1. This pricing decision from CMS is an important next step in our commercial strategy to build demand within the clinical, home and community use settings. We believe there are thousands of Medicare and Medicaid covered individuals with a spinal cord injury that can potentially benefit from our differentiated personal exoskeleton device enabling them to achieve better health outcomes, along with new levels of independence. We're thrilled that our differentiated exoskeleton devices are now accessible to a larger patient population and we look forward to providing future updates on our continued work with the SCI community, CMS, along with other public and private health insurance programs that generally follow CMS reimbursement practices. With reimbursement pricing secured, we anticipate growing the Personal Health business. We believe this growth will ramp up quarter-over-quarter as our commercial and clinical teams engage with skilled therapists and clinicians across our expansive customer base consisting of more than 260 clinical and rehabilitation centers domestically. We're leveraging our robust network to expand our reach to a potentially higher volume of individuals living with spinal cord injury who will benefit from our Ekso Indego Personal through establishing additional certified training centers across the U.S. Turning to our international performance. We're pleased that we continue to gain momentum across the EMEA and APAC regions. Results were particularly strong in EMEA as the French public health system has embraced the use of robotics in their NeuroRehabilitation programs. Looking ahead, we are working to continue to build on the strength of our vast international distribution network, which serves as our focal point of achieving operating leverage and scalable worldwide growth. Now I'd like to turn to an update on our Industrial segment, EksoWorks, in the first quarter of 2024, sales within this segment increased nearly 60% from the same period a year ago, although against a modest level. Notably, we delivered devices to an OEM in the construction vertical, along with continued shipments to potentially large volume customers in aerospace and energy segments. With improved cost structures driven by our new contract manufacturer and remain focused on scaling our commercial growth through targeted customers in large industrial settings. Overall, our performance in the first quarter of 2024 demonstrated continued progress across both of our segments. Now with CMS establishing reimbursement pricing for the Ekso Indego Personal, we believe we are poised to take the next step in our evolution. At this time, I'd like to turn the call over to our Chief Financial Officer, Jerome Wong, to review our first quarter financial results.

Jerome Wong, CFO

Thank you, Scott. We generated first quarter 2024 revenue of $3.8 million compared to $4.1 million for the first quarter of 2023. Gross profit for the first quarter of 2024 and 2023 was $2 million in both periods, representing a gross margin of approximately 52% in the first quarter of 2024 compared to a gross margin of 49% for the first quarter of 2023. The overall increase in gross margin was primarily due to lower EksoHealth device and service costs. Operating expenses for the first quarter of 2024 were $5.2 million compared to $6.4 million for the first quarter of 2023. The 19% decrease was primarily due to a decrease in general and administrative expenses stemming from lower legal expenses, head count, and the absence of costs associated with the acquisition and integration of HMC in the comparable quarter. Net loss applicable to common stockholders for the first quarter was $3.4 million or $0.20 per basic and diluted share compared to a net loss of $4.4 million or $0.33 per basic and diluted share for the same period in 2023. Cash and restricted cash as of March 31, 2024 was $8.8 million compared to $8.6 million as of December 31, 2023. Please see our Form 10-Q filed earlier today for further details regarding the quarter.

Operator, Operator

You may now open the line for questions.

Xun Lee, Analyst

This is Sean from H.C. Wainwright. And my first question is on the recent approval by Medicare on the reimbursement. So I was wondering it's been about 2 weeks since. Have you seen any increase in lead generation or interest in this device as a result of the Medicare approval?

Scott Davis, CEO

Yes. So thank you, Sean, for your question. In general, we are seeing strong demand from individuals with spinal cord injuries who are interested in the technology. So we saw a definite uptick from the announcement of the final payment determination. So yes, is the short answer to that question. And we are working to support our DMEs to be able to get those Medicare claims submitted.

Xun Lee, Analyst

That's great to hear. On elaborating on these claims. So I was wondering does having a standardized reimbursement number streamline your sales cycle such that it makes it easier for you to market and sell these devices?

Scott Davis, CEO

Again, the short answer to that is yes, absolutely. Previously, with the code approved, but on a case-by-case basis, the level of documentation that's required for that is fairly significant, and it's a rather unusual process to physicians who might be submitting a prescription for this or to DMEs who need to process it. With CMS establishing a payment determination, this claim now has an actual cash value behind it. So as those claims are being submitted, there is a recognized value that has been definitively provided by CMS. So it is more of a standardized process at this point in time.

Xun Lee, Analyst

That's great to hear. My final question then is on the international sector. You mentioned that you're gaining momentum especially in EMEA. So I was wondering, is that something that we could see going forward for the remainder of the year as well? Or is that more of a one-time boost in the first quarter?

Scott Davis, CEO

In the EMEA region, yes. So we are seeing good growth there. And part of that growth is attributed to the strong distribution network that we've built throughout both EMEA and APAC regions. We've been hard at work in developing our distributor network over many years now, and we are definitely seeing scale through the use of that channel. Additionally, there's been a significant project within the French health care system this year where they are adopting robotics for use in many of the hospitals throughout France, to which Ekso is being selected for many of them.

Operator, Operator

Our next question comes from the line of an analyst with Lake Street.

Unknown Analyst, Analyst

You mentioned the strong demand for the Indego Personal. Can you provide more details on where that demand is originating? Is it coming directly from patients, or is it referrals from neuro rehab providers? Additionally, how does that process work once the demand is identified, particularly if it originates from a patient, and how does it get fulfilled by DME?

Scott Davis, CEO

Thank you, Ben, for the multipart question. So I think we'll get started with where the leads are coming from. And we're seeing leads both from individuals themselves, who are basically coming to our website and inquiring, and we are also seeing them through our network of neuro rehab facilities that have individuals with spinal cord injuries in their programs. So it's a combination of really the two where we're seeing demand. I would say it's almost evenly matched as we look at where those leads are coming from. Now further to your question of what happens and how does the process work from here. Generally speaking, our approach to this is to work with our current customer base. We've got more than 260 centers throughout North America that currently are using Ekso products for NeuroRehabilitation. And many of these centers have individuals who have suffered spinal cord injuries in their networks or in their programs. And we will generally where it makes sense, connect that individual with the center for their onboarding and their training. We're also working with DMEs, durable medical equipment providers who are processing these claims. So it's not our intent to process individual Medicare claims ourselves, but rather to support our DMEs in getting the information required for that claim and also tying it into a center who can do the onboarding process and training.

Unknown Analyst, Analyst

Okay. Got it. How much easier are the documentation requirements for the DMEs compared to the previous situation?

Scott Davis, CEO

It's substantially easier now that there is final payment determination set. And I think the level of comfort by physicians who are writing prescriptions for this has had a much higher level, at least from what we've seen. So in general, having final payment determination makes this a substantially more straightforward program. However, as with any new program, we do expect a ramp-up over time. So this is not quite as easy as turning on a faucet. It is a new program for reimbursement. Reimbursing exoskeletons in a lump sum as a brace is something that is new. And so we are taking a very deliberate approach to this, with our DMEs, supporting physicians, and patients to ensure that we have good and comprehensive claims that are being submitted through CMS.

Unknown Analyst, Analyst

Okay. Got it. And as kind of the physician's default mindset I'll write a prescription and make sure this goes all the way through before I write another one? Or are they comfortable with the reimbursement level being in place to go ahead and write a handful of scripts right out of the gate?

Scott Davis, CEO

Well, I think that's a difficult question to answer as the early claim submissions that we've been supporting on have been from multiple physicians as opposed to through a single one. So I can't really answer that at this point. I would imagine that once a physician has done one successfully, it will become easier, that's my assumption.

Unknown Analyst, Analyst

That makes sense. And then on the 260-plus centers that you're in, have you seen increased interest on the EksoNR side just now that the reimbursement for the personal devices is available?

Scott Davis, CEO

I certainly think that the continuum of care story that we can now tell with being able to bring a patient from hospital through to home resonates with the centers. We've heard that from many of our centers that they're excited about that. Will that actually result in potentially more NR sales? That's to be determined. We do know that there's been a lot of positive feedback around our GaitCoach software, which has been newly introduced in the North American market that really helps drive ease of use in operating our exoskeleton. So where we do anticipate seeing some growth in centers that are beginning to do more with individuals with spinal cord injuries in their outpatient facilities, some of those centers may elect to look at using our Ekso Indego Therapy, which is really a resizable version of our personal device. So we have seen some additional interest in that particular product category.

Unknown Analyst, Analyst

Okay. Got it. And then lastly, regarding the $1 million increase in the backlog, can you clarify whether that was global or just specific to the U.S. or North America? Also, is France's rollout a significant part of that increase, or how should we consider this from an international perspective?

Scott Davis, CEO

Yes. So great question. Largely, the backlog that we have represents both North America and EMEA, and I will say that probably a larger portion of that is reflective of the EMEA opportunity, specifically the one with the French health care system.

Unknown Analyst, Analyst

Okay. Great. Well, congrats on the progress gentlemen and getting the reimbursement in plus.

Scott Davis, CEO

We're excited. Appreciate it.

Operator, Operator

There are no further questions in the queue. I'd like to hand it back to Scott Davis for closing remarks.

Scott Davis, CEO

Thank you, Doug, and thank you to everyone joining us today. Overall, the first quarter of 2024 was an encouraging start to the year, particularly following the final pricing determination for the Ekso Indego Personal. The thousands of individuals with spinal cord injuries that could benefit from our personal device, we believe this is a potentially transformative event for Ekso. In addition to this positive development, we look forward to sustaining our commercial growth while continuing to work to expand the market for our enterprise health products with new and existing IDNs and for EVO in large industrial settings. We look forward to providing updates on our continued progress. Thank you, and have a great day.

Operator, Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.