Good afternoon. Welcome to Hyperfine Second Quarter 2023 Earnings Conference Call. Currently, all participants are in listen-only mode. We will facilitate a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Marissa Bych from Gilmartin Group for introductory disclosures.

Great. Thank you for joining today's call. Earlier today, Hyperfine Inc released financial results for the quarter ended June 30, 2023. A copy of the press release is available on the company's website as well as sec.gov. Before we begin, I'd 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 that is accurate only as of the live broadcast today, August 14, 2023. 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. Since late last year, we have realized the benefits of our strategic financial initiatives, and the organization has delivered a meaningfully improved financial profile. We have nearly doubled our revenue on a year-over-year basis, demonstrated strong growth and healthy gross margin progression, and dramatically reduced our spending and net cash burn while continuing to invest in our core value drivers. I am very proud of the execution of the team and the resulting transformation of the financial profile and prospects for our business. In the second quarter, we made substantial progress on our mission, achieving record revenue of $3.4 million with the sale of 14 commercial Swoop Systems. Our performance was driven by strong international marketplace and commercial activity, in part through our collaboration with King's College of London, where we continue to strengthen our team and commercial pipeline in the U.S. During the second quarter, we also drove meaningful progress against our three strategic pillars: innovation, clinical evidence, and commercial expansion. On innovation, we are continuing development efforts across all elements of the Swoop System. This includes significant investments in hardware and AI-driven software to further advance the image quality and clinical utility of ultra-low field MRI. We have dedicated programs and product teams across these areas, and we are pleased with the strong cadence of system improvements our team has implemented year-to-date. As part of these improvements, we have been upgrading our proprietary AI and deep learning algorithms, which are central to the process of image generation with the Swoop System and are adding significant value to the utility of our platform. The Swoop System integrates deep learning, a form of artificial intelligence, as a component of its image processing for T1, T2, and FLAIR sequences. Our future product roadmap also includes the development of an AI algorithm for our DWI sequence. The integration of deep learning does not require any additional steps from the user and enhances the image quality and consequently, the diagnostic value of images generated at ultra-low field. The algorithms are designed to improve the image quality of our scan output while reducing the impact of artifacts. The interest created with these algorithms has been validated by expert radiologists. As we move forward, we are continuously investing in improving our AI-driven quality, leveraging each imaging focus software release to further improve Swoop System performance. Regarding our software pipeline, we launched our latest software earlier this year and rolled it out to accounts in March and April. Today, we are pleased to share that we plan to launch another software upgrade by early 2024 to further improve the sequences our system offers. The process of launching software updates is straightforward for our team and customers, with most U.S. commercial Swoop Systems operating connected, where new updates can be downloaded remotely without the need for field team or technician intervention. We look forward to sharing progress towards the launch of our next AI-driven software and later this year provide visibility for a product roadmap for 2024. Now turning to clinical evidence. Today, I would like to share more detail on the clinical evidence work we are doing across the breadth of applications of our technology. We're actively collaborating with leading U.S. and international institutions on multiple scientific research and clinical studies. These include early-stage activities exploring future market opportunities as well as several studies that are directly supportive of the clinical use cases we're focused on today. We recently took the next step towards defining our potential in the stroke use case by commencing our ACTION PMR study, a multicenter evaluation that will assess the use of the Swoop System in acute skin stroke patients. We are excited to update you that all four sites have the necessary approvals, documentation, and equipment to start enrollment, and one site is actively involving patients today. As we prepare to fully address the stroke opportunity, we have also appointed a stroke advisory committee consisting of leading clinicians in the field of stroke neurology, neuro-interventional radiology, neurovascular surgery, and interventional radiology. Their insight and guidance will help us shape our strategy to best address the needs of patients and technicians in this space. This is an exciting project for us and represents a step forward in pursuing the use of the Swoop System in triage in acute stroke. In pediatrics, we recently announced the completion of enrollment in the HOPE PMR study, a 150-patient observational multicenter study imaging pediatric hydrocephalus patients with a Swoop System. Hydrocephalus is the accumulation of too much fluid in the brain, and children with this neurological disorder need to be scanned frequently over many years. MRI is a very desirable imaging modality to prevent frequent exposure to radiation using CT. The goal of this 150-patient study led by Dr. Jeff Leonard from Nationwide Children's Hospital is to evaluate the safety of using the Swoop System to image patients with different shunts, assess ventricular size compared to high field scanners, and assess the safety of using the Swoop System to image hydrocephalus patients in the emergency department. Several publications and presentations are being prepared to share the results of the study with the scientific community, which we expect to see late this year. And relevant to our core use case today, imaging patients in critical care. We are participating in a study called the SAFE MRI ECMO study to evaluate the imaging of patients on extracorporeal membrane oxygenation or advanced life support with our Swoop System. The Swoop System potentially offers a brain imaging opportunity otherwise not available as they are unable to be transported to the MRI suite for conventional scans. We expect to see data from this study presented at the APELSO meeting in Seoul, South Korea in early November. Looking further ahead, we see a potentially large new opportunity for the MRI industry with the recent development in the treatment of Alzheimer's with the full FDA approval of Biogen's Makena and the positive results published in JAMA from our collaboration. The labeling of these new drugs requires multiple and frequent patient MRI scans at baseline and throughout the treatment to monitor potential risks, mainly amyloid-related imaging abnormality or ARIA, which are abnormal differences seen in imaging of the brain in patients with Alzheimer's disease. We believe the point-of-care Swoop System can offer a highly differentiated, cost-effective, and accessible solution for this new use case. We're currently in the early stages of planning clinical feasibility studies with current system users as well as the sales development efforts around sequences required for the imaging of patients on these new Alzheimer's drugs. Turning to commercial expansion, our U.S. commercial team is gaining experience as we strengthen our relationships with U.S. hospital systems and broaden our pipeline. We have further iterated the makeup of our field force and now have established three dedicated teams focused on selling, implementation, and utilization. We believe this structure positions us well to drive system sales, support successful programs, and expand our network of reference sites. In the second quarter, we fulfilled the outstanding deliveries associated with our 2022 purchase order from King's College London, which was supported by grant funding from the Bill and Melinda Gates Foundation. During Q2, we also secured a new grant for $3 million over the next three years to fund the support of research and clinical activities and the servicing of the subsystems in the Unity program and initiative funded by the Bill and Melinda Gates Foundation in low- and mid-income countries. Also on the international front in Q2, ISMRM, the International Society for Magnetic Resonance in Medicine committee was held late in the quarter in Toronto. The highlight of the Premier MR Society annual gathering revolved around low field scanning, and we generated substantial interest at our booth and in scientific sessions. On the Friday of ISMRM, we participated in a meeting organized by King's College London and representatives from the Bill and Melinda Gates Foundation network to discuss the many challenges and opportunities in patient access to MR imaging. Global commercial expansion remains a truly compelling long-term opportunity for us as well. As we enter the third quarter, having completed several recent successful international activities, our focus is within our core U.S. market opportunity. We're actively engaged with several U.S. hospital systems mainly focused on critical care and pediatric targets as our team continues to mature and gather experience. As we build this new ultra-low field brain imaging market, we are encouraged by the early positive clinical and economic feedback from existing and prospective U.S. accounts. In a recent customer-facing webinar, we were pleased to have two active users from prominent institutions share their strong views on the economic value of Swoop with several key takeaways, including substantial time savings for patients and staff, increased outpatient scanning volume and revenue, and overall improved patient satisfaction. Before I turn the line over to Brett, I'd like to reiterate that alongside our three strategic pillars, we remain laser-focused on spending discipline. We continue to operate the need and implement initiatives in support of cash runway extension while still investing in innovation, clinical evidence, and commercial expansion. We continue to see a cash runway for the business through 2025. I will now turn the call over to Brett Hale, our Chief Administrative Officer and Chief Financial Officer, who will review our second quarter performance and discuss the financial outlook in greater detail.

Thank you, Maria. Turning to our financial results for the second quarter 2023. Revenue for the quarter ended June 30, 2023, was $3.4 million compared to $1.5 million in the second quarter of 2022. Gross profit for the second quarter of 2023 was $1.4 million compared to negative $0.2 million in the second quarter of 2022, reflecting a 43% gross margin. R&D expenses for the second quarter of 2023 were $5.3 million compared to $7.3 million in the second quarter of 2022. Sales, general, and administrative expenses for the second quarter of 2023 were $7.8 million compared to $15.7 million in the second quarter of 2022. The net loss for the second quarter was $10.6 million, equating to a net loss of $0.15 per share as compared to a net loss of $23.1 million or a net loss of $0.33 per share for the same period of the prior year. Our cash burn in the second quarter was $10.1 million, and we ended the second quarter of 2023 with $93.9 million in cash and cash equivalents. Turning to our 2023 outlook, we are opting to maintain our full year expectation for $10 million to $14 million in revenue. Our approach to guidance incorporates our progress as we build and lead this new market for point-of-care MR imaging and sell systems into a new cycle for customers. We know our clinical value proposition with customers is strong, and we remain confident in steady price improvement in the back half of the year and going forward. For the year, we continue to expect gross margins to be approximately 40% to 50% as we begin recognizing scale and average Swoop System pricing moves gradually higher. Lastly, we are maintaining expectations for a total cash burn of $40 million to $45 million for the full year 2023. This incorporates an expectation for continued investment in R&D and substantially streamlined investments in SG&A versus history, while we maintain customer-facing resources to continue to drive adoption and growth. In line with this, we've allocated a greater relative portion of OpEx spending to R&D in 2023 versus 2022, with R&D spending projected to be approximately 40% to 50% of total OpEx dollars this year. We will continue to focus on our three strategic pillars and maintain spending discipline. We are excited about the momentum we are building for the remainder of the year and beyond, and we are pleased to have the cash and flexibility to invest in the right areas for continued Swoop system adoption. At this point, I'd like to turn the call back to Maria for closing comments.

Thank you, Brett. I'm proud of the progress the Hyperfine team has made in recent months, and I am very optimistic about what this team can deliver. Before closing, and on the note of our team, I would like to celebrate a recent change within our leadership structure. Specifically, the promotion of Tom Teisseyre, formerly our Chief Product Officer, to Chief Operating Officer. In this expanded role, Dr. Teisseyre will now oversee product development, clinical science, operations, cybersecurity, and technical service. In his two years with the company, Tom has overseen substantial improvement in image quality through multiple and frequent AI-powered software releases and the development of a robust product roadmap of future AI-powered software and hardware products. His contributions span strategy to operational execution and have set a high bar of excellence. We look forward to the many achievements of his ongoing leadership. With that, I want to thank you for your time and open the line for questions.

Our first question will come from Larry Biegelsen from Wells Fargo.

This is Charles on for Larry. First, congrats on a nice quarter. I wanted to ask about your second half expectations here. So you had $6 million in the first half, and you maintained your guide which implies about $6 million at the midpoint in the second half, which is essentially flat. I mean, what assumptions are kind of baked into this? Is this conservatism? Or are there any particular headwinds? Or maybe if the King's College orders fulfilled already, or maybe there's seasonality in the second half, you could talk about that would cause it to be flat or just not improve over the first half sales? And then I have a quick follow-up.

Sure. Let me start with some comments, and I'll let Brett add on to this. So we have chosen to be prudent with our guidance. We continue to see nice momentum in how we're building the U.S. pipeline, and we believe the U.S. will definitely drive a lot of our success in the second half now that we have completed all of the shipments in the King's College London, which was funded with the second grant from the Bill and Melinda Gates. There is always a little bit of summer potential variability or even seasonality. We're not seeing something too dramatic, but again, that could account for some of that which could still happen in the next few weeks. But again, the momentum is strong. The momentum around pricing, as we've messaged, continues to be strong, and we expect that pricing will continue to improve through the second half of the year. And as we've made some changes to our field force in the U.S., we also expect that this will continue to pay dividends as our team gathers more seasoning and more experience in the field. The one thing I would like to remind everyone, and I think it was there from our opening remarks, is that we are building a new market; we're not just competing in an existing market. And that is a big undertaking that comes with some variability and some uncertainty. So that has driven us to be prudent in how we are reiterating guidance. Brett, feel free to add any other commentary.

No. Thanks, Maria. I think yes, I would echo those comments that we're building a new market and given new markets and some variability, we wanted to maintain a prudent approach to our outlook.

Could you share any early thoughts on 2024? I understand it’s too early for formal guidance, but perhaps you could discuss at a high level some potential tailwinds or headwinds you anticipate for 2024, such as software upgrade pricing and changes made to the field force, among other factors? How should we consider the upcoming year?

Okay. So I assume you meant '24.

24, sorry. Yes.

Definitely it's too early. But as I think about what we're doing in terms of investing in the three pillars that are drivers of our business—innovation, clinical evidence, and commercial expansion—more time should only allow us to continue to make greater progress. Again, the pricing trend is favorable and gets a little bit better every quarter. We will have by early 2024 yet a new version of our software and we have other programs, as we said, that will later this year give you all more visibility to our product roadmap for 2024. But as we mentioned, all of the clinical studies that we are funding and supporting and being involved in, we will see the data from the SAFE MRI at the very end of this year, which is an important study for the work we're doing in critical care. We're going to see the publication and the presentation of the data from the HOPE PMR, which supports pediatric use through the balance of this year, along with the three things that that study was hoping to achieve—which were demonstrating the safety of using our system with a variety of different kinds of shunts, the ability of our system to allow clinicians to access ventricular volume changes, and last but not least, the ability to use our system in a variety of settings to test the shunts anywhere from hospitalized kids to just emergency department visits. So all this data will meet in 2024 and I think will be coming out in the fourth quarter for all intents and purposes. We see more traction from ACTION PMR. So I don't foresee headwinds—I foresee more tailwinds—but it's probably too early to be any more precise than that.

Our next question will come from the line of Neil Chatterji from B. Riley. Your line is open.

Maybe just first, any color you could provide just kind of on the makeup of the kind of the 14 orders in the quarter—maybe as far as institution type or any of that came from the BJC or King agreements? And then also any update on the expectations for the sales funnel in the back half, including on Kings and BJC.

Including, sorry, say that again, Neil, I didn't catch.

King and BJC. Sure. So we're not going to provide the geographic split of supporting orders. We only don't do that, so no different this time. Fair to say that the second quarter was dominated by international shipments. We have said publicly that we have completed now all of the shipments in the King's College 2022 order, so that should not really factor into anything in the second half. That is now completed, and we had a busy Q2 on international as we were busy with Bill and Melinda Gates negotiating the third grant. We also had ISMRM, and again, completed the shipments of the outstanding devices on that King's College order. So it's fair to say that in the second half, we have more U.S. than international, and that's going to be also a result of some of the changes that we have made and the hiring of new and different kinds of people to accomplish these three different things we need to do commercially in the U.S. and then gaining more experience and with that actually accelerating and broadening the pipeline of deals, which we're starting to see as we are moving here even through the weeks of the third quarter. Brett, anything I have missed?

No, I think that summarizes well.

And then maybe just if you could talk about the progress you've seen kind of on the software improvement side, maybe elaborate on kind of the AI and deep learning development and then anything high level you could potentially share on what that software update in early '24 could address?

Sure. So we feel really good about the feedback we're getting from the latest software that is now in the field, which we've rolled out to sites in the March, April time frame. We see that primarily around the DWI sequence. As we think about how we're driving software in the future, we really have some levers to pull. We have the actual team that develops sequences, a software team, and central to all of that effort is our AI team. We're also, I believe, doing more around being collaborative with the outside world on sequence optimization through some of the research collaborations we have. So I'd like to think that we're moving from just finished quality improvement to something that I've chosen to label image performance. Because we're incorporating not only quality but really how AI and this learning enhances the images and the ability for the images to inform decision-making at the clinical level. In some cases, it's not just about the quality of the images, but also the time to process. So we know on the acute stroke side, the time to generate images is going to be important, and we are very conscious of that. We are also turning our development efforts not only on just better quality, but we feel we have that quality that's quite good, while producing the same quality images at a fraction of the time that it takes right now. We are funding, and I think it was in our prepared remarks as well, a number of feasibility efforts around images that we don't have right now in our portfolio, and that will probably take a little bit longer than just the next revision of image performance that we focused primarily on DWI. But the feasibility work will start bearing through later in '24 and into '25 around some things that will continue to position us well to broaden our use cases, and some of those are around Alzheimer's, but there are other areas as well.

I don't have any further questions in the queue. I would like to turn the conference back over to Maria Sainz for any closing remarks.

I just want to close off by thanking you all for your interest in Hyperfine and look forward to updating you in another quarter. Thank you very much.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.