Good day, and welcome to the Lifeward Inc. Fourth Quarter 2024 Earnings Conference Call. All participants will be in listen only mode. Please note, today's event is being recorded. I would now like to turn the conference over to Mike Lawless, Chief Financial Officer. Please go ahead. Thank you, Rocco. Good morning, and welcome to Lifeward's fourth 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 months and full year ended December 31, 2024, which, along with this call, discuss certain non-GAAP information. I would ask you to review the full text of our forward-looking statements from this morning's press release. We anticipate making projections during this call and actual results could differ materially due to several factors, including those outlined in our latest filings with the SEC. A replay will be available shortly after the completion of the call accessible from the dial information in today's press release. The archive webcast will be available on 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 is held and recorded on March 7, 2025. 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 Larry.

Thank you, Mike. Welcome, everyone. And I appreciate you joining the call. I'd like to begin by commenting on my announcement in February regarding my retirement from the company later this year. I have been part of a remarkable, life-saving journey with many incredibly talented people. I am proud of the team and the company I've been a part of for the past 13 years. Lifeward today is a medical technology agent of change that has given people improved health and better lives. I thank every person that has been a part of this journey. I have confidence that Lifeward's Board will find an excellent leader to advance Lifeward into the next phase of growth, and I am committed to ensuring a smooth transition. I look back at 2024 as a year of meaningful achievement that defined long-term access to our technologies and launched our pathway towards profitability. The key milestones were; establishment of lump sum payment and a benefit category with CMS in Q1; issuance of a CMS price of $91,032 in Q2 for the ReWalk system; gaining a meaningful contract with BARMER in Germany that sets the standard for providing exoskeletons; achieving new coverage in Hungary; beginning an initiative to expand penetration with the United States Workers' Compensation insurers for the ReWalk system; initiating a national accounts program for the AlterG line; discussions on expanding our contract to enable further penetration with the MyoCycle; launching a new generation of AlterG with the NEO product; completing FDA usability studies and the full submission for the ReWalk 7; increasing operating efficiency by closing two locations; the reduction of our headcount by 35% to right-size the business for 2025; annual growth in 2024 of 85% with an $11.8 million increase over prior year sales to reach $25.7 million. It's a lengthy list that when taken synergistically places the company on sure footing for growth and for significantly reducing loss in 2025. We closed the year with record revenue of $7.5 million in Q4. Our parallel focus for 2025 will be maintaining reasonable growth with equal emphasis on reducing our quarterly operating loss each quarter and achieving a loss at or below $1 million in Q4 2025. The reduction in our operating loss will be driven by targeted growth towards our best margin opportunities and operating efficiencies. Examples include the increase in workers' compensation placements, which have a lower level of processing expense and pay in a shorter cycle, and the MyoCycle, where each ReWalk lead we develop can also be considered for a MyoCycle, which has an improved margin and where we have gained expanded distribution rights to provide home units. Specific growth targets for the ReWalk are placements with CMS, further market penetration targeting ReWalk with workers' compensation coverage and submissions to US commercial insurers. We will also expand penetration of clinic and home sales of the MyoCycles and advancement of AlterG placements in national accounts. The efficiencies are in product mix, near-term cost of goods reduction programs and tightly controlled spending levels to match our goals. Operationally for 2025, we have built a sustainable growth plan where we examined all aspects of the business and reduced costs to meet our goals. We also have favorable year-over-year factors that have enabled reduced expenses. They include completion of our significant investment to achieve industry coverage with the Center for Medicare and Medicaid Services or CMS, reduced R&D expenses as we completed major R&D programs with AlterG and ReWalk 7, the final consolidation activities post-merger, which results in a full year with reduced headcounts and more efficient manufacturing programs in the US and Israel. In addition, our expectations for the AlterG and MyoCycle product offerings are that they will be accretive to our business in 2025 and beyond. Mike will now provide a financial summary and then we can provide more color on the operational goals I have described.

Thank you, Larry. I'll remind everyone that I will discuss results on both a GAAP and non-GAAP basis, which excludes items listed in the reconciliation tables provided in today's press release. We believe that the non-GAAP results provide a means for investors to better track the underlying performance of the business. I encourage you to reference the GAAP results in the accompanying reconciliation tables as I discuss the fourth quarter 2024 financials. Moving to revenue. Lifeward reported revenue of $7.5 million in the fourth quarter of 2024 compared to $6.9 million in the corresponding quarter in 2023. For the full year '24, Lifeward reported revenue of $25.7 million for an increase of 85% versus the full year 2023. This is the highest quarterly and full year revenue performance in the history of Lifeward and reflects our progress in scaling the business. Revenue from sales of traditional products and services including ReWalk's exoskeletons, MyoCycles and ReStore Exo-Suits was $2.0 million in the fourth quarter of 2024, while revenue from AlterG products and services was $5.5 million, the highest quarterly revenue that this product line has had since we acquired it in August 2023. The ReWalk sales were below our expectations due to delays in some attrition of Medicare cases that we had expected to deliver during the quarter. We're working to reduce the cycle times from vetting leads, processing claims and scheduling deliveries. We expect that the growing volume of qualified leads that we are experiencing will bring more predictability to our quarterly performance in this product line. We delivered a strong fourth quarter for the AlterG product line with particularly robust performance from international customers. Spending by clinics in the US has shown stabilization and that trend has continued thus far into the first quarter, giving us more confidence in our expectations for AlterG sales growth in 2025. Next, our pipeline metrics for the ReWalk product line. First, let's talk about cases in process. Our number of ReWalk cases in process in the United States consists of more than 110 qualified candidates for future claim submissions, while in Germany we had 44 cases in process at the end of Q4. Active rentals also represent an important pipeline metric for ReWalk systems. The current pipeline of active rentals consists of 27 cases, which is broken down with 24 in Germany and three in the US and VHA hospitals. These ReWalk rentals with some attrition typically convert to sales within a three to six month period. Next, for AlterG systems, we ended the fourth quarter with orders for 25 AlterG systems in backlog. This figure shows a seasonal decline in backlog from the third quarter of 2024, as we cleared out as much as possible of the backlog and inventory to end the year. In spite of the lower backlog level at year-end, we still see the market demand improving for AlterG and we expect to drive growth in AlterG revenue of about 20% in the first quarter of 2025 versus the same quarter of 2024. Moving to gross margin. In the fourth quarter of 2024, our GAAP gross margin was 24.4% compared to 35.5% in the fourth quarter of 2023. This variance was primarily driven by the restructuring charge for the closure of the Fremont manufacturing facility and related expense reduction actions. On a non-GAAP basis, adjusted gross margin in the fourth quarter was 45.4% of revenue compared to 46.9% of revenue in the fourth quarter of 2023. We finished the year with adjusted gross margins slightly below our expectations, primarily due to the mix of products sold in the quarter, particularly the higher mix of international AlterG sales, which carried a lower gross margin in the quarter. GAAP operating expenses were $17.1 million in the fourth quarter of 2024 compared to $8.6 million in the fourth quarter of 2023. This variance was largely driven by a $9.8 million impairment charge on our intangible assets recorded as required by GAAP. Under accounting standards, intangible assets with indefinite useful lives and goodwill must be tested for impairment at least annually or in this case, the impairment was triggered by the market value of our equity compared to our book value. Importantly, this is a noncash charge in nature and ultimately does not affect the operating performance of our business. On a non-GAAP basis, adjusted operating expenses were $6.7 million in the fourth quarter compared to $7 million in the fourth quarter of 2023. This improvement is primarily due to lower marketing, general, and administrative expenses resulting from prior expense reduction efforts. Our GAAP operating loss for the fourth quarter was $15.2 million compared to an operating loss of $6.7 million in the prior year's quarter. This variance was largely driven by the aforementioned charges. On a non-GAAP basis, adjusted operating loss was $3.3 million in the fourth quarter, which improved versus the $3.8 million loss in the prior year's quarter. Since the end of the year, we ended the year with $6.7 million in cash and equivalents and no debt. Subsequent to the end of the quarter, on January 8th, we raised gross proceeds of an additional $5 million, which was added to our cash balance. As we will note in our Form 10-K, which we will file later today, we received a going concern qualification from our auditors as part of the 2024 audit process, reflecting their perception of the adequacy of our balance sheet to fund our business. We have already taken a number of actions to address this development. First, we initiated the sustainable growth plan that Larry described earlier to reduce our cash outlays. We believe prioritizing investment in higher margin near-term sales will significantly reduce our quarterly non-GAAP operating losses and cash burn rate by the second half of 2025. Second, we are putting in place an ATM facility that will allow us to opportunistically raise capital should we determine that we need to shore up our capital base. We're also exploring other nondilutive or minimally dilutive alternatives so that we can resolve this issue. Turning to our financial guidance. For 2025, Lifeward expects full-year revenue in the range of $28 million to $30 million with an adjusted gross margin between 47% to 49%. Following our efforts to rationalize our cost structure, we expect full-year non-GAAP operating expenses of $22 million to $23 million, down from $27.5 million in 2024. We expect these factors to drive a full-year non-GAAP operating loss of $7 million to $9 million. From a quarterly perspective on 2025, the first quarter is our seasonally lowest revenue quarter and we'll also have the highest operating expenses due to the timing of the fees in our savings initiatives under the sustainable growth plan. After the first quarter, we expect revenue to grow sequentially in each successive quarter from a combination of greater traction in delivering ReWalk systems, seasonally stronger quotation and sales activity for AlterG products, and a ramp of sales of MyoCycles as we execute under the expanded distribution agreement with MYOLYN. We expect quarterly operating expenses to decline through 2025 as the full benefit of the expense actions taken under the Sustainable Growth Plan take hold. By the fourth quarter of 2025, Lifeward anticipates that the combined effect of the growing revenue and declining operating expenses will result in an adjusted operating loss of approximately $1 million.

Thank you, Mike. Lifeward has built a portfolio of complementary products with technological innovations achieved with the ReWalk and the AlterG design, which has resulted in market leadership by addressing key unmet needs. Similarly, the MyoCycle is a more effective and easier-to-use design that we expect will also develop a leadership position. We believe the market access we have established with multiple avenues of coverage for exoskeletons are efficient distribution channels that have now developed, and a leveragable organizational footprint developed over the past two years has Lifeward uniquely positioned to capitalize on the market opportunity before us. We've charted the key tactical thrust for our product offering in 2025. ReWalk will build on lead programs and expand penetration through internal and external partnerships. In late 2024 and in 2025 to date, we have expanded our US digital media program to obtain thousands of leads. We are also building leads with educational efforts and programs with key opinion leaders and through conducting local clinic days where we demonstrate the ReWalk to potential users. From these US-based programs, we presently have greater than 110 leads that are qualified as a pipeline that supports our planned growth. These leads include individuals in Medicare, workers' compensation, and with commercial players. We have so far focused on Medicare and the VA. The next stages are expanded reach into workers' compensation, followed by selected submissions to commercial insurers. We announced this week our exclusive partnership with CorLife to provide supply and support for individuals covered by workers' compensation. CorLife has an extensive national patient-facing organization and will be managing all leads and processing claims for these patients. ReWalk will deliver the systems and provide training as necessary. In the commercial payer segment, we have qualified leads in our pipeline and will selectively submit claims to Medicare Advantage and commercial payers to request prior authorizations on a case-by-case basis. We also announced this week the expansion of our distribution agreement with MYOLYN. We have expanded our geographic reach and length of the agreement. The new structure allows us to directly supply systems for home referrals from the clinics we work in. Previously, we focused on sales in the VA and on VA users for home placements. In parallel, with increased volumes, we will gain a lower price and better margins. Our AlterG focus is adding a deeper expansion into US national accounts due to the consolidation by those groups in the industry. We have established a pricing contract with one of the largest national organizations and have pilot programs now active with two other groups. Beyond our efforts in our direct markets, we have moved to reestablish distribution channels that have not yet recovered in the post-COVID period. Specifically, targets include Australia, Japan, and the Middle East. Our path for 2025 is clear. First, continuing sales growth with a mix that is most favorable with our margin goals. Second, implementation of the sustainable growth plan to reduce costs in all areas of the business. Third, we do maintain our reduced expenses from a full year post-integration and no new large government policy initiatives or major R&D programs. And fourth, reduction in our loss each quarter in 2025 and at or below $1 million in Q4. This progress in 2025 and the subsequent path for 2026 is a tipping point for the company for long-term financial health that was built off the investments and successes in 2024. We look forward to presenting our results each quarter. Thank you for your time today. I'd now like to open the call for any questions.

Thank you. We'll now begin the question and answer session. And today's first question comes from Yale Jen at Laidlaw & Company.

Larry, you did a great job, and congrats on your retirement, and best wishes for things after ReWalk, Lifeward. My first question is, for the 2025 guidance, how do you see the growth of each component, and is the guidance generally more conservative or do you think that's okay? So that's my first question. Then I have a follow-up.

The guidance indicates overall growth across our three main product lines: ReWalk, AlterG, and MyoCycles. Each area is contributing consistently, with MyoCycles currently being the smallest revenue source but expected to experience the highest percentage growth due to an expanded distribution agreement. We anticipate growth in the other two product lines as well, thanks to our sustainable growth strategy. We're aiming for a balance between top-line growth and disciplined spending. The spending focus has been primarily on boosting the ReWalk business, which will see growth concentrated in segments where we expect quicker returns and lower resource use. Overall, we're experiencing growth in all three product lines, and I believe it will be more profitable and efficient moving forward.

And maybe just one follow-up here, which is for the CorLife partnership you just mentioned days ago. The question is that, what do you think the impact of that may have on the workers' compensation part? Is it just a smooth increase in the process, reduce the cost, or maybe even increase the lead? I just want to see any quantifiable way to look at this partnership in terms of the benefits.

The CorLife program for us was very important because historically we have limited access to this really important and attractive segment. Given their size and scope, they have great depth and experience in treating and working for this population. So it's a great opportunity for us to have a much larger conduit into workers' compensation. And they also can process these very efficiently, so we don't have the expense of that. And we'll get paid in a reasonable cycle; they're probably a 30 to 45 day payer. Overall, the workers' compensation market is about 6% of all spinal cord injuries, and it's a group we didn't have access to. So we're very excited about this agreement and to get underway.

Maybe just ask one more question. I remember the prior conversation that you will have the next-gen ReWalk to be introduced this year. Would that still be the go for this year and any color on that as well?

We believe it will be a go for this year. We're ready with the product; it's been through all testing. The final submission after some questions from the FDA and one of the rounds were completed, so that's the mission went in early in this quarter. We anticipate our clearance sometime in the first half of this year, so that next generation product, our seventh generation, we're proud of that, should be on the market sometime this year, we would hope no later than midyear.

Our next question today comes from Ben Haynor with Lake Street Capital Markets.

Just going back to the revenue guidance and some of the recent announcements, the CorLife being one and the MYOLYN and MyoCycle being another. Is there much factored into the revenue guidance from those recent announcements or what's the right way to think about those?

I believe Mike and I will touch on this together. I'll begin by saying we have incorporated those factors, but we've done so conservatively since CorLife represents a new arrangement for both parties. However, we see strong growth potential for us throughout this year and into the future. Regarding MYOLYN, we've been selling that product for several years, but our reach has been limited. It's been a successful partnership. Now that we have the rights to sell in all the clinics where we want to place units, we can also sell to patients at home, tapping into a larger market—80% of the market is home-based, while 20% is clinic-based. We expect growth in both areas, and as Mike mentioned, we anticipate growth across the board; we will assess the speed of uptake for each as we progress.

I would just echo Larry's comments to say too that for the workers' comp market, we have historically had some access but very limited access in that marketplace. Through this CorLife agreement, we have a conduit now into a much higher volume of workers' compensation cases. And from a standpoint of the economics of it, it is attractive to us because we have the opportunity now to be able to have all these cases processed on our behalf by CorLife. So we don't need to have the expense and the resources necessary to have the claims processed internally. So looking forward to that. And then again, on the MyoCycle side, the home market is four times the size of the facility-based market where we've historically been operating. So this gives us an opportunity for a much wider, greater penetration of the overall FES bike market.

In your prepared remarks, you mentioned patient attrition for ReWalk. Can you provide any specific details about that? Is it related to the appeals process or the suitability of the patients? Are there any common factors, or is it in line with your expectations?

I'll elaborate on that a bit. It was influenced by seasonal factors. During this time, clinics tend to be busier around the holidays, and patients may try to schedule appointments accordingly. Some patients didn't come in as planned, and for a few, these were simply delays; they weren't lost patients but rather individuals who were unwell on their appointment day or had minor issues that needed resolution before their visit. These types of deferrals are common in this patient group, considering the challenges they face.

I believe that as we continue to see growth in that business line, there will likely be a noticeable seasonal trend in the fourth quarter due to factors such as clinic availability and the holiday season.

Our next question comes from Swayampakula Ramakanth with H.C. Wainwright.

Larry, congratulations on your retirement. And you as a true marathon runner have been putting in steady energy behind ReWalk/Lifeward, and I've certainly got the company to a sustainable growth state, so congratulations on that end as well. And I'm sure I'll be seeing you around in the industry. So in terms of questions or my questions on the quarter and the year. So based on your experience with the reimbursements from the Medicare programs, what are the learnings that you have got into so far? And do you think the cycle, the reimbursement cycle is smooth as of now? And how are you taking this information to the private payers when you're discussing for reimbursement from them?

What we've learned is that the cycle with the Medicare groups has taken longer than we anticipated as they familiarize themselves with this industry and product line, but we expect that cycle to shorten. We've shared metrics regarding the number of days involved, and we are working to reduce that time frame as much as possible. Our experience with Medicare has established a useful baseline as we approach private payers, where the quality of the package we need to assemble is quite extensive. For instance, we are finding that with CMS, when comparing it to private groups like workers' comp patients, we have more than enough data for their requirements, and they are processing claims more quickly on the commercial side. We foresee that CMS will become increasingly efficient and effective as they become familiar with the products, and it seems that the path on the commercial side may be shorter.

And then, I know a few of the commentators have already asked you questions on the workers' comp side of the business, but my question is a little bit on the strategy. And I know you always had this part of the business segment, but it looks like you're getting to put more resources behind it in terms of trying to get these transactions done. Is this more of a long-term strategy so that you can buttress any losses from how the federal government is trying to ask for expenses? And so there's a potential for loss on the Medicare side? Is that part of the strategy here or is this natural progression of the market itself that you have an eligibility to?

This is not a response to the federal government developments; we still view those as advantageous. Our focus is on opportunity. Having a diverse portfolio, where two of our products are now contributing positively to the business, enables us to grow efficiently. Our field team has effectively leveraged our three product lines. The expanded agreement with MYOLYN will allow us to enhance the growth of their exceptional product, as we can provide more resources than they currently have, benefitting both parties. On the AlterG side, we're noticing a market recovery, and we've adjusted our approach to pursue national accounts rather than relying on individual sales. By restructuring our resources, we believe we can place this business on a successful trajectory. We anticipate this will contribute positively to the company's profitability. Integrating the three product lines is the most rapid and effective way for us to reach breakeven.

We do have a follow-up from Yale Jen, Laidlaw & Company.

I have a quick question regarding the CorLife collaborations. What are the terms of the deal, and how does that relate to MYOLYN, particularly in accessing the home use segment which is significantly larger? Additionally, will this increase your marketing expenses to fully capitalize on this opportunity?

Well, the scope of the CorLife initially is strictly with the ReWalk workers' compensation. Given their size and their depth of connection, they're going places we can't go, and it certainly will not increase our marketing expenses as we'll just be using materials directly. And we will no longer be having to pursue those. So we'll actually reduce some of our expense because they'll be taking that on. They are an extensive national network and in just about every major area of the country for workers' compensation, and they already have those relationships. So it's really going to be much more efficient for us. And the way the contract has worked, it's much more favorable to us financially, we believe, than trying to do it ourselves.

Would they also get certain profits or other compensation that otherwise would go to you guys beforehand?

The processing with them will be more efficient because they already have large groups established. We are pleased with the terms of the deal. Although we haven't gone into the specifics, we believe this segment will be more profitable for us overall, especially considering the five-year lifespan of the product. We see a commitment from those groups to cover the necessary costs associated with servicing and maintaining the product's warranty over the five-year period. This arrangement is beneficial for both us and CorLife.

Would the expansion of the product offer into a larger market lead to an increase in your marketing or sales expenses?

It will not increase sales and marketing expense. It will increase our revenue.

It's a greatly simplified business model to work through CorLife as opposed to doing it ourselves, as I already mentioned. So the economics are consistent, if not better, than doing it ourselves.

Thank you. And this concludes the question-and-answer session. I'd like to turn the call back over to Larry Jasinski for closing remarks. Mr. Jasinski, do you have any closing remarks?

Yes, thank you, everybody. And what I'd like to do is close a little bit on the 2025 plans. In particular, our 2025 Sustainable Growth Plan strikes a balance between top-line growth and spending discipline, and that we believe that's what's needed in this segment at this point. We will be more selective in the growth we're seeking. We'll prioritize our investments to generate revenue that's higher margin and use lower resources as examples of what we talked about with CorLife. And as we develop the ReWalk market further and we establish more third-party relationships with the centers, we will reaccelerate our investments there to stimulate higher, more efficient growth in the future. So we believe this is the right path for where ReWalk is today. And the short term why this means a little less top-line growth, it measures into better bottom-line performance, which is our key goal for this year. With that, I thank everybody for joining us today, and I really do look forward to being able to present the results of what we are set out in the next quarter and the following quarters. Thanks.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.