Ekso Bionics Holdings, Inc. (EKSO) on Q4 2021 Results - Earnings Call Transcript
Operator: Greetings. Welcome to the Ekso Bionics Fourth Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. The 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.
Matt Steinberg: Thank you, operator. And thank you all for participating in today's call. Joining me from Ekso Bionics are Steven Sherman, President and Chief Executive Officer; Scott Davis, President and Chief Operating Officer; Jack Glenn, Chief Financial Officer; and Bill Shaw, Chief Commercial Officer. Earlier today, Ekso Bionics released financial results for the quarter and year ended December 31, 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 statements regarding our business strategy, future financial 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, February 24, 2022. I will now turn the call over to Ekso Bionics' Chairman and CEO, Steven Sherman.
Steven Sherman: Thank you, Matt. And thank you everyone for joining us today. I am pleased to participate on my first conference call as Ekso Bionics new chief executive officer, and I will be working in tandem with our experienced leadership team. I've been Ekso's Chairman, I'm an early investor, and I have participated in follow on capital raises. My reputation is one of a serial entrepreneur. I have the choice, I have the confidence and I have the experience and the belief that we will realize the value of Ekso's assets. Ekso's is a leader in early to market wearable robotic solutions for medical rehabilitation and workplace safety. Under our leadership, we will focus on strengthening our core business. Now I will turn the call over to our new President and Chief Operating Officer, Scott Davis.
Scott Davis: Thank you, Stephen. Before I jump into an overview of our performance, I'd like to first state that I'm excited to assume the role of president and COO. Previously, I've served as Ekso's Executive Vice President of Strategy, Corporate Development, and I have more than two decades of worldwide leadership experience in public and private high tech companies. I have firsthand experience and a strong track record in optimizing business performance and managing change while also having an intimate knowledge of Ekso's operations and strategy. I look forward to working closely with Stephen and the Ekso executive leadership team to realize the full potential of our company and ultimately maximizing shareholder value. Now to talk about our fourth quarter results. We're pleased to have closed 2021 on a high note by achieving record fourth quarter revenue. Our results reflected strength in both our medical and industrial segments as our customers continue to see the value of our industry leading solutions. We generated solid fourth quarter revenue of $4.1 million, up 81% on an annual basis and 34% sequentially. In the EksoHealth segment, we sustained high customer engagement levels, enabling us to secure several multi-unit orders from top network operators globally. Our commercial teams focused on network operators, combined with our flexible commercial offerings, is leading to increased demand in order flow. We recorded 30 EksoNR bookings in the quarter, with most being capital purchases, a continuation of third quarter trends. On the industrial side, demand for the EVO continues to build as evidenced by growing revenues on both an annual and sequential basis. The annual market opportunity for this product exceeds $5 billion and spans across multiple industry verticals. We're seeing momentum, particularly in the automotive industry, and we look to expand this growth moving forward. As our leadership team plans for the future, we will remain prudent in managing costs and uphold our fiduciary responsibility. We continue to closely monitor our expenses and use of cash as we keep an eye toward strategic growth opportunities. Now, I will turn the call over to Bill for an update on our medical and industrial segments as well as our global commercial strategy.
Bill Shaw : Alright. Thank you, Scott. We finished 2021 with a strong Q4 and our team exceeded performance expectations across the board. For the fourth quarter of 2021. We delivered approximately $3.4 million in EksoHealth revenue. Our cumulative conversion and renewal rate is 83%. We now have more than $1.2 million of contracted unrecognized revenue under our subscription model. We've made significant inroads with many of the top network providers. And in the fourth quarter, we closed a six unit order, our largest order within the network customer base. Because of our efforts, network comprised 69% of our new US bookings in 2021, up from just 24% for all of 2020. We are seeing a balanced mix of capital purchases and subscription commitments depending on the customer. In the international market, Europe delivered consistent performance throughout 2021. contributing to a record Q4, we received our largest one time order from Technomex, one of our largest partners out of Poland. In our direct markets, we've become more efficient in our sales process, which allows us to create more opportunities with outpatient neuro rehab centers. We also had a strong quarter for APAC. Both Europe and APAC remain important regions where we see significant opportunities for future growth. Today, we want to share a milestone for Ekso with a customer story that demonstrates the value we bring the customers. Earlier this month was the 10 year anniversary of shipping our first Ekso device which went to Craig Hospital in Colorado. Craig Hospital uses Ekso with their inpatient, outpatient and community clients in their peak center and adaptive health and wellness center that serves individuals with neurological disabilities. One of their patients, Rick, who sustained a spinal cord injury in 2018, has used Ekso for two years and has completed more than 100 sessions. Rick said, "being upright is the way we're meant to be. It's an activity that I know is good for my bones, my muscles and my health." Rick's therapist Natalie also shared that the peak center staff have used Ekso extensively for 10 years to give patients and community clients the opportunity to stand and step over ground. She said for many patients using Ekso, to stand in a photo with their families is the first time they can stand for a photo in years. We'd like to congratulate Craig Hospital. Turning to an update on the progress with our industrial segment, EksoWorks. We exceeded our plan for 2021. And the fourth quarter represented our strongest quarter of the year. For the full-year 2021, we had an annual growth rate of 84% and we are encouraged by the high level of engagement with strategic targets and customers. Our current segment focus on aerospace, automotive and general manufacturing is resulting in positive order flow. At the same time, we are seeing more interest within the construction and logistic verticals. Looking ahead to 2022, we are cautiously optimistic about returning to normal in-person selling activities as COVID cases continue to decline. We are still experiencing lingering COVID challenges, including in our supply chain. Nevertheless, with customer engagement levels increasing and promising industrial trends, we are poised to sustain our commercial strength in 2022. At this time, I'd like to turn the call to our CFO, Jack Glenn, to review our fourth quarter financial results.
Jack Glenn : Thank you Bill. Ekso generated record fourth quarter 2021 revenue of $4.1 million, compared to $2.3 million for the fourth quarter of 2020, an 81% increase. Our gross profit for the fourth quarter was $2.4 million, representing a gross margin of approximately 59% compared to gross margin of 60% for the same period a year ago. The slight decline in gross margin was primarily the result of a slight increase in manufacturing costs. As a reminder, gross margin tends to fluctuate from quarter to quarter based on channel and product mix. Operating expenses for the fourth quarter of 2021 were $7 million compared to $4.4 million for the fourth quarter of 2020. During the fourth quarter of 2021, the company incurred increased general and administrative expenses related to business development costs and increased employee compensation from higher headcount. The rise in business development expenses took place during the fourth quarter and we expect overall OpEx to return to a more normalized level in 2022. Net operating loss in the fourth quarter of 2021 was $4.6 million compared with a net operating loss of $3 million in the prior-year period. Gain on warrant liabilities for the quarter ended December 31, 2021 was $2 million from the revaluation of warrants issued in 2019, 2020 and 2021 compared to a $1.5 million loss associated with the revaluation of warrants issued in 2015, 2019 and 2020 for the same period in 2020. Turning to our full-year results, revenue for the full year ended December 31, 2021 was $11.2 million compared to $8.9 million for the same period in 2020. The 27% increase in revenue was the result of an increase in the volume of device sales, driven by business In this conditions normalizing from the impact of the COVID-19 pandemic. Gross profit for the full year ended December 31, 2021 was $6.7 million, an increase of 33% from gross profit of $5.1 million for the same period in 2020. Gross margin for the 2021 fiscal year increased to 60% from 57% for the full year of 2020. Operating expenses for the 2021 fiscal year were $20.6 million compared with $18.4 million for the prior-year period, as a result of the increase in general and administrative expense, which was partly offset by a decrease in sales and marketing expense. Net operating loss in the 2021 fiscal year was $13.8 million compared with $13.3 million for the comparable period of 2020. For the full year ended December 31, 2021, we record a gain on warrant liabilities of $4 million associated with the revaluation of warrants issued in 2019, 2020 and 2021 compared to a $3.1 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 in the 2021 fiscal year was $11.2 million. As of December 31, 2021, the company had a strong cash balance of $40.4 million. Please see our 10-K filed earlier today for further details regarding the quarter and full year. Operator, you may now open the line for questions.
Operator: . Our first question is from RK of H.C. Wainwright.
Swayampakula Ramakanth: Congratulations on a very strong fourth quarter and full-year 2021. Just for starters, to Steve and Scott. Since you have spent quite a bit of time on the board and now you're here running the operations on a day to day basis, should we think there could be some changes in the overall strategy of how you would want to run the company compared to how Jack Peurach was doing this?
Steven Sherman: Well, Jack did a good job. We came to COVID. And that gave this company a good opportunity to downsize and focus. And Jack left the company in very good shape. We have lots of assets here. I am confident that the branding that we have, the markets that we're participating in are beginning to open. And I think I'm fortunate to be here at the right time at the right moment. I hope, I'm confident, I intend to accelerate everything that we were doing. I am focused on shareholders' equity. I am, as you know, a shareholder and an early one. I love this company. We're doing brilliant work. I think it's our time. And so my job, I'm going to step on the gas pedal a bit and make sure we are all proud of the hard work that we're doing.
Scott Davis: This is Scott. And in terms of 2022, we're going to continue the great work that we did to make this business more efficient and more focused. We're going to continue to improve our organizational efficiencies. We're going to strive even more for operational excellence, while continuing to grow our business, and we're also going to, of course be evaluating strategic opportunities.
Swayampakula Ramakanth: Scott, even in this initial commentary, you said something about trying to do some strategic changes, strategic opportunities. So what do you mean by that? Are you looking at products? Are you looking at markets? What sort of strategic opportunities are you looking for?
Scott Davis: Well, I think the answer to that is we're looking at everything. The BD work by nature is quite opportunistic and difficult to predict. Ekso has historically and we will continue to evaluate potential business growth opportunities. And those could be – run the gamut of what you'd normally see for this sort of activity. In terms of 2022, this work is difficult, it's dynamic, it's difficult to predict. And at this time, we really cannot comment on possible future strategic activity.
Swayampakula Ramakanth: Bill, in terms of the EksoHealth business, first of all, congratulations on the six-unit order and also the increase in terms of multi-unit orders. So, so should we expect 2022 and beyond to have an increased number of such orders come through?
Bill Shaw: I think adding a dedicated team has really helped us align with these network stakeholders and in our clinical teams focus on customer success has really helped. So, all these things are part of our strategy to grow faster. And if you look at the top five network providers in our space, they own roughly 20% of our core market. And our market penetration into that group is stronger than our core market. So to us, that's a predictor of future opportunities, like you're seeing. So, to answer your question directly, yeah, we do expect to have more multi-unit orders. But, again, every quarter is a little bit different.
Swayampakula Ramakanth: My last question to you, folks, is the sort of growth that we saw in the fourth quarter, certainly, closer or even better than pre-pandemic levels, does this mean – I know you and I cannot predict COVID. But in terms of, if it is status quo as of today, should we expect this sort of growth not only in the first quarter, but also as we go through 2022 and beyond?
Steven Sherman: I think Jack Glenn can address that.
Jack Glenn: RK, of course, we don't give guidance. So that's first of all. But I would say that, in talking with Bill too, we remain cautiously optimistic from a COVID standpoint as we come out of this, right? And so, it's hard to predict the growth rates, but we are feeling things are getting better out there for us. And so, I would say, again, that we feel good. And some of those growth rates still are coming off of COVID as well, right? Again, I think we remain pretty optimistic coming into 2022.
Operator: We have reached the end of the question-and-answer session, and I will now turn the call over to Scott Davis for closing remarks.
Scott Davis: Thank you, operator. And thanks to everyone for joining us today. We are pleased to have closed 2021 with record revenue. Up against a challenging selling environment, we successfully executed against our plan to achieve our goals for the year. As the gradual reopening of in-person meetings continues, we believe we are well positioned to deepen the relationships with top inpatient rehab operators and industrial customers, which is the core of our current commercial strategy. We are proud that we've been able to adapt quickly to the many COVID challenges, and this gives us the confidence that we can still cultivate these relationships even as the future remains unpredictable. We're cautiously optimistic that we can have our sales force more engaged in the field as direct sales activities normalize. We look forward to providing updates on our continued progress. We want to thank everyone and wish you all a great day.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.
