Acutus Medical, Inc. (NASDAQ:AFIB) Q1 2023 Earnings Call Transcript May 11, 2023
Acutus Medical, Inc. beats earnings expectations. Reported EPS is $-0.57, expectations were $-0.69.
Operator: Good afternoon and thank you for standing by. Welcome to the Acutus Medical First Quarter 2023 Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Caroline Corner, Investor Relations.
Caroline Corner: Thank you, operator. Welcome to Acutus’ first quarter 2023 earnings call. Joining me on today’s call is David Roman, Chief Executive Officer; and Takeo Mukai, Chief Financial Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements. Factors that may cause results to differ from these forward-looking statements are discussed under the Forward-Looking Statements section in the press release attached as an exhibit to Acutus’ Form 8-K filed with the SEC today and are also discussed in more detail under the Risk Factors section in Acutus’ most recent filings with the SEC, including the risk factors described in Acutus’ Form 10-K.
Any forward-looking statements provided during this call, including projections for future performance, are based on management’s expectations as of today. Acutus undertakes no obligation to update these statements, except as required by applicable law. Acutus’ press release with first quarter 2023 results is available on the Acutus website, www.acutusmedical.com under the Investors section and includes additional details about Acutus’ financial results. The Acutus website also has Acutus’ SEC filings which you are encouraged to review. A recording of today’s call will be available on the Acutus website by 5.00 PM Pacific Time. Now, I would like to turn the call over to David.
David Roman: Thank you, Caroline and good afternoon, everyone. Our prepared remarks today will include updates on our key strategic imperatives, some perspective on how the business is performing in Q2 and our outlook for the rest of the year. Starting with our first priority to drive utilization and adoption for AcQMap. Q1 got off to a slow start but procedure volumes accelerated throughout the quarter with March commercial procedure volumes increasing over 60% on a month-over-month basis. Overall, our commercial procedure volumes increased on a year-over-year basis for the quarter, driven by continued adoption of our full portfolio outside the U.S. and geographic expansion with our partner, Biotronik. U.S. procedure volumes showed steady progress during Q1 and exited the quarter with growth in March.
Importantly, we are seeing encouraging trends here in the second quarter and anticipate procedure volumes to ramp sequentially throughout the year and put us back on a strong trajectory for procedures, utilization and correspondingly, AcQMap disposable product revenue. Over the short, medium and long-term, a major driver in achieving our growth objectives is our product development pipeline. Our portfolio investments are geared toward both strengthening our position and expanding our addressable opportunity. All of these new product launches keep us focused on the complex treatment segment of the EP market, ranging from the most difficult multiple redo patients to first-time persistent AF patients. As we have discussed previously, AcQMap is most regularly used today in redo procedures.
Photo by National Cancer Institute on Unsplash
Specifically, about 55% of U.S. and 80% of OUS procedures come from redo cases. AcQMap has clear differentiation in these procedures and our clinical results and sustained utilization in these segments underscore our value proposition. At the same time, these procedure categories represent only a portion of the total complex ablation segment. Over the next several years, our pipeline is geared towards further strengthening our position in the re-treatment segment as well as bridging into primary use cases. The innovations required to enter new categories largely center around software, including algorithm development and disposables. These include our next-generation software platforms like AcQMap 9 and AcQMap 10 as well as their therapy and ablation systems.
We expect to launch a steady cadence of new products over the course of 2023 and 2024 that will contribute to higher utilization, procedure volume growth and increased revenue per case. We received FDA clearance for AcQMap 8.5 software with AcQBlate features last week which paved the way for an integrated software platform to pair their ablation system when approved later this year. In addition to our new product pipeline, critical to the adoption of AcQMap will be additional clinical research. Over the course of this year, we have plans to release several data presentations and publications that builds on the UNCOVER AF study that showed freedom from AF in persistent patients of 73% at 1 year. As a reminder, most landmark studies for the treatment of persistent AF using incumbent systems show 1 year success rates in the 50% to 60% range for de novo cases and 60% to 68% in redo cases.
In April, data from the RECOVER AF study were published online in EP Europace. This study evaluated an extremely complex patient population and further demonstrated AcQMap’s clinical impact in the retreatment segment of the market. Specifically, results showed patients who had only undergone pulmonary vein isolation or PVI before enrollment, achieved 91% freedom from atrial fibrillation at 1 year, while the entire study population with varying prior procedures reported 76% freedom from AF at 1 year. These results further confirm AcQMap’s utility and differentiation in the redo market where we expect to drive further penetration into this $700 million category. In addition to the RECOVER AF study, we look forward to this year’s Heart Rhythm Society where investigators will present data on AcQMap at a late-breaking special science session on Sunday, May 21.
This study evaluated AcQMap to identify non-pulmonary vein triggers in the persistent AF population. Utilizing AcQMap to identify triggers of AF is an emerging use of the technology that can further support expanded utilization. And we expect this study to demonstrate strong clinical outcomes when using AcQMap to guide therapy in complex patients. Beyond this study presentation, we will have a fulsome program in HRS, featuring user group meetings, physician-led presentations at our booth during the conference and several opportunities for customers and business development partners to engage with AcQMap users from across the world. We will also offer the opportunity to get more insight into some of our recently launched products and future pipeline development.
Switching gears to our efforts to strengthen our financial performance. We continue to make significant progress during Q1 2023 with year-over-year declines in both non-GAAP operating expenses and cash burn as well as significant improvement in our non-GAAP gross margin. Takeo will cover these topics in more detail during his prepared remarks but overall, we continue to take the necessary steps to strengthen our financial position and extend the cash runway. Putting this all together, we are pleased with our start to the year and are laying the foundation for stronger performance to the rest of 2023 and thereafter, driven by a steady cadence of new product launches, clinical data and commercial execution. When combined with our operational improvement initiatives, this business trajectory will position us well for the future and allow us to maximize value for all stakeholders.
With that, I will now turn the call over to Takeo to walk through our financial results.
Takeo Mukai: Thank you, David and good afternoon, everyone. During my remarks today, I will review our first quarter 2023 results as well as provide an update to our full year outlook for 2023. For the first quarter, net revenue of $4.2 million compared to $3.7 million in the year ago first quarter. The 13% year-over-year increase was primarily driven by disposable sales and increases in service, rent and other revenue. We ended the first quarter with an installed base of 77 systems globally, up sequentially from 76% last quarter. Through the balance of the year, we continue to expect growth in our global installed base, while remaining targeted to ensure new consoles are placed into service where we can drive strong procedure adoption.
Our priority remains growth in procedure volumes, utilization and revenue per procedure rather than just growing the installed base. Disposables revenue in the first quarter of $3.4 million grew 7% compared to the year ago first quarter, driven by AcQMap disposables growth outside of the United States and growth in left-heart access through our distribution agreement with Medtronic. Similar to the year ago comparable period, we did not record any capital revenue in the first quarter of 2023. Service, rents and other revenue of $0.7 million was up from $0.5 million in Q1 2022. Q1 2023 revenue was impacted with back orders by an estimated $250,000 as we continue to remediate the supply chain disruptions that emerged earlier in the year. We are working diligently to resolve the price constraints and continue to expect full resolution by the end of this year.
Non-GAAP gross margin of negative 60% in Q1 2023 improved sequentially from negative 64% in the fourth quarter of 2022 and was favorable compared to the negative 119% registered in the first quarter of 2022. This performance represents our strongest quarter since the second quarter of 2021. The year-over-year and sequential improvement in our non-GAAP gross margins was primarily driven by improvements in manufacturing efficiencies and improved leverage on higher production volumes. We will continue to dedicate significant attention to improving our gross margins and expect to show further improvement for the full year of 2023 and continue to forecast the path to positive gross margin in Q1 2024. In addition to volumes driving this improved trajectory in gross margins, we remain focused on several ongoing work streams to drive efficiency, reduce product costs through improved yield and bringing select processes in-house.
Non-GAAP operating expenses were approximately $13.9 million in the first quarter of 2023, down 39% from the same period last year and down slightly on a sequential basis. We continue to realize the benefits of our discipline around expense management and expect our full year 2023 non-GAAP expenses to decline on a year-over-year basis as compared to 2022. Excluding specified items, our non-GAAP net loss for the first quarter of 2023 was $16.8 million or $0.59 per share compared to a non-GAAP net loss of $28.5 million for the first quarter of 2022 or $1 per share. Our total cash and cash equivalents balance, including restricted cash at the end of the first quarter of 2023 was $76.7 million. Our cash burn, excluding milestone payments and the employee retention credit was $18 million in the first quarter, down 39% versus the prior year.
The first quarter tends to see higher cash burn as accrued annual bonuses were paid out to employees. Our first quarter also saw higher inventory purchases as we replenished supply to support higher current and future projected demand. Overall, we are pleased with the improvements we have made in reducing our quarterly cash burn and we’ll continue to drive intense focus on optimizing our financial position. For the full year 2023, we now expect revenue to be in the range of $19 million to $21 million, driven by growth in AcQMap procedure volumes and associated disposable sales globally, targeted expansion in our installed base and a second half 2023 approval of AcQBlate in the United States. We appreciate your continued interest and support and I will now turn the call back to the operator to facilitate our Q&A session.
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Q&A Session
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Operator: [Operator Instructions] Our first question comes from the line of Marie Thibault at BTIG. Our next question comes from William Plovanic at Canaccord Genuity.
Operator: Our next question comes from Margaret Kaczor from William Blair.
Operator: Our next question comes from the line of Marie Thibault from BTIG.
Operator: Thank you for your participation in today’s conference. At this time, we conclude the program. You may now disconnect.
