Ekso Bionics Holdings, Inc. (NASDAQ:EKSO) Q4 2023 Earnings Call Transcript

Ekso Bionics Holdings, Inc. (NASDAQ:EKSO) Q4 2023 Earnings Call Transcript March 4, 2024

Ekso Bionics Holdings, Inc. misses on earnings expectations. Reported EPS is $-0.22 EPS, expectations were $-0.11. EKSO isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to the Ekso Bionics’ Fourth Quarter 2023 Financial Results Conference Call. At this all participants’ are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt Steinberg, Finn Partners. 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 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 and year ended December 31, 2023. 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 our businesses, please see our 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: Thank you, Matt. We’re excited to have closed out 2023 on a positive note, highlighted by record annual revenues of $18.3 million, an increase of 42% from the prior year period. Our solid results reflect continued improvements in consistency of returns from our scalable commercial strategy in addition to the early contributions of our Indego product lines that we acquired in late 2022. On today’s call, I’ll briefly review our fourth quarter 2023 results and share other business updates. Starting with our Q4 results, we generated revenue of $4.8 million in the fourth quarter of 2023, a 36% increase from the same period in 2022. During the quarter, we sold 38 EksoHealth devices. Throughout our enterprise EksoHealth segment, inpatient rehabilitation facilities continue to leverage our advanced exoskeleton technology to help stroke, traumatic brain injury, multiple sclerosis and spinal cord injury patients on the road to recovery.

Our clinically proven patient improvements in functional outcomes support our efforts to elevate the standard of care for neuro rehabilitation. Additionally, the economic value proposition for neuro rehab providers to implement our EksoNR and Ekso Indego therapy devices into their programs have been shown to increase patient throughput and drive higher patient volumes. Altogether, we continue to translate these compelling data points into our commercial strategy by selling both multiunit orders and multiunit renewals to our vast network of operators. The output from our commercial team led to a record year of EksoHealth devices sold. For the full-year 2023, we sold 151 EksoHealth devices, up 51% from 2022 levels. We believe we are well positioned to build upon this momentum to drive sustained growth for our EksoHealth enterprise devices as we continue to strengthen our distribution network and expand our pipeline of opportunities.

Earlier this year, we were pleased to have launched our GaitCoach software for EksoNR. GaitCoach is our next-generation gait therapy software for EksoNR that simplifies the use of robotics. The intention is to improve user trust in technology, provide impactful dynamic feedback and offer specific guidance acting as an extra set of clinical eyes. We believe GaitCoach will reduce training demands and increase utilization, making the device more intuitive and easier to use for both patients and physical therapists and marking a milestone in improvement of our product portfolio. Users of EksoNR recently introduced to GaitCoach through initial survey results have exhibited support for this software upgrade with nearly all users finding it to be intuitive.

Feedback also indicated that guidance from GaitCoach makes EksoNR easier to use. It is useful for new or less experienced therapists at the clinic and is believed to further help patients achieve their clinical goals. A demonstration of this exciting new software can be found on our website. Now turning to an update on our Ekso Indego Personal device. On February 29, CMS announced that a deferred payment determination for personal exoskeletons, including the Ekso Indego Personal. As part of its communication, CMS requested additional examples of non-medicare payor data that would support a payment determination for products that qualify under HCPCS Code K1007, such as our Indego Personal. We intend to provide materials to CMS to help provide additional commercial details supporting a reimbursement rate.

Until the reimbursement rate has been established, we will provide relevant support to help our customers process Medicare claims on a case-by-case basis. As we have done throughout 2023, we will continue to offer our Indego Personal device to veterans through the VA established reimbursement program. The lightweight, packable, modular design of this device allows individuals living with a spinal cord injury to more easily bring it along with them for use in their communities and the advanced gait feature allows them to achieve average walking speed, an important consideration if navigating crosswalks. Ekso is committed to delivering well-built affordable products and to help enable this potentially life-changing technology reach a higher number of individuals living with a spinal cord injury.

We look forward to our continued work with CMS and the SCI community. On the international front, we achieved solid performance across EMEA and APAC regions as we generated an increase in sales volume built on the strength of our distribution network. Not only are we getting more placements, but our network enables us to gain operating leverage abroad. Notably, in the fourth quarter, we generated multiunit EksoNR sales across Eastern Europe. Looking ahead, we continue to focus on building relationships with larger customers in these regions, as we invest in our international footprint to support Ekso’s ongoing growth across the globe. Now I’d like to turn to an update on our industrial segment Ekso Works. In 2023, we drove notable progress in our industrial product line, especially on the operational side with the implementation and initial supply of EVOs from our new high-volume contract manufacturer.

By reducing supply constraints and substantially lowering costs through our contract manufacturer relationship, we believe we’ll be able to better meet the supply and pricing demands of a potentially high-volume industrial customer pipeline. Based on this, we feel we are poised for continued growth and market expansion. While revenue contributions from our industrial segment have recently been at modest levels, we remain steadfast in our commitment to maximize EVO’s placement in large industrial settings, leveraging a significant emerging market opportunity. Overall, I’m enthusiastic with our record-breaking revenue performance in 2023. We’re focused on building out the market across the continuum of care for our pioneering EksoHealth devices and believe we are well positioned to deliver on our objectives.

Now I will turn the call over to Jason Jones, our Chief Operating Officer, for an operational update.

Jason Jones: Thank you, Scott. I’m pleased to report several key achievements and developments within Ekso’s operations in 2023. First, we’ve bolstered our operating leverage, reflecting a more efficient and scalable operational model. While our revenues grew by 42% year-over-year in 2023, our operating expenses increased by only 11%. We believe this is indicative of the operating leverage we’re able to achieve going forward as we continue to manage expenses. Further, our efforts in inventory management have allowed us to reduce our inventory on hand by 3% as of the end of 2023, compared to the prior year despite strong revenue growth. We believe there is still room to improve on inventory efficiency. In Q4, we also completed the transition for our Ohio team from Parker Hannifin’s IT system to a new electronic quality management and product life cycle management system.

This new system is expected to be the foundation of our product development and quality processes going forward with the entire company planned to transition over throughout 2024. We believe that consolidating our teams onto a single system will improve collaboration across our sites and once fully implemented, will reduce audit and compliance costs. At this time, I’d like to turn over the call to our Chief Financial Officer, Jerome Wong, to review our fourth quarter and full-year financial results.

Jerome Wong: Thank you, Jason. We generated an increase in the fourth quarter of 2023 revenues of 36% to $4.8 million compared to $3.6 million for the fourth quarter of 2022. The increase in revenue is primarily due to an increase in the volume of EksoNR and Indego device sales. Gross profit for the fourth quarter was $2.4 million, representing a gross margin of approximately 49% compared to a gross profit of $1.7 million and a gross margin of 47% for the same period of 2022. The 41% increase in gross profit was primarily driven by an increase in EksoHealth device sales. Margin expansion was primarily due to lower EksoHealth device and service costs. Operating expenses for the fourth quarter of 2023 were $5.8 million compared to $6.1 million for the fourth quarter of 2022.

The 5% decrease was primarily due to a decrease in general and administrative expenses stemming from lower legal expenses. Net loss applicable to common stockholders for the fourth quarter was $3.2 million or $0.22 per basic and diluted share compared to a net loss of $3.2 million or $0.24 per basic and diluted share for the same period of 2022. Operating cash burn for the fourth quarter was $1.6 million compared to $3.7 million in the fourth quarter of 2022. Turning to our full-year 2023 results. Revenue increased by 42% to $18.3 million compared to $12.9 million for the same period in 2022. The increase in revenue was primarily driven by an increase in EksoHealth device sales of $5.9 million. Gross profit for the full year ended December 31, 2023, was $9.1 million, representing a gross margin of approximately 50% compared to a gross profit of $6.2 million for the same period in 2022, representing a gross margin of 48%.

The increase in gross profit was a result of lower device and service costs and product mix. Operating expenses for the 2023 full year were $24.2 million compared with $21.8 million for the prior year period. The increase in operating expenses was primarily related to the acquisition and integration of HMC. Net loss applicable to common stockholders for the 2023 full year was $15.2 million or $1.10 per basic and diluted share, compared to a net loss of $15.1 million or $1.16 per basic and diluted share for the 2022 full year. Cash used in operating activities in the 2023 fiscal year was $12.1 million. As of December 31, 2023, the company had cash on hand of $8.6 million. Subsequent to year-end, Ekso closed on a registered direct offering with certain institutional investors, resulting in total net proceeds to the company of approximately $3.9 million.

Please see our Form 10-K filed earlier today for further details regarding the quarter and full-year. Operator, you may now open the line for questions.

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Q&A Session

Operator: Thank you. And ladies and gentlemen, at this time we will conduct our question-and-answer session. [Operator Instructions] Our first question comes from RK with H.C. Wainwright. Please state your question.

Swayampakula Ramakanth: Thank you. Good afternoon, Scott and Jerome.

Scott Davis: Hello, RK.

Swayampakula Ramakanth: First question is on Indego pricing. So I did hear that you’re still in discussions with CMS on the final pricing and up until they come up with a number, it’s case by case. So what do you need to do in terms of helping CMS come to a decision, so that we have a price that will become effective on April 1, which is not too far from here?

Scott Davis: Yes. Thank you, RK. So with CMS’ recent announcement, they have requested additional commercial pricing evidence. Back when this meeting took place in November, Ekso was — had provided commercial pricing information to CMS. However, in the November time frame, we were not officially approved through PDAC for our Indego Personal device, which was done on December 9. As a result, it appears that CMS did not include this pricing information in their evaluation. So we plan to provide this information to CMS along with any additional details that they require. And in the interim, we’ll continue to work with our customers to provide commercial pricing information to support their Medicare claims on a case-by-case basis.

Swayampakula Ramakanth: Okay. So does this mean we might have to wait for the next cycle to start, which is November 1 for a final pricing? Or there is a possibility that things can get resolved before April 1?

Scott Davis: Yes. There’s — we spoke with our consulting experts who are in this area and CMS typically has biannual meetings where they publish their pricing determinations. However, we are told that it’s possible that they could issue a correction prior to that biannual meeting. We’ll certainly know more as we work through this process. In the time being, we’re going to continue to support CMS by providing the requested additional pricing detail to support this final payment determination.

Swayampakula Ramakanth: Okay. Thanks for that. And then thinking through the growth in sales, especially in the fourth quarter and also for the entire year. 36% growth year-over-year in the fourth quarter is really something to be proud of. How much of the sales increase is sustainable? I’m just trying to understand, did you open up new areas — new areas where the sales are happening? Or do you have some new accounts where you expect to see more of this multiunit sales/multiunit leases to happen going into ’24 and beyond?

Scott Davis: Sure. Great question. One of the things that we’ve been hard at work on is building a strong pipeline and a scalable go-to-market strategy inside of our organization. So — and much of that relates to our enterprise health customers, customers who are using our NR or Indego therapy to treat patients in clinics. We have been saying quarter-over-quarter that we have an increased number of multiunit orders coming in as we become more of a standard of care inside of these IDNs. And what we are seeing are a combination of new IDNs who are coming online with their programs and rolling them out to additional hospitals. And in addition to that, we’ve been doing this now for a couple of years. So we also have renewals of programs with existing IDN customers.

So we continue to grow our pipeline with these larger operators in North America. In addition to that, we are seeing significant growth in Europe. We have distribution relationships in Europe that are continuing to grow and evolve and expand geographically. So between the geographic expansion, the scalable go-to-market strategies and the work with the integrated delivery networks, we are seeing this growth and we believe that this growth will continue going forward.

Swayampakula Ramakanth: Okay. And then the last question from me is on the operating expenses. In addition to what you’re doing at the Ohio plant, are there additional cost containment programs in place and should we expect some operating margin expansion in ’24?

Scott Davis: Yes. This is something that we continually work on, RK. We did a lot of work on this in 2023, and we really saw the positive effects of that in the back half of the year. We had a lot of costs in the early part of 2023 that were associated with our HMC acquisition. We had legal and accounting costs that were associated with that, that you saw in the first half that you didn’t see in the back half. So again, those costs, onetime costs, we don’t anticipate those going into this year. But we are doing all we can to maintain the utmost in operating efficiencies in terms of cost control, in terms of inventory management. We continue to work on that, as well as work on cost improvements to help keep the margin trend line going in the right direction.

Swayampakula Ramakanth: Okay. Thank you. Thanks for taking all my questions.

Scott Davis: Thank you, RK.

Operator: Thank you. [Operator Instructions] Our next question comes from Ben Haynor with Alliance Global Partners. Please state your question.

Ben Haynor: Good afternoon, gentlemen. Thanks for taking the questions. Can you hear me okay?

Scott Davis: Yes, we can hear you fine, Ben.

Ben Haynor: Okay. Great. Just a couple of big picture ones for me. On kind of the referral path for the personal units, how do you see that changing versus kind of what’s in place now as the CMS kind of has made the decisions that they’ve made and deferred the decision on pricing? What’s the right way to — for investors to think about how those referral pathways happen? What docs do in terms of if there’s reimbursement in place, are they more likely to write a prescription? Anything — any color on how you see that developing would be helpful.