ReWalk Robotics Ltd.
Q4 2021 Earnings Call Transcript

Published: 26 Feb 2022

[Operator:]

Welcome to the Q4 2021 ReWalk Robotics Earnings Conference Call. My name is Vanessa, and I will be your operator for today's call. I will now turn the call over to your host, Ori Gon.

[Ori Gon:]

Thank you, Vanessa. Good morning, and welcome to ReWalk Robotics Fourth Quarter 2021 Earnings Call. This is Ori Gon, ReWalk's Chief Financial Officer. And with me on today's call is Larry Jasinski, our Chief Executive Officer. Today, the company issued a press release detailing financial results for the 3 and 12 months ended December 31, 2021. This press release and a webcast of this call can be accessed through the Investor Relations section of the ReWalk website at www.rewalk.com. Before we get started, I would like to remind everyone that any statements made on today's conference call that express the beliefs, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to ReWalk management as of today and involve risks and uncertainties, including those noted in our press release and ReWalk's filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. ReWalk specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. Our earnings press release and this call will include discussion of certain non-GAAP information. You can find our earnings press release, including ReWalk's non-GAAP reconciliations on our corporate website at rewalk.com. A telephone replay of the call will be available shortly after completion of this call. You will find the dial-in information in today's press release. The archived webcast will be available on the company's website at rewalk.com. For the benefit of those who may be listening to the replay or the archived webcast, this call was held and recorded on February 24, 2022. Since then, ReWalk may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings. And with that, I'll turn the call over to ReWalk's CEO, Larry Jasinski. Larry?

[Larry Jasinski:]

Thank you, Ori. ReWalk completed 2021 in a positive position to achieve our vision of creating a meaningful and sustainable market for personal use of robotic technologies to change people's lives. The key measurements for the year are progressing -- our progress in creating systemic reimbursement payment pathways to build the business, technical developments that can expand our markets and allow more effective market penetration under coverage programs achieved and a financial position that supports achieving our goals. During the year when the pandemic continued longer than expected and the significant spike in the fourth quarter with the Omicron variant, the company grew revenue for the year ended December 31, 2021, to $5.97 million, a 36% increase year-over-year. We had $1.24 million in Q4 sales, which was a 2% increase over the prior year quarter. During 2021, the COVID-19 pandemic continued to impact our sales activities. Three key factors were

[Ori Gon:]

Thanks, Larry. ReWalk reported total revenues for fiscal year 2021 of $6 million compared to $4.3 million in 2020, which represents 36% year-over-year growth. Our 2021 fourth quarter revenue remained flat with $1.2 million compared to the prior year quarter. Now let's look at the elements that drove the growth in 2021 in some more detail. First, Personal 6.0 sales have increased by systems with a higher average selling price, resulting in a total of $5.3 million compared to $4.1 million last year. The increase in volume was shown in both the U.S., which included our multiunit order to an academic center in the third quarter and in Germany, where we have 5 more units sold this year. The average selling price was positively affected by the euro-dollar exchange rate and change in sales mix. Second, distributed products performance has increased to $446,000, compared to $86,000 in the previous year. This increase is primarily with our MYOLYN FES product line as we sold 20 personal systems and 9 rehab systems compared to 6 and 1, respectively, last year. We have also placed our first 2 MediTouch kits within 2 clinics in Q4 2021. Third, our restore results remained generally flat with 7 units sold each year and a total of $199,000 in revenues this year, compared to $160,000 in 2020. Now let's look at our insurance performance. This quarter, we had a total of 7 new insurance decisions to place a device for a new rental or a direct purchase, including 1 from the VA, and 5 conversions of previously rented devices. Our current pipeline of active rentals consists of 15 cases, representing a total revenue potential of $1.5 million, and our overall pending insurance cases is currently at 71, with 56 of them in Germany and 15 in the U.S. Turning to our gross margin. In the fourth quarter of 2021, our gross margin was 27% compared to 33% in the prior year quarter. This decrease was mainly due to a reduction in our average selling price due to change in sales mix this quarter compared to the last quarter. Our fiscal year 2021 margin was 49% compared to 50% in the previous year. This year, we have written off some of our restore inventory parts as we had lower sales than expected due to COVID restrictions that have not allowed us to price and demo the device properly. We have also seen increased service costs. We anticipate margins will return to similar levels for the full year in 2022. As we look into our operating expenses, our 2021 fourth quarter OpEx were $4.2 million compared to $3.2 million in the prior year quarter. This increase is mainly attributed to our SG&A as we had higher labor and sales-related expenses as well as an offsetting PPP loan that was forgiven in the previous year. The lower R&D that offset this increase is mainly due to lower employee and employee-related expenses as well as reduced professional services. Our full year OpEx landed in $15.6 million compared to $14.2 million in the previous year. Same as we have seen in the fourth quarter, the main contributors to that change of higher SG&A, offset with reduction in R&D employee and employee-related expenses. To recap the quarterly results, our net loss for the fourth quarter of 2021 was $3.9 million compared to a net loss of $3 million in the fourth quarter of 2020. Our non-GAAP net loss for the fourth quarter of 2021 was $3.6 million compared to $2.7 million in the fourth quarter of 2020. Our yearly net loss in 2021 was $12.7 million, compared to $13 million in 2020. Our non-GAAP net loss was $11.6 million in 2021, compared to $11.9 million in the previous year. We ended the year with $88.3 million in cash, and our cash burn was $11.5 million compared to $12.6 million in the previous year. With that, I'd like to turn the call back to Larry for additional remarks. Larry?

[Larry Jasinski:]

Thank you, Ori. I'd like to complete the session today with 3 topics

[Operator:]

And I see we have our first question from Arthur He with H.C. Wainwright.

[Arthur He:]

Larry and Ori, this is Arthur He for RK. First, congratulations on the strong finish for the year. I just want to follow up on the German Federal Court case. So I recall during the pre-remarks you mentioned, the case was in the queue for the 2022 rulings. Could you tell us what gives you the confidence for your estimate for the decision by the end of the first quarter, if I recall correctly?

[Larry Jasinski:]

It is primarily based on the progress we've seen with the court. We have steadily moved up the list and it is through the interaction we've had with our counsel. Very important case, I think, for the German social system and the courts. So we believe it will be addressed during in Q1, if COVID keeps the courts open. That has been 1 of our big limiters. But that is generally the guidance we've been given mostly by counsel.

[Arthur He:]

And so could you remind us how many cases pending for the German insurance?

[Larry Jasinski:]

Ori, do you want to do that?

[Ori Gon:]

Yes. I can speak about that, Larry. So we have a total of 56 -- 5-6 cases within the insurance pipeline. Out of them, we have 13 active rentals, okay, currently being trained into a conversion. And remember we have a good conversion rate over 60%, and it's getting even improved as we continue to qualify the process in the patient. And the rest are basically in the reimbursement pipeline, about half of the 56 are within what we call the legal stage, okay? And those will be the ones who will be more affected of a positive decision when it comes.

[Arthur He:]

Great. So Larry, I just want to take your brain regarding the CMS decision. So if I understand correctly, if things moving smoothly, we could expect a number for the reimbursement from the CMS by early of 2023. Is that correct?

[Larry Jasinski:]

There are sessions that are held within CMS that they conduct in midyear and in the fall, and we will also begin moving some cases forward. And those 2 events together, the cases that we will put in for payment will help them set and finalize the category and the pricing. So they are all sort of working together, so there's multiple things moving. But we do believe we will have a conclusion in 2022. A little bit of fear of COVID still, a fear of the 2 years we've just had. But if we can keep the business open and everybody is continuing to work, we should be okay this year.

[Arthur He:]

Got you. So I guess for a follow-up, do you guys have started the conversation with the private insurance payor or you prefer to wait for the discussion after the CMS to getting more engaged?

[Larry Jasinski:]

We do have some ongoing interaction with the private insurers at a lower level. But we believe that because many of the insurers also are overseeing parts of Medicare Advantage and things of that type, that this is a much more appropriate path after we have completed things with CMS to engage in a coverage and policy level. So until then, we'll provide data, we'll do case-by-case as we have in the past, but we'll build mostly on the CMS decision.

[Arthur He:]

Got you. And Ori all the best for your future journey. Nice working with you.

[Ori Gon:]

Thank you very much, Arthur.

[Operator:]

I see no further questions at this time. I will now turn the call over to Larry Jasinski for closing remarks.

[Larry Jasinski:]

First, Vanessa, thank you for your leadership of the call here. And for everybody here, I appreciate the time you've invested in the call today. Stay tuned to the publications and announcements because I've outlined the goals for this year, and we will continue to update the progress against these goals. So I wish everyone to have a very good day. Thank you.

[Operator:]

And thank you, ladies and gentlemen. This concludes our conference. We thank you for participating. You may now disconnect.