ReWalk Robotics Ltd. (NASDAQ:RWLK) Q3 2022 Earnings Conference Call November 7, 2022 8:30 AM ET
Company Participants
Michael Lawless – CFO
Larry Jasinski – CEO
Conference Call Participants
Operator
Good day, and welcome to the Q3, 2022 ReWalk Robotics Limited Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Mike Lawless, CFO of the company. Please go ahead.
Michael Lawless
Thank you, [indiscernible]. Good morning, and welcome to ReWalk Robotics’ third quarter 2022 earnings call. This is Mike Lawless, ReWalk Robotics’ Chief Financial Officer. And with me on today’s call is Larry Jasinski, Chief Executive Officer. Earlier this morning, ReWalk issued a press release detailing financial results for the three and nine months ended September 30, 2022. This press release and a webcast of this call could be accessed through the Investor Relations section of the ReWalk website at rewalk.com.
Before we get started, I would like to remind everyone that any statements made on today’s conference call that express a belief, 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. A telephone replay of the call will be available shortly after the completion of this call. You’ll find the dial-in information in today’s press release. The archived webcast will be available on the company’s website in the Investor Relations section.
For the benefit of those who may be listening to the replay or the archived webcast, this call was held and recorded on November 7, 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 Jasinski
Thank you, Mike. Good morning. Thank you for joining us today
I want to start with an update on the strategic activities that are occurring to allow the establishment and support of exoskeletons through providing public or private coverage for individuals seeking a ReWalk system. In the U.S., we have submitted our first case to the Medicare administrative contractors, known as the MACs and have more submissions in process.
The ReWalk exoskeleton has always pioneered the exoskeleton industry starting with our de novo FDA clearance, more recently with our breakthrough designation for the pending stair, ascend and descend features and have now completed the first exoskeleton submissions to CMS. The importance of submitting claims means that paralyzed Medicare beneficiaries may soon experience the benefits of functional ambulation.
While coverage is in place under the code we established with CMS, the unfinished designation of the benefit category and of pricing exoskeletal is now a part of the MAC submission process to complete the ongoing supply of exoskeletal systems. Now CMS is using a new process and exoskeletons are unique, the timelines are not specifically defined. However, we expect to receive some guidance or response approximately 30 days after the submissions.
In Germany, ReWalk has led the way in establishing a coverage code and then entering into contracts with several large public and private insurers. While it has been an active process with several of the larger insurance entities, the question of whether exoskeleton provides a direct or indirect disability compensation from the spinal cord injured individual seeking to walk again has been pending in the court since May of 2017.
This case is advanced to the highest and Supreme Court in Germany for these matters, the Federal German Social Court. This session is scheduled later this week for November 10, and a decision is expected just after the hearing. Predictable coverage for individuals who meet the inclusion exclusion requirements is essential for the clinical and spinal cord injury communities to be able to consider their possible options to have a better quality of life.
This will also permit the industry to properly advise and help this community. In parallel with the coverage, ongoing innovation and improvements on the ReWalk personal exoskeleton system are moving forward. The company has received and is interacting with the FDA with additional information request through the regulatory review process. This current 510(k) application is for the provision of navigating curves and stairs with our ReWalk exoskeleton.
These additional capabilities will significantly improve users’ access to more locations and environments and increase their opportunities to achieve the benefits of functional ambulation. For our continuing technology innovation efforts, we are advancing the ReBoot Soft Exosuit program for post-stroke, home and community use. This design allows both plantar and dorsiflexion for the users of the clinic, home and community.
While the design has a breakthrough designation with the FDA, we are also presently reviewing the existing coverage codes that may support payment and have identified multiple potential coverage pathways. In parallel, we are working with an independent firm to help define the market requirements and seek feedback on the initial product concepts from all stakeholders, including users, finishers and payers.
I’d now like to turn the call back to Mike who will review our financial details.
Michael Lawless
Thanks, Larry.
ReWalk reported revenues for the third quarter, 2022 of $886,000 as compared to $2 million in the third quarter of 2021. For the nine months ended September 30, 2022, we have recorded revenues of $3.3 million as compared to revenues of $4.7 million in the same period of the previous year.
For the Q3, 2022 results, the decrease as compared to the same period last year was due to sales of a lower number of ReWalk exoskeleton units. The sales of ReWalk units in the quarter were adversely affected by the timing of coverage decisions by insurers and delays in the training timetable for some of our candidates.
Also important to note is that the prior period reflects the benefit of a large multiple unit order from the institution of physical rehabilitation that did not reoccur in Q3, 2022. On the positive side, in Q3, 2022, we generated revenue of about $250,000 from the sale of MYOLYN MyoCycles, which marks our highest quarterly performance for this product line.
As we look at our progress during Q3, within our ReWalk Personal 6.0 commercial pipeline, we had a total of eight new insurance decisions to place a ReWalk device for rental or direct purchase and three new VA decisions to place a ReWalk device for rental.
Our current pipeline of active rentals consists of 26 cases and our overall number of cases in process currently sits at 74 with 56 in Germany and 18 in the U.S. Not every case in our pipeline will translate into an – eventual sale, but these figures do provide some perspective on the scale of the opportunities on which we are working.
Turning to gross margins, in the third quarter of 2022, our gross margin was 25% as compared to 58% in the prior year’s quarter. This decrease is mainly driven by the impact of fixed production costs being covered by the margin from fewer sales of the ReWalk Personal 6.0 devices as well as rising production costs.
Our third quarter of 2022 operating expenses, were $5.7 million as compared to $3.8 million in the prior year’s quarter. Within R&D, this increase is attributable to higher consultants activity on development projects, partially offset by some grant assistance from the Israel Innovation Authority.
In sales and marketing, we also had an increase in spending primarily due to higher consulting expenses related to CMS progress, sales-related expenditures for trade show activities since the COVID restrictions are being lifted and personnel-related costs.
General and administrative expenses also grew primarily from higher professional services associated with the expanded 2022 proxy process. The proxy process contributed an incremental spend above typical levels of about $600,000 during Q3, which will not carry into Q4 for the year, the impact of the excess spending on the extended proxy process took, – a totaled $1 million.
Our net loss for the third quarter of 2022 was $5.5 million or $0.09 per share as compared to a net loss of $2.7 million or $0.06 per share in the third quarter of 2021. Our non-GAAP net loss for the third quarter of 2022 was $5.1 million or $0.08 per share, as compared to $2.3 million or $0.05 per share in the third quarter of 2021. We ended the quarter with $74 million in cash and cash equivalents with no debt.
We continue to have a strong balance sheet with resources to fund our – organic growth and pursue selective attractive business development opportunities, which can supplement our growth. We also have an active share buyback program in place, which we initiated during Q3 2022. Since the inception of the program, we have bought back a total of $863,000 of stock, representing a repurchase of about 1.4% of our shares outstanding.
With that, I’ll turn the call back over to Larry for further comments.
Larry Jasinski
Thank you, Mike.
I’d now like to provide more detail for Q3 in the last quarter 2022. Here are two key environmental considerations. First, both the U.S. and German markets were almost fully open, which is now allowing training and placement for the home systems. As our cycle time for sales is about nine months, we are now moving past the final surge of COVID that was one element that limited the units closing in Q3 due to delayed starts early in the year.
Our current global home system pipeline is 74 systems, for our clinic-based products, we are seeing capital budgets that are constrained and delay in some planned purchases. The capital budgets pipeline is 31 systems. The second environmental factor, the company has remained active with several major trade shows globally year-to-date, and in particular, we’re able to develop leads at the [RioCare] Conference in September, our largest show in the world, which had not been held for the prior two years.
The assessments are meaningful and allowed a restart of many contracts. Here is a follow-up on five of the annual objectives we defined in Q1 and let me review each quarter. Objective number one, revenue, due to the delayed timing of reimbursement decisions from our original projections, we no longer expect year-over-year revenue growth for 2022 due to the slower movements of pending cases year-to-date.
The timing of many of these, are beyond our control and that limits our ability to provide further clarity at this time. We do anticipate that many of the deferred cases will conclude in Q4. Objective number two, product offering. We continue to pursue at least one additional commercial product line, which we believe can allow further leveraging of our organizational structure, provide growth and help achieve the pathway to profitability.
We are focusing on opportunities with some that may be accretive others that offer strategic growth, all our adjacent technologies each help us build infrastructure and each could have meaningful synergy. Objective number three, CMS and the German court, in September, CMS affirmed that the MACs have discretion to cover and reimburse the ReWalk exoskeleton.
CMS also indicated plans to further deliberate on a benefit category designation for the ReWalk exoskeleton and stated that we’ll provide some more information in the near future. With the submissions to the MACs now underway, we expect some feedback to these within approximately 30 days. The German court case will be held later this week, and we anticipate attendance from several stakeholders in the session.
A direct compensation determination means that the court functional deficit is to be compensated for as far as possible according to the current state of medical and technical process and that the restoration of function is a basic need. An indirect compensation determination is growth. If the consequences of the disability are eliminated or mitigated and a so-called basic need of daily life is effective. So the court’s decision will provide the legal basis for the supply of exoskeletons to cover beneficiaries in Germany.
Our fourth objective, technology development, our goal is two FDA device applications for improved ReWalk designs to launch in 2022 and 2023. The first of these submissions was made in June 2022, and the second submission is now expected for Q1, 2023 due to the addition of usability requirements in the submission. The timing to launch is dependent on CE marking and FDA processes and some supply chain considerations.
And then objective number five, the operational controlled but increased investment of an additional $3 million to $4 million year-over-year in reimbursement, product development, market development and access, Investor Relations and new business development. We have followed through on reimbursement support in a precise manner, have been able to restart market development and access programs post COVID, and have resourced the process for identifying and pursuing new business development.
We are still considering expansion of our IR support with a mix of internal expansion and contracted support for select functions. We will provide updates to each via press releases, quarterly earnings calls and other appropriate communications. Because of coverage decisions, this remains the pivotal year for this company and for this industry. We remain highly focused on execution for the benefit of patients and to enhance our shareholders’ value.
Thanks for your time and interest today. I’d like to turn the call over to questions at this stage. Operator, if you’d please go ahead with the instructions. Thank you.
Question-and-Answer Session
Operator
Larry Jasinski
Okay, operator, if we have no questions at this time. I would like to thank everybody that listened to this today. And if you do have questions, I’d encourage you to reach to us through the Investor Relations part of our company. We look very much forward to providing updates to these initiatives that we’ve been working on. Thanks very much for your time today.
Operator
Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may all now disconnect.
Be the first to comment