Asensus Surgical, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Census Surgical Inc. Third Quarter Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call, you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, November 14, 2023. I would now like to turn the conference over to Mark Klausner from Westwick Partners. Please go ahead.

Good afternoon, everyone, and thank you for joining us for the Ascensus Surgical Third Quarter 2023 Business and Financial Update Conference Call. On the call with me today are Anthony Fernando, President and Chief Executive Officer, and Shamiz Rampertab, Chief Financial Officer. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call, including any guidance provided, are forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business, including any geopolitical factors beyond our control. The company undertakes no obligation to update the information provided on this call. For a discussion of risks and uncertainties associated with the Ascensus Surgical business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the 2022 Form 10-K, filed in March 2023, and the Form 10-Q, expected to be filed later today, and any other filings we make with the SEC. During this call, we will also present certain non-GAAP financial information related to adjusted net loss attributable to common stockholders and the adjusted net loss for common share attributable to common stockholders. Management believes that these non-GAAP financial measures, taken in conjunction with U.S. GAAP financial measures, provide useful information for both management and investors by excluding certain non-cash and other expenses that are not indicative of the company's core operating results. Management uses non-GAAP financial measures to compare our performance relative to forecast and strategic plans, to benchmark out performance externally against competitors, and for certain compensation decisions. Reconciliations from U.S. GAAP to non-GAAP results are presented in the tables accompanying our earnings release, which can be found in the investor relations section of our website. With that, it's my pleasure to turn the call over to Ascensus Surgical's President and Chief Executive Officer, Anthony Fernando.

Thanks, Mark, and thank you, everyone, for joining us today. To kick off, I'll provide an overview of our recent performance and key achievements, after which Shamish will detail our financial results. Next, I'll update you on our priorities for the remainder of 2023 before we open the line for questions. Before I dive into the quarterly review, I would like to take a moment to acknowledge the recent events in ISRA. The attacks and escalating conflict there have deeply affected us all. I extended our deepest sympathies to those who have suffered losses or injuries and to all impacted by the violence. Our thoughts and support are with our team in Israel and their families during this time. We are proud of the incredible care and support they've shown one another with some of our own team members and their spouses having been called to military service. I would like to say thank you to our team in Israel for managing through this trying time. Turning to an overview of the third quarter, we are pleased to share that we've reached significant milestones recently. One of the key achievements, including finalizing an advanced manufacturing partnership for our upcoming lunar surgical system, ensuring a reliable manufacturing process for this innovative technology. Additionally, we partnered with a graphics hardware provider to enhance the capabilities of our ISU, which will contribute to improved performance. Our ongoing focus remains on expanding the adoption of Senhance, increasing utilization, advancing our clinical evidence, refining our portfolio to enhance Senhance's capabilities, and deliver the value of performance-guided surgery through the launch of Luna. During the quarter, four clinical papers were published, two of which I want to discuss. These studies highlight the promising performance of Senhance in comparison to the current market-leading robotic system and traditional laparoscopy in various procedures. The first study from Taiwan reveals cost advantages of Senhance with shorter operative times and comparable patient outcomes versus the current market-leading robotic system. The second study emphasizes Senhance's comparable outcomes to laparoscopic procedures with the added benefit of shorter hospital stays. Incision to suture times also showed a close match between Senhance and laparoscopy. More information on all the papers published can be found on our website. Procedure volumes continue to be an important input to develop and improve our digital surgery capabilities. Year-to-date, our performance reflects a strong 17% growth in procedures. During the third quarter, we saw 2% year-over-year growth and over 760 enhanced procedures performed across a variety of specialties globally. Our machine learning engine improves as we continue to gather surgical data, enabling us to offer useful clinical intelligence to surgeons via the ISU. Another positive aspect of increased procedure volumes is the expansion of our clinical registry. As of this call, our trust registry has grown to include data from over 3,000 patients. with cases across gynecology, general surgery, and urology. This growth signifies a notable step forward in our efforts to accumulate valuable patient data and to help inform surgical decision-making and ultimately help improve patient care. The Senhans Clinical Registry is one-of-a-kind collection of data and the only registry focused on digital laparoscopy. The Trust Registry is a multi-specialty clinical registry that is investigator-led and managed by a third-party clinical research organization with full ethics committee approval at each institution. The primary goal of this registry is to create a collection of 60-plus intraoperative data points and 12-month post-operative follow-up data. This information will serve as a foundation for a greater number of high-quality clinical publications and play a vital role in advancing our market development strategy. Moving to new program initiations, we initiated two new Sennheis programs in the quarter ended September 30, 2023. In August, we initiated a program with First Tawakai Hospital in Japan. The Sennheis system is being used in their urology and gynecology centers and gastroenterology departments. We are seeing ongoing expansion in Japan, solidifying agreements with highly regarded institutions. The encouraging progress in Japan is a testament to our efforts, and we are enthusiastic about further driving adoption in the region. The second was Mayo Clinic Hospital, St. Mary's Campus, the leading United States-based hospital that was announced in July. This marks an important milestone as this is the first system to be exclusively utilized by pediatric surgeons at a U.S.-based hospital. The SENHANCE system is well-suited for pediatric procedures given a mix of unique features like augmented intelligence, machine learning, haptic feedback, eye-tracking camera control, 3D visualization, and most importantly, specialized 3- and 5-millimeter instruments. Subsequent to the end of the quarter, we initiated two additional SENHANCE programs. The first was Klinikum Ida-Aubenstein Hospital in Germany to be used by their clinic for general, visceral, and minimally invasive surgery. The second system was sold to the company's distribution partner and will be placed in a pediatric hospital in the Commonwealth of Independent States region. In March of this year, we expanded our U.S. pediatric indication, complementing our existing regulatory approvals in Europe and Japan. This expansion allowed us to engage with leading pediatric surgeons, especially those operating at top children's hospitals who have recognized the distinct advantages of Senhans for younger patients. The system's smaller instruments, a digital fulcrum to minimize tissue trauma, and haptic feedback for precise touch and feel have been particularly appreciated by surgeons as they enable the preservation of the benefits of minimally invasive surgery for delicate pediatric tissues. As we discussed on our last call, July marked an important milestone for pediatric surgeons from around the world to converge at the first joint meeting of the European Society of Pediatric Endoscopic Surgeons and International Pediatric Endosurgery Group societies in Sorrento, Italy. Ascensus played a prominent role delivering an impactful robotic masterclass highlighting the integration of cognitive science, data science, and robotics, providing attendees with valuable insights on the application of robotics in pediatrics as well as the opportunity to gain hands-on experience. With hundreds of customer interactions at this surgical forum, Ascensus went on to host potential customers at our headquarters in Research Triangle Park and in Milan, as well as partner with leading children hospitals to execute awareness events that engaged these leaders in considering how to incorporate Senhance into their clinical programs. With pediatric surgeons and thought leaders recognizing Ascensus' unique system design, which not only preserves minimally invasive surgery, but goes beyond by advancing laparoscopy and robotics. With digital surgery solutions, the interest in SennHands and the ISU for pediatric applications continues to grow, and we are committed to meeting this rising demand in the pediatric market. I'd also like to highlight our recently launched e-book titled Augmented Intelligence, The Answer to Surgery Shortcoming, which has generated positive responses from the medical community. The e-book explores how performance-guided surgery can address surgical variability, providing operational advantages for surgeons, cost-efficient advancements for hospitals, and improved patient outcomes. It highlights the potential for technology adoption to attract and nurture talent in the medical field, ultimately enhancing hospital reputation. The e-book can be found on our website or LinkedIn, and I encourage everyone to read it. Now taking a look at the portfolio development front. Starting with the recent announced agreement with Flex for lunar system manufacturing. Under this agreement, Flex will provide a range of design and advanced manufacturing services across Luna's product lifecycle to enable us to deliver the Luna platform at scale. Flex's proven track record of delivering complex electromechanical systems across diverse industries and deep understanding of the complex requirements for medical devices will enable us to accelerate time to market for our Luna platform. Also, Flexa's focused portfolio of advanced manufacturing capabilities and clustered supply chain network will be instrumental in scaling Luna globally. In September, we announced a collaboration with NVIDIA to enhance the capabilities of the ISU. By directly collaborating on NVIDIA's advanced tools, we aim to refine the ISU's augmented intelligence features and further develop advanced features based on surgeon feedback. The ISU, already powered by NVIDIA hardware, has been providing real-time support to surgeons since 2021. This announced collaboration will expand the relationship to facilitate shared access to product roadmaps. We are exploring innovative models for the development and deployment of digital surgical solutions, leveraging NVIDIA's AI computing platform, Holoscan. This collaboration highlights the potential for improved decision-making in surgical procedures through the application of advanced AI tools, aligning the goals of both companies, and highlighting the growing importance of data-driven technologies that support surgeons and advanced surgery. With an overarching focus on data, our collaboration with Google also holds immense value, particularly in our joint effort in data collection and analysis. This partnering integrates Google's cutting-edge machine learning tools and secure cloud data architecture with our performance-guided surgery framework. By harnessing the data gathered through the ISU in tandem with Google Cloud's leading technologies and providing surgeons with real-time intraoperative clinical intelligence, we have the potential to achieve superior outcomes for patients. Regarding Carl Storch, our discussions are ongoing. Both organizations are dedicated to expediting the finalization of an agreement, and we will provide an update once these conversations conclude. To wrap up, I'm pleased with the progress we've achieved in the third quarter and continue to build on the groundwork for sustained success.