Acutus Medical, Inc.

Good day, and thank you for standing by. Welcome to the Accurius Medical third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 1-1 on your telephone. You will then hear a message that your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Carolyn Corner, with Investor Relations.

Thank you, Operator. Welcome to Acutis' third quarter 2022 earnings call. Joining me on today's call is David Roman, Chief Executive Officer, and Takeo Mukai, Interim 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's Form 8-K filed with the SEC today and are also discussed in more detail under the risk factors section in ACUTUS's most recent filings with the SEC, including the risk factors described in ACUTUS's 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's press release with third quarter 2022 results is also available on the ACUTUS website, www.acutusmedical.com, under the investor section and includes additional details about ACUTUS's financial results. The ACUTUS website also has ACUTUS's SEC filings, which you are encouraged to review. A recording of today's call will be available on the ACUTUS website by 5 p.m. Pacific time. Now, I'd like to turn the call over to David.

Thank you, Caroline, and good afternoon, everyone. During today's call, I will update you on the progress we are making on key strategic goals, as well as the status of our left-hand access portfolio sale to Medtronic. Takeya will provide an overview of our third quarter results, as well as our outlook for the rest of the year. On our last call in August, when I moved into the CEO role, we presented two strategic imperatives that would guide our business and set the foundation for Acutus' future. Driving utilization and operational excellence with people and culture at the foundation of everything we do. I'm happy with the steps we are taking to advance these objectives and want to take a moment to recognize the extraordinary commitment of my Acutus colleagues, as well as the support and engagement from our key physician partners. Starting with our first priority to drive utilization and adoption for AccuMap globally with a commercial strategy we introduced earlier this year is unfolding well. Our shift to focus on procedure volume growth and utilization over expanding the install base has enabled us to grow year-over-year procedure volumes, increase utilization per console, and drive higher revenue per case as we launch new products. Year to date, procedure volumes advanced 21% versus the prior year, with console utilization up 17% and revenue per procedure up 16% constant currency. This increased productivity has been accomplished with a near 40% reduction in our commercial organization as we have streamlined resources. Overall, these performance metrics reflect strength in our core business and give us confidence in our ability to drive future growth. While we continue to proactively relocate underperforming consoles, We also expect our installed base to return to growth in 2023. In addition, we are seeing good traction in adding multiple users within existing accounts, helping to strengthen utilization and increase disposable revenue per console. As we reinitiate our expansion efforts, we will remain disciplined in where we deploy our assets with a goal to exit 2023 with a higher installed base, higher utilization per console, and higher revenue per procedure. Further to achieving our growth objectives is our new product pipeline, which includes software, disposables, and hardware platforms. Exiting Q4 and into early 2023, we will move into full market release of our Acumap 8.5 software, which is designed to improve anatomy build and enable better visualization during Acumap procedures. We have taken a deliberate and focused approach in launching Acumap 8.5 to ensure a positive physician experience. This software release will be followed by AccuMap 9 in mid-2023. AccuMap 9 is expected to make significant improvements to catheter localization, procedural efficiency, and workflow flexibility. In addition to new software platforms, our AccuBlade force sensing ablation catheter and system launch in the U.S. is an important addition to the portfolio expected next year. In early October, we submitted our PMA for AccuBlade, which initiated the standard 180-day review clock. During this time period, we expect to receive questions from the FDA, as well as engage with the agency during site inspections and evaluation of our submission. From where we sit today, we continue to expect approval in the first half of 2023, consistent with our prior disclosures. The data from our U.S. AccuBlade 4 study will be submitted for presentation at the 2023 AF Symposium, and we are therefore unable to share specifics about the study results. That said, based on the efficacy and safety results in this study, as well as the strong commercial uptake outside the U.S., we are confident that AccuBlade will help support our growth objectives. Beyond 2023, our magnetic navigation system is moving through development. magnetic-based navigation has become industry standard, and we will be integrating this important feature into our AccuMap console, mapping catheter, and ablation catheter. We will provide additional updates on the timeline for our magnetics program as it progresses. With respect to pulse field ablation, or PFA, we continue to evaluate the next steps in our program. Recent data from other industry participants, such as those presented at the European Society of Cardiology in September, have provided insight into the performance of PFA in real-world settings. Consistent with our approach to make disciplined strategic and resource allocation decisions, we are carefully watching the evolution of this category and are assessing the best path forward for ACUTUS, whether with our internal program or via partnership. We will update you as we finalize our plans. Switching gears to our efforts to strengthen our operating and underlying financial performance. We undertook a major leadership restructuring and organizational realignment in July, and our teams are executing well in this new structure. We have reduced the layers of management in the organization and are driving efficient decision-making at the functional level. We are seeing these efforts play through in our results as we recorded our lowest level of operating expenses and cash burns since IPO, with declines of 30% and 23% respectively on a year-over-year basis. We expect further moderation in cash burn during the fourth quarter. At this point, we see our operating expenses at a more sustainable level and we'll look to selectively open headcount in certain areas while keeping very tight parameters on non-headcount expense. We know that we need to maintain discipline in our operating expenses, but we will ultimately need to invest in the business long term. As a result, this will require intense focus on our gross margin improvement workstreams that Takeo will discuss in his remarks. While it is early in the process and will take time to see results, I am pleased that we saw an approximate $1.3 million improvement on a sequential basis despite the expected heavy seasonality in revenue. In addition to internal restructuring to strengthen our financial position, we are making good progress in the transition of our Less Hard Access portfolio to Medtronic. In early November, We achieved the first major milestone post-transaction closing, which came several months ahead of previously communicated expectations. Acutis is now approved as an Original Equipment Manufacturer, or OEM, for Medtronic. Achieving this milestone also triggers a $20 million earn-out payment that we expect to receive by year-end. Acutis will continue selling the LeftHard Access portfolio until commercial distribution is fully transitioned to Medtronic. Accomplishing this earn-out required tremendous cross-functional engagement from our operations, quality, clinical, regulatory, and R&D teams, in addition to strong partnership with Medtronic. As a reminder, in addition to OEM qualification, we are eligible to receive a milestone payment of up to $17 million once we file for EU MDR, as well as four years of revenue-based earn-out payments. We expect to achieve the milestone for EUMDR during the first half of 2023, which is consistent with timelines we shared on our prior earnings call. Beyond the financial impact of these initiatives, we are reestablishing the company's culture and building a patient and physician-centric organization. Importantly, we are retaining our key talent with meaningful declines in voluntary attrition and September and October recording the lowest levels of attrition in years. I am very confident in our team and believe we have the right people in the right roles to execute our strategy. Putting this all together, we continue to see 2022 as a transition year where we reset our strategic priorities, focus our R&D programs on those products that enable higher utilization of AccuMap, and address some of the key adoption barriers and establish a strong operating foundation. Parsing through some of the external challenges, including FX headwinds, supply chain disruption, and a challenging capital equipment market, our business fundamentals are strong, setting us up well for the long term. Beyond 2022, we expect our business to see progressive improvements in 2023 and even stronger performance in 2024. 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. I will be happy to cover any of these topics in more detail during our Q&A session, and I will now turn the call over to Takeo.