ClearPoint Neuro Inc.

Greetings and welcome to ClearPoint Neuro, Inc. fourth quarter and full year 2021 financial results conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. Comments made on this call may include statements that are forward-looking within the meaning of securities laws. These forward-looking statements may include, without limitation, statements related to anticipated industry trends, the company's plans, prospects, and strategies, both preliminary and projected, and management expectations, beliefs, estimates, or projections regarding future results of operations. Actual results or trends could differ materially. The company undertakes no obligation to revise forward-looking statements for new information or future events. For more information, please refer to the company's annual report on Form 10-K for the year ended December 31, 2020, and the company's quarterly report on Form 10-Q for the quarter ended September 30, 2021, both of which have been filed with the Securities and Exchange Commission and the company's annual report on Form 10-K for the year ended December 31, 2021, which the company intends to file with the Securities and Exchange Commission on or before March 31, 2022. All the company's filings may be obtained from the SEC or the company's website at www.clearpointneuro.com. I would now like to turn the conference over to your host, Joe Burnett, Chief Executive Officer.

Thank you, Peter, and thank you to all of the investors and analysts on today's call for being a part of the ClearPoint vision and journey. Our mission and our priority is to help restore quality of life to patients and their families who are suffering from some of the most debilitating neurological disorders imaginable. In the fourth quarter and full year 2021, we have continued to make progress across our four pillars of growth and their strategy, including biologics and drug delivery, functional neurosurgery navigation, therapy and access products, and in achieving global scale. While elective case volumes was once again impacted in 2021 by the Delta and Omicron variants, and supply chain disruptions created very meaningful distractions on a day-to-day basis, our team still achieved record revenue in case volume for the year. We expect that growth to continue here in 2022 as we keep our heads down and focus on the task at hand in a very unsettling geopolitical environment. I will now turn the call over to Danilo, our CFO, to review our financial performance in the quarter and full year 2021, after which I will add some details to our four-pillar growth strategy.

Danilo? Thank you, Joe, and thank you all for joining us today. Let me start by looking at the full year 2021 results. ClearPoint Neuro total revenues were $16.3 million for the year ended December 31st, 2021, a 27% increase over revenue of $12.8 million in 2020. Our revenue is made up of three components, functional neurosurgery, navigation, and therapy, biologics and drug delivery, and capital equipment and software. Functional neurosurgery navigation revenue consists of commercial sales of disposable products and services related to cases utilizing the ClearPoint system to deliver medical device therapy to the proper target. This revenue segment increased 30% to $8.1 million for the year 2021, up from $6.2 million for the year 2020. Biologics and drug delivery revenue includes sales of disposable products and services related to customer-sponsored preclinical and clinical trials utilizing our products. Biologics and drug delivery revenue increased 31% to $6.8 million in 2021, up from $5.2 million in 2020. This increase was due to an increase in commitments by our current and new pharmaceutical partners. Capital equipment and software revenue, consisting of sales of ClearPoint reusable hardware and software and of related services, was $1.4 million for the year 2021, broadly in line with the year 2020. We believe that 2021 capital spending continued to be somewhat subdued as hospitals face the Delta and Omicron variants. ClearPoint Neuro achieved a gross margin of 69% on its sales for 2021 compared to a gross margin of 71% for 2020. This decrease in gross margin was due primarily to an increase in overhead allocated to cost of sales in 2021 as compared to 2020. Research and development costs were $9 million for the year 2021 compared to $4.7 million for the year 2020, an increase of $4.3 million or 92%. The increase was mainly due to the increases in personal costs of $2.3 million due to growth in headcount. Product and software development expenses increased $2.2 million resulting from our efforts to develop new products and expand the applications of our technology platforms. These cost increases were partially offset by lower amortizations. Sales and marketing expenses were $6.9 million for the year 2021, compared to $5.4 million for the year 2020, an increase of $1.5 million, or 29%. This increase was mostly due to increases in personal cost of $1 million, resulting from our geographical expansion and increases in headcount in our clinical and marketing teams. Travel expenses were also higher by about $0.4 million due to increased activity. General and administrative expenses were $8.8 million for the year 2021, compared to $5.3 million for the year 2020, an increase of $3.5 million, or 66%. This increase was due primarily to increases in share-based compensation of $0.8 million, while personnel costs, professional fees, insurance costs, and state franchise taxes all increased by about $0.4 million each in 2021 compared to 2020. Net interest expense for the year 2021 was $1 million, compared with $1.4 million for the same period in 2020. The decrease in interest expense is primarily due to the repayment of the outstanding 2010 notes in the first quarter of 2020 and the conversion into equity of two tranches of convertible debt in May 2021 and in November 2021. I will now turn to the fourth quarter 2021 results. Total revenues were approximately $4.3 million for the three months ended December 31st, 2021, an increase of 15% over $3.7 million in the fourth quarter of 2020. Functional neurosurgery and therapy revenue increased to $2.1 million for the fourth quarter of 2021, from $1.6 million for the same period in 2020. Biologics and drug delivery revenue increased 10% to $1.7 million in the fourth quarter of 2021, from $1.5 million the same period in 2020. The increase was predominantly due to a 61% increase in biological drug delivery product sales, partially set by lower service revenue. Capital equipment product and related service revenue decreased 20% to $0.5 million for the fourth quarter of 2021, as compared with $0.6 million in the same period in 2020, due primarily to timing of system and upgrade placements in the fourth quarter of 2021 relative to the same period in 2020. We realized a gross margin of 77% of sales for the fourth quarter of 2021 compared to a gross margin of 61% for the same period in 2020. The increase was mostly due to a one-time reclassification of certain costs, previously classified as operating expenses, to cost of revenues performed in Q4 2020, and due to lower excess and obsolete inventory reserves taken in the fourth quarter of 2021. Research and development costs were $2.7 million for the fourth quarter in 2020, 21 compared to $1.8 million for the same period in 2020, an increase of 50% resulting primarily from increases in headcount and product development expenses. Sales and marketing expenses were $1.8 million for the fourth quarter compared to $1.5 million in the fourth quarter of 2020, an increase of $0.3 million due mainly to our geographical expansion and an increase in marketing and clinical support expenses. General administrative expenses were 2.7 million for the fourth quarter of 2021 compared to 1.3 million in the fourth quarter of 2020. The increase was due primarily to higher share-based compensation, personnel costs, professional fees, insurance costs, and a one-time reclassification of costs made in the fourth quarter of 2020. With respect to our cash position at the end of December 2021, we held cash and cash equivalent balances of 54.1 million compared to 20.1 million at the end of 2020. Our cash increase resulted primarily from the completion of a public offering of the company's common stock in February 2021. I'd like now to turn the call back to Joe.