ClearPoint Neuro Inc.

Greetings and welcome to the ClearPoint Neuro second quarter 2022 financial results conference call. At this time, all participants are in the 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's 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, 2021, and the company's quarterly report on Form 10-Q for the first three months ended March 31, 2022, both of which have been filed with the Securities and Exchange Commission and the company's quarterly report on Form 10-Q for the three months ended June 30, 2022. which the company intends to file with the Securities and Exchange Commission on or before August 15, 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.

Good afternoon, everyone. 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 first half of 2022, we continued to make progress across our four pillar growth strategy, including biologics and drug delivery, functional neurosurgery navigation, therapy and access products, and in achieving global scale. Despite a continued high cancellation of procedures due to COVID, historically high surgeon transitions, and daily supply chain challenges, our team was able to achieve record revenue of $5.2 million for the second quarter, representing 52% growth year over year. Biologics and drug delivery revenue surpassed functional neurosurgery revenue for the first time as our largest contributor, and grew 73% year-over-year in the quarter at $2.4 million, including the addition of multiple new partners. As a company, we believe we remain well-capitalized with over $45 million in cash and short-term investments and will continue to execute against our strategy while carefully managing our expenses. We continue to expect total revenue for 2022 to be in the range of $21 to $22 million, representing 30 to 35% annualized growth for the year. I will now turn the call over to Danilo D'Alessandro, our CFO, to review our financial performance in the second quarter, after which I will add some detail to our four-pillar growth strategy moving forward. Danilo?

Thank you, Joe, and thank you all for joining us today. Looking at the second quarter 2022 results, total revenue was $5.2 million for the three months ended June 30th, 2022, and $3.4 million for the three months ended June 30th, 2021, which represents 52% growth versus the second quarter of 2021. Our revenue is made up of three components, biologics and drug delivery, functional neurosurgery navigation and therapy, and capital equipment and software. 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 73% to $2.4 million in the second quarter, up from $1.4 million in Q2 2021. 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 17% to $2.2 million for the second quarter, up from $1.9 million in the second quarter of 2021. Capital equipment and software revenue consisting of sales of ClearPoint reusable hardware and software and related services nearly tripled to $0.6 million for the second quarter, from $0.2 million for the same period in 2021, following the addition of new centers installed in the second quarter. We achieved a gross margin of 63% in the second quarter of 2022, slightly lower than the 67% gross margin recorded in the second quarter of 2021. The decline in gross margin was mostly due to an increase in overhead expenses and obsolete reserves. Research and development costs were $2.3 million in Q2 compared to $2.1 million for the same period in 2021, an increase of $0.2 million or 8%. This increase was due primarily to increases in product development of 0.1 million, resulting from our efforts to expand the applications of our technological platforms. Sales and marketing expenses were 2.2 million for the second quarter, compared to 1.6 million for the same period in 2021, an increase of 0.6 million or 38%. This increase was due primarily to additional personnel costs of 0.3 million as we expand our clinical team. Additionally, our travel costs and marketing activities increased 0.1 million each in the quarter, General administrative expenses were $3 million in Q2 compared to $2 million for the same period in 2021, an increase of $1 million, or 51%. This increase was due primarily to increased share-based compensation of $0.5 million and increased personnel costs of $0.4 million, both attributed to increases in headcount. Net interest expense in the second quarter was $0.1 million compared to $0.2 million for the same period in 2021 due to the conversion into equity of two tranches of convertible debt in May 2021 and November 2021. In the first half of the year, our operational cash burn was $9.3 million. Similar to many of our peers, we continue to face a challenging supply chain environment that occasionally requires us to deploy more capital near term to solidify vendor supply. Despite these issues, we continue to expect to step down in operational cash burn in the second half of the year, and remain confident we are well capitalized to achieve our mid and long-term growth conditions. With respect to our cash position, we finished the quarter with cash and short-term investments of 41, 45, sorry, 0.1 million compared to 54.1 million as of December 31st, 2021. As interest rates have picked up over the prior months, we have shifted some of our liquidity position to be in the form of six-month and one-year US treasury bills to capture some yield from the market. At this point, I'd like to turn the call back to Joe.