ClearPoint Neuro Inc.

Greetings, and welcome to the ClearPoint Neuro fourth quarter and full year 2022 financial results conference call. At this time, all participants are in a listen-only mode. The 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, the size of total addressable markets or the market opportunity for the company's products and services, 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 three months ended September 30, 2022, 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 31st, 2022, which the company intends to file with the Securities and Exchange Commission on or before March 31st, 2023. All the company's filings may be obtained from the SEC or the company's website at www.clearpointneuro.com. I will now turn the call over to Joe Burnett, Chief Executive Officer.

Thank you, Maria. 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 2022, we have 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. We are excited to continue this momentum into 2023, where we again expect more than 20% growth and further progress in all four of those same growth pillars. I will now turn the call over to Danilo De Alessandro, our CFO, to review our financial performance in the fourth quarter and full year 2022. after which I will add some additional detail to our four-pillar growth strategy moving forward. Danilo?

Thank you, Joe, and thank you all for joining us today. Let me start by looking at the full year 2022 results. Third-point euro total revenues were $20.6 million for the year ended December 31, 2022, which represents a 26% increase over revenue of $16.3 million in 2021. 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 intended target. This revenue segment increased 13% to $9.1 million for the year 2022, up from $8.1 million in 2021. Biologic and drug delivery revenue includes sales of disposable products and services related to customer-sponsored preclinical and clinical trials utilizing our products. Biologic and drug delivery revenue increased 34% to 9.1 million in 2022, up from 6.8 million in 2021. This increase was due to both an increase in commitments by our current partners and new pharmaceutical partners. Capital equipment and software revenue consisting of sales of ClearPoint reusable hardware and software and of related services was $2.3 million for the year 2022, a 61% increase compared to 2021. Gross margin for the full year 2022 was 66% compared to 68% in 2021. This decrease was due primarily to an increase in indirect labor costs in 2022 as compared to 2021, as well as an increase in excess and obsolete inventory reserves. Research and development costs were $10.9 million for the year 2022 compared to $9.3 million in 2021, an increase of $1.6 million, or 17%. The increase was due primarily to increases in personal costs, including share-based compensation expense of $1.4 million due to growth in headcount and a $0.1 million increase in regulatory fees. Sales and marketing expenses were $9.4 million for the year 2022 compared to $7.2 million in 2021, an increase of $2.1 million or 30%. This increase was primarily due to increases in personal costs, including share-based compensation expense of $1.5 million, resulting from increases in headcount in our clinical and marketing teams, increases in travel expenses of $0.3 million, and increases in marketing activities of $0.2 million. General administrative expenses were $9.6 million for the year 2022, compared to $8 million in 2021, an increase of $1.6 million, or 20%. This increase was due primarily to increases in personal costs and share-based compensation of $1.5 million, IT costs of $0.3 million, insurance costs of $0.2 million, offset by decrease in bad debt expense of $0.3 million. Net interest expense for the year 2022 was 0.1 million compared to $1 million in 2021 due to the conversion into equity of two tranches of convertible debt in May 2021 and November 2021. Additionally, interest expense was partially offset by higher interest income in 2022 as a result of the increasing interest rates and the company's investment in U.S. government debt securities. I will now turn to the fourth quarter 2022 results. Global revenues were $5.2 million for the three months ended December 31, 2022, an increase of 21% over $4.3 million in the fourth quarter of 2021. Functional neurosurgery and therapy revenue increased 7% to $2.3 million for the fourth quarter of 2022, from $2.1 million for the same period in 2021. Biologics and drug delivery revenue increased 37% to $2.3 million in the fourth quarter of 2022, from 1.7 million in the same period in 2021. The increase was predominantly due to a 79% increase in biologics and drug delivery service revenue, partially set by a slight decrease in product revenue. Capital equipment product and related service revenue increased 25% to 0.6 million for the fourth quarter of 2022, as compared with 0.5 million in the same period of 2021, due to an increase in the placement of ClearPoint capital and software. Gross margin was 64% for the fourth quarter of 2022 compared to a gross margin of 77 for the same period in 2021. The decrease in gross margin was due primarily to higher overhead expenses and inventory reserves. Operating expenses for the fourth quarter of 2022 were $7.8 million compared to $7.3 million for the fourth quarter of 2021. The increase was mainly driven by the increase in headcount across the organization and share-based compensations. The fourth quarter operating expenses include a one-time year-to-date reclassification of $1.9 million to classify share-based compensation in the same income statement line items as a cash compensation paid to those employees, rather than in general administrative expense. With respect to our cash position, at the end of December 2022, we held cash, cash equivalents, and short-term investment balances of $37.5 million compared to $54.1 million at the end of 2021. Our cash decrease resulted primarily from our operating cash needs. Net cash flows used in operating activities for the year ended 2022 were $16.2 million, an increase of 3.5 million from the year ended 2021. The increase in operating cash need was primarily driven by $4.4 million in additional inventory purchases to mitigate any risks to our supply chain. In the fourth quarter, our cash burn was approximately $3 million, the lowest quarterly cash burn since Q1 2021. I'd like to turn the call back to Joe.