ClearPoint Neuro Inc.

Greetings and welcome to the ClearPoint Miro, Inc. Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in 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 cell phone 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, 2022, and the company's quarterly report on Form 10-Q for the three months ended March 31, 2023, 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, 2023. which the company intends to file with the Securities and Exchange Commission on or before August 14, 2023. 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 call over to your host, Joe Burnett, Chief Executive Officer. Please go ahead.

Thank you, and thank you to all of the investors and analysts on today's call. And thank you also for being a part of ClearPoint's 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 second quarter of 2023, the company returned to double digit growth and delivered record revenue of $6 million in the quarter. We have also continued to make progress across our four pillar growth strategy, including pillar one, biologics and drug delivery, Pillar 2, functional neurosurgery navigation. Pillar 3, therapy and access product. And Pillar 4, achieving global scale. I will now turn the call over to Danilo D'Alessandro, our CFO, to review our financial performance in the quarter, after which I will add some detail to our four-pillar growth strategy and expectations for the second half of 2023. Danilo?

Thank you, Joe, and thank you all for joining us today. Looking at the second quarter 2023 results, total revenue was $6 million for the three months ended June 30th, 2023, and $5.2 million for the three months ended June 30th, 2022, which represents 14% growth versus the second quarter of 2022. As a reminder, 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 40% to $3.4 million in the second quarter, up from $2.4 million in 2022. This increase was fueled by a 155% increase in biologics and drug delivery service revenue as we expand our service offering to pharmaceutical customers. The biologic and drug delivery service growth was partially offset by a $0.9 million decrease in product revenue. 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 desired target. This revenue segment increased 1% to $2.2 million for the second quarter. Capital equipment and software revenue consisting of sales of ClearPoint reusable hardware and software and related services decreased 38%, $2.4 million in the quarter from $0.6 million for the same period in 2022, reflecting fewer placements of ClearPoint capital and software. Gross margin for the second quarter 2023 was 53% as compared to a gross margin of 63% for the second quarter 2022. The decrease in gross margin was primarily due to an increase in biologic and drug delivery preclinical services, which to date have had a lower margin than product sales as we increase our presence in the space. Increased and duplicated costs related to the transition to the new manufacturing facility also contributed to the decrease in gross margin in the quarter. Research and development costs were $3.6 million for the three months ended June 30th, 2023 compared to $2.4 million for the same period in 2022, an increase of $1.2 million or 50%. The increase was due primarily to increases in personal costs, including share-based compensation of $0.8 million and increases in product development costs of $0.4 million as we invest in our technology platforms, particularly our software and biologics and drug delivery offering. Sales and marketing expenses were $3.5 million for the second quarter, compared to $2.4 million for the same period in 2022, an increase of $1.1 million, or 46%. This increase was due to additional personal costs, including share-based compensation, as we expand our commercial reach in preparation for multiple new product launches over the next 18 months. The expanded hiring reflects the learning curve required to train and educate on the expanding ClearPoint product portfolio, which will be targeting new physician customers and new surgical arenas within hospitals. General and administrative expenses were $3.2 million for the second quarter compared to $2.7 million for the same period in 2022, an increase of $0.5 million, or 19%. This increase was due primarily to an increase in share-based compensation of $0.2 million and an increase in the allowance for credit losses of $0.2 million. Net interest income for the three months ending in June 2023 was $0.1 million compared to $0.1 million net interest expense for the same period in 2022. With respect to our cash position, as of June 30th, 2023, we held cash, cash equivalents, and short-term investments of $26.5 million compared to $37.5 million as of December 31st, 2022. While our operational cash burn in the second quarter was broadly in line with the prior year, we expect our operational cash burn to reduce meaningfully in the second half of 2023 compared to our first half of 2023. The reduction in operational cash burn will be driven by one, the easing of supply chain conditions that allows us to gradually reduce the inventory. Two, operating leverage due to higher revenue. And three, our existing headcounts should be sufficient to support our business into 2024. In addition, in the second quarter of 2023, we invested $0.3 million to set up our new manufacturing site in Carlsbad, California. With that, I'd like now to turn the call back to Joe.