ClearPoint Neuro Inc.

Greetings and welcome to the ClearPoint Neuro, Inc. fourth quarter and full year 2023 financial results conference call. At this time, all participants are in a listen-only mode. A brief 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 revenue, results of operations, or the adequacy of cash and cash equivalent balances. to support operations and meet future obligations. 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 31st, 2022, and the company's quarterly report on Form 10-Q for the three months ended September 30th, 2023. 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, 2023, which the company intends to file with the Securities and Exchange Commission on or before March 31, 2023. All the company's filings may be obtained from the SEC or the company's website at www.ClearPointNoro.com. It is now my pleasure to introduce to you Joe Burnett, Chief Executive Officer. Thank you, Joe. You may begin.

Thank you, Diego. And as always, thank you to all of the investors and analysts on today's call. Our mission and our priority are to help restore quality of life to patients and their families who suffer from some of the most debilitating neurological disorders imaginable. We are thrilled to have you here on this journey with us. ClearPoint had an excellent fourth quarter of 2023. and is off to a strong early start here in 2024, both financially and in the execution against our four pillar growth strategy, which includes biologics and drug delivery, functional neurosurgery navigation, therapy and access products, and in achieving global scale. We continue to expect growth in 2024 of approximately 25 to 35% fueled by the continued expansion of preclinical services the progression of our pharma partners through the global regulatory and clinical trial process, as well as the introduction of numerous exciting clinical products to our new and existing hospital customers. I will now turn the call over to Danilo, our CFO, to review our financial performance in the fourth quarter and full year 2023. After which, I will add some additional detail on progress relative to our four pillar growth strategy here in 2024. Danilo?

Thank you, Joe, and thank you all for being with us here today. Let me start by looking at the full year 2023 results. ClearPoint Neuro total revenues were $24 million for the year ended December 31, 2023, which represents a 17% increase over revenue of $20.6 million in 2022. 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 49% to $13.6 million in 2023, up from $9.1 million in 2022. This increase was due to an expansion in our services, an increase in commitments by our current partners and new pharmaceutical partners. 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 declined 7% to $8.5 million for the year 2023. The decline in this segment was fully due to lower service revenue of $.6 million as a result of pausing a co-development program with one of our brain computer interface partners in 2023 compared to 2022. Capital equipment and software revenue consisting of sales of ClearPoint reusable hardware and software and of related services was $1.8 million for the year 2023, a 21% decline compared to 2022. Gross margin for the full year 2023 was 57% compared to 66% in 2022. This decrease in gross margin was primarily due to an increase in biologics and drug delivery Preclinical services, which to date have had a lower margin than in prior years as we launch new services and increase our presence in this space. Increased costs related to the transition to the new manufacturing facility contributed as well to the decrease in gross margin compared to the prior year. Research and development costs were $11.7 million for the year 2023 compared to $10.9 million in 2022, an increase of 0.8 million or 7%. The increase was due primarily to increases in personal costs, including share-based compensation expense of $1.2 million due to growth in headcount, partially offset by decrease of $0.6 million in research costs as a result of reprioritization of certain activities. Sales and marketing expenses were $12.6 million for the year 2023 compared to $9.4 million in 2022, an increase of $3.2 million, or 35%. This increase was primarily due to increases in personal costs, including share-based compensation expense of $3 million, resulting from increases in headcount in our clinical and marketing teams as we expand our commercial reach in preparation for multiple new product launches over the next 12 to 15 months. This hiring reflects the learning curve required to train and educate on the expanding ClearPoint Neuro product portfolio, which will be targeting new physician customers and new surgical arenas within hospitals. General administrative expenses were $11.8 million for the year 2023 compared to $9.6 million in 2022, an increase of $2.1 million or 22%. This increase was due primarily to an increase in the allowance for credit losses of $1.4 million and the increased share-based compensation of $0.8 million. Net interest income for the year 2023 was $0.4 million. I will now turn over to the fourth quarter 2023 results. Total revenues in Q4 were $6.8 million for the three months ended December 31, 2023, an increase of 32% over $5.2 million in the fourth quarter of 2022. Biological and drug delivery revenue increased 76% to $4.1 million in the fourth quarter of 2023, from $2.3 million in the same period in 2022. The increase was predominantly due to a 122% increase in biologics and drug delivery service revenue, partially upset by slight decrease in product revenue. Functional neurosurgery and therapy revenue decreased 11% to 2 million for the fourth quarter of 2023 from 2.3 million for the same period in 2022. Capital equipment product and related service revenue increased 23% to 0.7 million for the fourth quarter of 2023 as compared with 0.6 million in the same period in 2022 due to an increase in the placements of ClearPoint capital and software. Gross margin was 59% for the fourth quarter of 2023 compared to a gross margin of 64% for the same period in 2022. The decrease in gross margin was due primarily to an increase in biologically-directed delivery of preclinical services, which to date have had a lower margin than in prior years, as we expand into new services and increase our presence in this space. Operating expenses for the fourth quarter of 2023 were $8.7 million compared to $7.8 million for the fourth quarter of 2022. The increase was mainly driven by the increase in headcount across the organization and share-based compensation, as well as an increase in the allowance for credit losses. With respect to our cash position, at the end of December 2023, we held cash, cash equivalents, and short-term investment balances of $23.1 million. Our cash burn in Q4 was $1.2 million, down 60% from the prior year fourth quarter and the lowest quarterly cash burn since 2020. We maintained our focus on appropriate resource allocation and cash management and remain committed to effectively and carefully managing our operating expenses. As anticipated in our prior earnings call, our operational cash burn in the second half of 2023 at $3 million was meaningfully below the operational cash burn of the first half of the year. We expect to continue to have a very disciplined approach on managing our expenses. We continue to believe that our current headcount is sufficient to support our business for the next 12 months. On March 4, 2024, we also completed an equity offering with gross proceeds of $50 million, which further strengthened our balance sheet. The proceeds will allow us to retire fully our outstanding convertible debt in the next 10 months. I'd like now to turn the call back to Joe. Thanks, Danilo.