5/5/2025

speaker
Operator
Conference Operator

Greetings and welcome to the ExoBionics first quarter 2025 financial results conference call. At this time, all participants are in a listening mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stephen Comer of Investor Relations. Thank you. You may begin.

speaker
Stephen Comer
Head of Investor Relations

Thank you, operator, and good afternoon, everyone. Earlier today, ExoBionics released financial results for the first quarter and in March 31st, 2025. A copy of the press release is available on our website. I would like to point out that management will make statements during this call that include forward-linking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including statements regarding our business strategy, future financial performance or operational expectations, or our expectations of the regulatory landscape governing our products and operations, are based upon management's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with the company's businesses, please see its filings with the Securities and Exchange Commission. EXCO disclaims any obligation, except as required by law, to update or revise any financial or operational projections, its regulatory outlook, or other forward-looking statements, whether because of new information, future events, or otherwise. Any forward-looking statements made on this call speak only as of the date of this call. Representing ExcoBionics today are Scott Davis, our Chief Executive Officer, Jerome Wong, our Chief Financial Officer, and Jason Jones, our Chief Operating Officer. With that said, I'll now turn the call over to Jerome. Thank you, Steve.

speaker
Jerome Wong
Chief Financial Officer

Good afternoon, everyone, and welcome to our first quarter 2025 conference call. On behalf of the management team and everyone at ExcoBionics, I would like to thank you for your interest in our company, and for those who are shareholders, we appreciate your support. For the benefit of those who are new to the ExoBionics story, I would like to take a moment to summarize our business. Exo designs, develops, and markets exoskeleton products that augment human strength, endurance, and mobility. The primary end market for exoskeleton technology is healthcare, where our technology primarily serves people with physical disabilities or impairments in both physical rehabilitation and mobility. We operate as one operating and reportable segment with two markets. Enterprise Health and Personal Health. Our legacy Enterprise Health products consist mainly of our ExoNR device, which is our wearable robotic exoskeleton specifically designed to be used in a rehabilitation setting to assist individuals recovering from both acute and chronic conditions. And our ExoIndigo personal device, a wearable lower extremity powered exoskeleton that enables certain individuals living with spinal cord injuries with the ability to stand and walk independently. Both products also include support and maintenance contracts. I will turn the call over to Scott in a moment for an update on our commercial activities and growth plans. However, before I do, I would like to provide a brief summary of our financial results. To streamline things, all the numbers I referred to have been rounded, so they are approximate. The company recorded revenue of $3.4 million in the first quarter of 2025, compared to $3.8 million for the same period in 2024. This reduction was due to capital budget impact from certain inpatient rehabilitation facilities, or IRFs, related to our XONR Enterprise Health product. Gross profit for the first quarter was $1.8 million, representing a gross margin of approximately 54% compared to a gross profit of $2 million and a gross margin of 52% for the same period of 2024. The change in gross profit was driven by a decrease in revenues enterprise health devices, partially offset by cost savings in supply chain and a reduction in service costs. The increase in gross margin was primarily due to cost savings in supply chain and a reduction in service costs, partially offset by lower margin sales related to increased volume through distribution. Operating expenses for the first quarter of 2025, which consists of R&D, G&A, and sales and marketing expenses were $5.3 million, essentially unchanged from $5.2 million for the first quarter of 2024. Net loss applicable to common stockholders for the 2025 first quarter was $2.9 million or 12 cents per basic and diluted share compared to a net loss of $3.4 million or 20 cents per basic and diluted share for the same period of 2024. For the fourth quarter of 2025, the company used $2 million net cash in operations compared to $3.5 million for the same period in 2025. As of March 31st, 2025, the company had cash and restricted cash of $8.1 million up from $6.5 million as of the end of 2024. That's it for my summary of our first quarter 2025 results. Please see our form 10Q filed earlier today for further details regarding the results. I'll now turn the call over to Scott.

speaker
Scott Davis
Chief Executive Officer

Thank you, Jerome. While we saw some softness in our legacy enterprise business in Q1, as we had several customers whose capital budgets were at least temporarily impacted by reactions to macroeconomic uncertainties, that was partially offset by good growth from our ExoIndigo Personal. As we have discussed in the past, CMS established pricing determination for our Indigo Personal exoskeleton in Q2 of 2024. This regulatory change created a significant opportunity to help Medicare enrollees living with a spinal cord injury by removing what had historically been a primary barrier to assessing our exoskeleton. Accordingly, we immediately set out to establish a go-to-market strategy aimed at notifying as many early physician and provider adopters as possible of the new CMS benefit category redetermination and the fee schedule listing. Additionally, we began working closely with our extensive network of neurorehabilitation partners across the country, focused on education efforts and on appropriate patient selection and process for patients prescribed an ExoIndigo Personal for the home and community setting. With that early work largely completed, we then shifted our primary focus from building awareness and providing customer education to advancing our scalable go-to-market strategy for the personal channel. As we discussed on our Q4 call just a few weeks ago, one of the key changes we made was to engage PREA Healthcare, one of the leaders in market access services, which has been instrumental in the successful commercialization of over 300 medical devices. As a quick status update, we also recently announced bringing on Bionic P&O as a new and our first O&P distributor. And we're excited to report that they already submitted their first patient claim for the indigo personal exoskeleton to Medicare in Q1. And with EXO's focused marketing efforts, we've now developed a pipeline of more than 35 Medicare beneficiaries that we believe are qualified candidates for EXO indigo personal in 2025. That's up 37% from where we were on our Q4 call in early March. Factors considered for the candidates to be represented in our pipeline include, among other things, Medicare enrollment, an appropriate indication for use, and medical necessity. Moving forward, we believe working with our growing distribution network and leveraging our new relationship with PREA throughout the claims process places qualified candidates in a good position of having their claims successfully processed. That said, and as we cautioned on our last call, we obviously cannot guarantee that all of our pipeline will result in new claims submissions occur within this timeframe or ultimately be paid. Nevertheless, we believe that we can leverage our experience over the past year and the capabilities and reach of our new partners to navigate the complexities of coding, coverage, and payment, which will allow us to more effectively put ExoIndigo Personal within reach of the individuals who need this potentially life-changing mobility-enhancing technology. In summary, with a strong focus on business development activities, XO is building what we believe is a more scalable go-to-market strategy for our XO Indigo Personal. This is exemplified by our most recent separate but clearly related moves, where we named National Seating and Mobility as the company's exclusive distributor of the device within the U.S. complex rehabilitation technology, or CRT, industry. And as I mentioned a moment ago, our most recent engagement with Bionic P&O as a non-exclusive distributor of Indigo Personal within the orthotics and prosthetics industry. We believe that NSM and Bionic P&O will significantly broaden access to our portable exoskeleton device for individuals living with spinal cord injuries and longer-term perhaps other mobility challenges across the United States. NSM brings a network of over 180 locations and more than 2,400 team members who support more than 250,000 mobility solutions each year. And Bionic P&O, a leading national provider of prosthetic and orthotic solutions, is an ABC accredited independent clinical practice group that now operates across 12 states. While the majority of our revenue in 2025 will still come from enterprise health, we believe with our significant investment in these scalable programs, we will continue to see rapidly increasing contribution from our personal health products throughout 2025. In summary, the first quarter was another period of significant progress for exobionics, marked by a growing shift between legacy enterprise and newer personal revenue contributions. Good gross margins, lower cash burn, a stronger balance sheet, a growing pipeline of Medicare beneficiaries, and what we believe are excellent candidates for Indigo Personal in 2025. and the continued building of a scalable go-to-market strategy for Indigo Personal, supported by both established and new industry-leading DME, O&P, and market access partners. This ends our prepared remarks for today. With that, we're happy to take any questions that you might have. Operator?

speaker
Operator
Conference Operator

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while I pull for questions. Our first question here is from Ben Hainer from Leak Street Capital Markets. Please go ahead.

speaker
Ben Hainer
Analyst, Leak Street Capital Markets

Good afternoon, gentlemen. Thanks for taking the questions. First off for me, you know, now that you've got the O&P channel covered with bionics, or at least initially covered, and you have the complex rehabilitation therapy channel, the traditional, you know, kind of Medicare DME, along with the, you know, kind of post-acute rehab clinics on the more enterprise side, how should investors kind of think about where, the patients will fall this year in terms of the indigo personal and kind of, you know, is it kind of a third, a third, a third with CRT, O&P, and the traditional channel? And then what do you expect from your enterprise folks?

speaker
Scott Davis
Chief Executive Officer

Okay. Yeah, great question, Ben. Thank you. Again, the majority of our business historically has come out of our enterprise health product portfolio. And in general, as we move through 2025, we still expect that enterprise product will represent the large majority of what we do. 75% to 80% of our business represented by that product category. Moving into the personal product, again, as we have worked to develop, you know, our initial channels into that segment and we've really scaled up our market access capabilities and we've driven a good pipeline, we do expect a solid contribution growing quarter over quarter as we move through the year. with really the balance of our business represented from that segment. As far as how that falls between CRT and O&P space, I think there's a bit more of a familiarity in the O&P space. The product sort of lends itself a little bit more to reimbursement through O&P providers. However, There's been a big investment with NSM in this space. So we do expect that as the year progresses, we'll see a good contribution from there as well. So how that actually falls as we move through the year, we're uncertain of. But, you know, it could be as much as 50-50. It could be a little less. We just won't know until that program really starts to wrap up. on the CRC side.

speaker
Ben Hainer
Analyst, Leak Street Capital Markets

Okay, that's fair enough. And then, you know, with PREA, I guess, any more color on how things are going there? Are you getting the sense of, you know, what's kind of a no-go submission if you don't have certain documentation or, you know, things of that nature that you need or don't need and kind of coming up with the knowledge that you need to have more successful claims down the road?

speaker
Scott Davis
Chief Executive Officer

Yeah, we had learned from, you know, from the claims that we've submitted, you know, past claims. And, you know, we've had a claim that ended up in ALJ, which gave us a very clear indication of perhaps what they were looking for. And, you know, we believe that what we've put together right now as far as the requirements for what we consider to be a solid claim or successful claim. And we believe we have a strong understanding of that. That being said, you know, there has not been, you know, a definitive set of criteria that have been published through CMS or through the DME-MACS, which indicate what is, you know, their definition of exactly what's required in those claims. However, you know, based on what we've seen, our interactions, and what we learned through our engagement with PREA, we feel like the claims that are being submitted today are very comprehensive and have a high probability of of going through.

speaker
Ben Hainer
Analyst, Leak Street Capital Markets

That's encouraging. And then on kind of the IDN front, you know, it sounds like there's still some budget constraints. Obviously there's a lot of uncertainty out there just generally speaking. Do you have a sense of what, you know, what these folks are looking at on the capital budgeting side later this year or how much of a read through do you have on that sort of part of the business?

speaker
Scott Davis
Chief Executive Officer

Yeah, I mean, so as I had, you know, talked about in previous quarters, we had talked about, you know, 2024 being an off-cycle year for IDNs. We do have a lot of renewals coming up with IDNs in 2025, and those appear to be on track, you know, at the moment. So that, you know, we expect in North America that to be a a solid contribution to our enterprise health business in 2024. We also have a lot of inpatient rehab facilities that, you know, maybe aren't part of, you know, larger health networks, independent, you know, independent hospitals that have capital budgets where we've been working with them for some of them for a years, others for months. Those capital budgets, we've seen a little bit of a softness, certainly in Q1, around that, around economic uncertainties, and we've seen those capital budgets, which were there, disappear rather suddenly. We also have many of our capital customers who receive federal grants for some of this technology. And, you know, the status of those grants is uncertain at the moment as well. So, you know, while we have a strong pipeline, you know, on the enterprise business, you know, we are seeing budgets impacted at least temporarily around some of those purchases. It certainly affected us in Q1. And, you know, it's something that we are, you know, preparing ourselves as we move through, you know, through 2025, that this could be a bit of a longer-term impact. But, you know, to date, we don't have anything definitive that it will be.

speaker
Ben Hainer
Analyst, Leak Street Capital Markets

Okay, got it. And lastly, for me on the You know, gross margin, it's been four to six quarters, then you've been north of 53%, and it looks like you're clearly trending in the right direction there. I mean, is this kind of a new sort of baseline, and as revenues expand from here, you can move gross margin higher with that?

speaker
Scott Davis
Chief Executive Officer

We believe so. The operations team, Jason and the operations team have done just an amazing job as it relates to keeping our costs down, raw material costs, bill material costs on the product. And the impact, we frankly expected margins to be a bit higher. In Q1, it was really just driven by you know, just a lower volume of products that we put out that had an impact to those margins and some of it was mixed to, you know, we had, again, a fair contribution from Europe as well.

speaker
Ben Hainer
Analyst, Leak Street Capital Markets

Got it. Excellent. Well, thanks for taking the questions, guys.

speaker
Scott Davis
Chief Executive Officer

Appreciate it, Ben. Thank you.

speaker
Operator
Conference Operator

Next question here is from Swayampa Gwamek from HC Winwright. Please go ahead.

speaker
Swayampa Gwamek
Analyst, HC Winwright

Thank you. Good afternoon, Scott and Jerome.

speaker
Operator
Conference Operator

Okay, how are you?

speaker
Swayampa Gwamek
Analyst, HC Winwright

Good, good. So just trying to expand a little bit on the two relationships that you built over the last quarter or so. That's the NSM and the BNO, I mean, Bionic BNO. Yes. So when I take a quick look at where their locations are, obviously bionic piano is a smaller set compared to national S&M. What I'm trying to understand is like, will their clientele, them being in certain areas, similar areas in certain geographies, will that be an issue for you or actually that will actually enhance your product in these geographies?

speaker
Scott Davis
Chief Executive Officer

Yeah, so we believe that these partnerships actually enhance our value because of the strength of these organizations. And, you know, they have existing relationships with processing large, you know, numbers of claims, you know, through the DME Max. They are experts, certainly in national seating and mobility. an expert on the mobility, um, uh, side of things with power wheelchairs and, you know, and, and, and high-tech mobility, uh, products. Um, they, uh, understand, you know, how to work with, um, with the patient, with the payers positions around that. And when we look at Bionic, uh, P&O, you know, they are used to dealing with complex, uh, orthotics and, um, you know, they, uh, you know, again, can really help coordinate that experience for that patient in helping them gain what they need from their physician as well as other health care providers and work with the payer to ensure that they have a solid claim. So, you know, they're both geared toward that for national seating and mobility. They're quite a large organization, so maintaining the right – certifications and taxonomy on a state-by-state basis is something that they're working on and building out. As they build out their coverage, they do have full national coverage. As they build that out, the reach will expand with them. Bionic P&O is currently in 12 states. As it turns out, we have a lot of folks that we have that are within our growing pipeline of potential beneficiaries, we have a lot of crossover in their states. We're also continuing to develop the program so that we have good coverage across all 50 states to ensure that individuals who qualify for this technology have a convenient location and a convenient partner to work with. So we do believe that their expertise absolutely helps and facilitate, you know, cleaner and better submissions.

speaker
Swayampa Gwamek
Analyst, HC Winwright

Okay. And then having these relationships, I'm just trying to understand, you know, how much of a help does it give you in terms of your G&A expenses Because, you know, you don't have to have that many feet on the ground, so to speak. But at the same time, how much of that gets neutralized by the amount of pay-away that you'll need to do to these two groups?

speaker
Scott Davis
Chief Executive Officer

Sure. And, you know, again, as we, you know, looked at, you know, the, you know, is this something that we that we do ourselves, do we build this capability in-house or do we leverage experts who are out there? And we made the decision to leverage experts in this space, and that does save us considerably. When you're talking about market access and B2C business, it would require a significant investment in-house for XO to be able to hire the number of people that we would need to be able to process all of these claims, to be able to be a local point of presence as these fitments and screenings are happening. It would be incredibly challenging for us to do that. So by setting up a distribution network You know, this allows us to leverage these much larger organizations that have, you know, wider teams with regional and national coverage. You know, of course, that is at the tradeoff of, you know, now we have, you know, a two-tier, you know, model. So we need to be able to support the margins for our distributors. And through the good work that Jason and his team have been doing in ensuring that we maintain good cost controls on our devices and continually improve our operating efficiency, both inside as well as through outside contract manufacturers, we are, as the volume increases, we expect to be able to maintain adequate margins to be able to support this distribution network and still maintain margins that are within what people are used to seeing from us in those high 50s plus.

speaker
Swayampa Gwamek
Analyst, HC Winwright

Thank you. Thank you, Scott, for taking the questions.

speaker
Operator
Conference Operator

Thanks, RK. This concludes the question and answer session. I'd like to turn the floor back to management for any closing comments.

speaker
Scott Davis
Chief Executive Officer

Thank you, Matt, and thank you to everyone for joining us today. We look forward to updating you as we continue to progress.

speaker
Operator
Conference Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-