Ekso Bionics Holdings, Inc.

Greetings and welcome to the ExoBionics second quarter 2025 financial results conference call. At this time, all participants are in a listen-only 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. It is now my pleasure to introduce your host, Stephen Kilmore, Investor Relations. Thank you. You may begin.

Thank you, operator, and good afternoon, everyone. Earlier today, XO Bionics released financial results for the second quarter ended June 30, 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-looking 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 or operational expectations, our ability to close on delayed customer sales, 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. EXO 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 XO Bionics 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 will now turn the call over to Jerome.

Thank you, Steve. Good afternoon, everyone, and welcome to our second quarter 2025 conference call. On behalf of the management team and everyone at ExoBionics, I would like to thank you for your interest in our company. And for those of you 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. ExoDesigns 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 impairment 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 product consists mainly of our ExoNR device, which is a wearable robotic exoskeleton specifically designed to be used in a rehabilitation setting to assist individuals recovering from both acute and chronic conditions. And our newer ExoIndigo personal device is 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 the sale of support and maintenance contracts. I will turn this 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 of the numbers I referred to have been rounded, so they're approximate. As we mentioned in today's press release, we experienced abnormal weakness in the second quarter of 2025. The company recorded revenue of $2.1 million for the period, compared to $5 million for the second quarter of 2024. This was primarily driven by what we believe are short-term delays in completing certain multi-device enterprise health sales and was offset partially by higher ExoIndigo personal device sales. As Scott will discuss shortly, we're working to get back on track for the second half of the year and beyond. Gross profit for the second quarter was $800,000, representing a gross margin of approximately 40% compared to a gross profit of $2.6 million and a gross margin of 53% for the same period of 2024. The change in gross profit was driven by a decrease in revenues associated with our enterprise health devices, partially offset by an increase in revenues associated with ExoIndigo personal devices and a reduction in service costs. The decrease in gross margin was primarily driven by fixed cost of goods in relation to the decrease of enterprise health device sales lower margin sales related to increased volume through distribution and an increase in shipping costs, partially offset by improved margins in service. Operating expenses for the second quarter of 2025, which consists of R&D, G&A, and sales and marketing expenses, were $4.8 million, a 4% improvement from $5 million for the second quarter of 2024. Net loss applicable to common stockholders for the 2025 second quarter was $2.7 million or $1.24 per basic and diluted share, compared to a net loss of $2.4 million or $1.99 per basic and diluted share for the same period of 2024. As of June 30, 2025, the company had cash and restricted cash of $5.2 million, That is it for my summary of our second 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.

Thank you, Jerome, and good afternoon, everyone. I'll cut to the chase. Our second quarter revenues were disappointing. But as Jerome noted, we believe this was a temporary setback driven mostly by short-term delays in completing two significant multi-unit enterprise health device sales that were anticipated in the quarter. As we discussed on our last call, we've also had a small percentage of U.S. customers impacted by loss of federal grants and or concerns related to economic uncertainties who have pushed their purchases into later 2025 or early 2026. Nevertheless, we don't believe the second quarter revenue shortfall truly reflects the health of our current business nor our prospects for the future. Several reasons are bolstering our confidence that we can get back on track for the second half of the year and beyond. First, we're confident that we will be able to close a significant portion of the deferred multi-device enterprise health sales prior to year end. At the same time, we are capitalizing on continued enterprise health customer demand by recently signing a master subscription agreement with another major integrated delivery network. And to help support that, we are constantly looking for ways to help us raise awareness, acceptance, and adoption of our exoskeleton technology within the market. A good recent example is our launch of ExoUniversity, a new virtual platform providing continuing education courses to physical therapists and physical therapist assistants across the country. While we believe ExoUniversity can generate incremental revenue for us, the greater value is represented through the program's ability to educate the neurological physical therapy community on a wide range of relevant topics and ever-evolving patient treatment options. I'm happy to share that we've already delivered our first official CEU certification to a Connecticut-based PT, coincidentally via a course entitled Benefits of a Personal Exoskeleton. In addition, The general trend of lower but steady growth in our more mature legacy enterprise health business is being increasingly counterweighted by the growth in personal health from sales of the XO Indigo Personal. To put that into perspective, despite total revenues for the first six months of 2025 being down 38% compared to the same period in 2024, personal health product revenues grew by more than 50%. As I've said in the past, while the majority of our revenue in 2025 is expected to still come from enterprise health, we believe that we will continue to see increasing contribution from our personal health products during the remainder of the year and beyond. There are a few things driving that. First, as we've discussed in the past, CMS established pricing determination for our Indigo Personal Exoskeleton in Q2 2024. This regulatory change created a significant opportunity to help Medicare enrollees living with a spinal cord injury by removing what has historically been a primary barrier to accessing 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 fee schedule listing. Additionally, we began working closely with our extensive network of neurorehabilitation partners across the country, focused on educational 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. One of the important changes we made was to engage Priya Healthcare, one of the leaders in market access services, which has been instrumental in the successful commercialization of over 300 medical devices. We are confident we made the right choice in partnering with Priya. Priya has been providing us with invaluable strategic guidance, leveraging its expertise to help us navigate the complexities of coding, coverage, and payment. thereby allowing us to more effectively put XO Indigo Personal within reach of individuals who need this potentially life-changing mobility-enhancing technology. On the distribution front, I'm pleased to report that in the second quarter, we received the first order from National Seating and Mobility, or NSM, our exclusive XO Indigo Personal device distributor within the complex rehabilitation technology, or CRT, industry in the United States. Also in Q2, we named Bionic P&O, a leading national provider of prosthetic and orthotic solutions, as our first O&P distributor. We're excited that they submitted an additional three patient claims for the Indigo Personal Exoskeleton to Medicare in the second quarter. Altogether, with Exo's focused marketing efforts, we've now developed a pipeline of more than 45 Medicare beneficiaries that we believe are qualified candidates for ExoIndigo Personal in 2025. That's up more than 200% from where we were at the end of 2024. As a reminder, 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. And we again caution that we cannot guarantee that all of our pipeline will result in new claims submissions occur before the end of this year or ultimately be paid. Finally, we continue to innovate. In mid-May, we announced that XO joined a select group of medical device companies in the NVIDIA Connect program. NVIDIA Connect brings together emerging and established technology companies to accelerate product development and increase cost efficiency. Members gain specialized training, priority engineering support, and exclusive access to NVIDIA's advanced development kits, GPU platforms, and global ecosystem, helping facilitate the program members' ability to deliver next-generation solutions in AI and high-performance computing. While we believe our advanced exoskeleton technology platforms are already state-of-the-art, We're working to use the valuable tools and resources provided through this prestigious NVIDIA program to support a new strategic initiative to build a proprietary foundation model for human motion in physical rehabilitation and to help develop and integrate related new AI capabilities across our portfolio of enterprise health and personal health devices. This aligns squarely with our mission of improving health and quality of life with advanced robotics designed to enhance, amplify, and restore human function. And we are walking the talk. Indeed, just 34 calendar days after announcing our acceptance into the NVIDIA Connect program, we revealed initial proof of concept in the form of a new AI voice agent designed for intelligent control of our legacy XO and R device. XO voice agent is being implemented on NVIDIA Jetson Orin Nano hardware developed with the NVIDIA Jetpack SDK and OpenAI tools for voice recognition. The proof of concept is configured as an edge AI system, which can run with or without connection to the cloud. While this initial proof of concept was with the XONR, integration of new AI powered capabilities into both our enterprise and personal health devices is a key pillar of our growth strategy. We are in the fortunate and enviable position of already having a repository consisting of approximately 350,000 patient sessions and over 15 million step-by-step data points. And that is growing by an additional 60,000 patient steps on average every day. The aim is to develop AI tools designed to leverage this proprietary data in order to help transform human-robot interaction. In other words, while the AI hardware is coming from NVIDIA and others, and much of the software is open source, we believe our large and growing database sets us apart, making us uniquely positioned to utilize AI to advance exoskeleton technology platforms. In summary, the second quarter was abnormally weak from a revenue perspective, and that was primarily due to what we believe are short-term delays in completing some multi-device enterprise health sales, and we're working diligently to get back on track for the second half of the year and beyond. At the same time, as we work to capture deferred sales and capitalize on anticipated customer demand in the legacy enterprise health market, We are continuing to build and execute on a scalable go-to-market strategy for Indigo Personal, supported by established and new industry-leading DME, O&P, and market access partners that is driving an increased contribution from our personal health products, which grew by more than 50% year-over-year in the first half of 2025. Finally, we've launched a strategic initiative aimed at building a proprietary foundation model for human motion in physical rehabilitation. and to help develop and integrate related new AI capabilities across our portfolio of enterprise health and personal health devices. We believe AI is a necessary component to enable broader adoption of exoskeletons for personal use. This ends our prepared remarks for today. And with that, we are happy to take any questions you might have. Operator?

Thank you. We will now be conducting a question and answer session. If you would 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 the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Ben Hayer with Lake Street. Please proceed with your question.

Good afternoon, gentlemen. Thanks for taking the questions. First off, for me, on the deferred sales that you guys have on the enterprise health side, it sounds like a lot of them are potentially going to fall into the current quarter. Can you quantify how much is deferred there, how much you expect kind of the back half of the year?

Hello, Ben. Thanks for your question. Yeah, we – As we had indicated, we had two multi-unit device sales that fell out of Q2. And to shed a little bit more light on those, there were two. One was an international order that was delayed due to some regulatory challenges that we expect to occur in this, this calendar year. We have a strong belief that that will happen, you know, within 2025. And the other was a North American IDN. This was a sizable multi-unit order that was comprised of renewals as well as new hospitals coming online. And that we believe will occur in the, third quarter and the quarter that we're in today. And that one is, you know, in the million-dollar range. And the other, you know, between the two is about $1.4 million. Okay.

Got it. That's definitely helpful. And then on the Indigo personal, I know that's obviously grown at a faster rate than you expect the enterprise health business to grow. And, you know, eventually they'll overtake the enterprise health business. Do you have any sense on, you know, what's your thinking, I guess, on when that sort of flip could happen?

That's a great question and something that we've been, you know, working really hard on as a management team, as a company. You know, all of the work that we've done internally with our own resources, as well as working with Bria Healthcare, the onboarding of our two new distribution partners in the space for scalable go-to-market strategy, the work we've done to increase the marketing efforts to continue to increase leads and build pipeline demand, as well as the business development work we continue to do, looking for other national O&P providers to work with you know, we're already beginning to see the positive impacts of that work. And in addition to that, we're doing a lot of work within the VA systems to, you know, increase those opportunities as well as workers' compensation. So as we're looking at that sort of blended ecosystem and we look back at 2024, you know, that represented, approximately 10% of our revenue for the company. And, you know, as we're looking at 2025, we believe that that will be closer to 25% contribution to, you know, to our revenue, total revenue. And, you know, as we move forward and cross into, you know, 2027, we believe that it will begin to overtake what we're seeing on Enterprise.

Okay, so a couple years out, maybe 18 months from today. That's good. So then just kind of thinking about Priya and just kind of curious, I mean, it does sound like you've really nailed down the patient profile. You know, how is nailing down the process come along? You know, have you been before any more ALJs? learn anything new that's worth noting, kind of anything on that front?

Yeah, I mean, that remains an area of focus for us as we work through appeals process. We have a couple of patient claims that will go before ALJ in Q3, in Q2. We had one that went before ALJ that was remanded to a lower level in CMS and ultimately approved. So we are seeing positive outcomes. The important part here is that we are being reaffirmed that these are medically necessary. So they are getting reimbursed when we're able to you know, get in front of these administrative law judges, they can, you know, really understand this a bit better. And again, you know, this is a ramp up period. So what we're being very cautious with and working with our DME partners and O&P partners is to ensure that, you know, we're level setting expectations with patients and healthcare providers and ensuring that, you know, You know, we're putting forth the best claims possible so that we can pave a way to these happening on a more routine basis. But with any new process, it takes a little time to crime it. But we believe that we're starting to make some good progress.

Okay, got it. And then lastly for me on exo-university, is that going to be something that is solely focused on exoskeletons, or are there additional modules or CE content that we're going to be putting in there?

Yeah, great question. So we see that as just an area that can really focus in on exoskeletons uh, on neuro rehabilitation and our, you know, our first courses are centered more around exoskeleton technology, but, uh, we expect that they'll run the gamut in the latest in, uh, you know, uh, neuro rehabilitation process and procedures that, uh, that we're seeing out there. We have, uh, you know, a, a rich population of, uh, neuro pts uh that uh that are part of our ecosystem uh that are contributors um as we're developing these materials so you know we have uh a lot to pull from as we're uh putting these uh these courses together so you know for us it's it's it's purely about education and you know if we can uh show uh demonstrate uh and expose more people to what's possible with technology, all different types of technology, than we believe it benefits the entire industry.

Okay. Got it. Thanks for all the color, gentlemen, and that's it for me.

Thanks, Ben. Thank you. Our next question comes from the line of Swayam Pakula Ramakath with HC Wainwright. Please proceed with your question.

Thank you. Good afternoon, Scott and Jerome. Sorry, I've been on the call on and off. So just to understand what's, you know, the new collaborations that you generated, you know, to ensure smooth commercialization of the personal devices, how is that working out? And do you, you know, when do you think that the growth will be meaningful based on these new relationships, just on the personal before we get into the enterprise. I have a couple of questions there.

Sure. Thanks, RK. You know, as we talked about, you know, today on our comments and, you know, as I had previously said, we're working diligently with, with industry partners, uh, Priya on the, you know, just helping us navigate the nuances of, of market access and working with, uh, with CMS and not only us, but also, uh, being a resource for, um, our, uh, partners for our distribution partners, whether, you know, on the CRT side or on the O and P, uh, side, you know, helping with the appeals process and really navigate, um, and help us sort of build this new road brick by brick. So that has been helping us tremendously. The partnerships that we have developed with Bionic P&O and with NSM and with other large O&P providers that we're also building relationships with, we see that progressing quarter over quarter You know, what starts slow with, you know, initial discovery and then, you know, getting those first patients through and initial claims submitted to more claims submitted the following quarter, we're seeing the progression. You know, we're going from one to a handful to more through these, you know, leads that we've been developing, you know, have been ones that EXO has created, but we're already beginning to see a bit of a shift through the ecosystem where, you know, as we're out doing trainings and onboardings, you know, out at the various rehabilitation sites, you know, the sites themselves have patients that they want to bring in. These are our existing you know, maybe legacy customers who are using, who have used our technology for years, where the training happens, or identifying, beginning to identify some individuals who could use the technology, as well as, you know, our distribution partners through their own connections are, we see this as a lead source that's just beginning to develop. So, You know, this truly is what we believe is a scalable process, working with best-in-breed providers, all focused on what we do best to bring this technology out to the people who can use it most.

Okay, great. And then, you know, on the enterprise sales side, What do you think needs to be done immediately to manage, to get back to growth, and how long do you think it will take?

Yeah, so, yeah, as I had said, we are certainly disappointed with the results of Q2, but Um, and to get, uh, to get back on track, um, the, I guess the good news in that is that we had a number of, of, uh, devices and, and two large deals in particular that are still on the table, very much on the table and the North American, um, the North American IDN, uh, which was over a million dollars, um, you know, in Q2, which we believe has potential for, um, you know, even more in Q3. We are, you know, bullish that we could pull that in Q3, so we don't view that as a lost deal, rather as one that's deferred. And, you know, we're continuing to work in our rich pipeline that we've developed, you know, over the years to help enterprise customers who maybe have had some budget interruptions, whether it's a loss of a federal grant or whether it's just concerns in their budget, we're working with them to identify potentially another option, other options for being able to onboard the technology that maybe isn't leveraging a capital budget or leveraging a grant. We are actually working with a new third party financial partner that can also help these individuals switch this into their operational budgets from their capital budgets. So we are, I will say, pulling out all the stops to help the enterprise customers who want to use this technology to treat patients still have the wherewithal to do that, even with some concerns over you know, over their 2025 budgets.

No, thanks for that. And the last question from me is, you know, so far we've been talking about enterprise, potential enterprise clients who are being impacted by the loss of federal grants. The corollary question is, like, how many of them, how many of the current enterprise clients enterprise clients are actually utilizing federal grants and how sure are we that those things will get extended over the next contract period?

In general, we don't have a magic number on how many hospitals go for federal grants for this technology. I think, you know, if we look, you know, historically, from a pure revenue standpoint in North America, you know, I would approximate 10% of our enterprise customers rely on federal or outside grants to provide to fund their technology, and I think that's a conservative estimate.

Okay. Thanks for taking all my questions.

Thank you, RK.

Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to CEO Scott Davis for closing remarks.

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

Thank you, and this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. Have a great day.