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spk00: Good afternoon, and welcome to Hyperfine's third quarter 2023 earnings conference call. Currently, all participants are on a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Marissa Bice from Gilmartin Group for introductory disclosures.
spk03: Great. Thank you for joining today's call. Earlier today, Hyperfine Inc. released financial results for the quarter ended September 30, 2023. A copy of the press release is available on the company's website, as well as sec.gov. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, expense management, expectations for hiring, training and adoption, growth in our organization, market opportunity, commercial and international expansion, regulatory approvals, and product development are based upon our 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 our business, please refer to the risks factor section of our latest periodic filing with the Securities and Exchange Commission. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 9, 2023. Hyperfine, Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that, I will turn the call over to Maria Sainz, President and Chief Executive Officer.
spk04: Good afternoon, and thank you all for joining us. On the call with me today is our Chief Administrative Officer and Chief Financial Officer, Brett Hale. In the third quarter, we saw the benefits of our focus in the U.S. and the realization of our new pricing model, resulting in an improvement in the financial profile of our business. We achieved revenue of $2.3 million, plus compared to the same period last year, an up 55% year to date. We sell six subsystems, predominantly U.S. direct sales, driving record, average selling price, and gross margin. As we have mentioned in the past, commercializing ultra-low-field MR brain imaging requires us to develop a new capital equipment imaging market. Our technology makes brain imaging possible at multiple sites of care, from critical care units to neurology offices, anytime a patient can benefit. We are still learning the dynamics of the selling cycle and advancing through many firsts, with every deal being somewhat unique considering our customers are early adopters of this new imaging paradigm. This involves adoption of new technology and new workflows. We also continue to closely manage our cash use with controlled spending while investing in our three strategic pillars, innovation, clinical evidence, and commercialization. Exiting the third quarter, I'm very proud of the execution of the team, transforming our financial profile and laying a strong foundation for the future of our business. Innovation continues to be an area of great focus as we pursue development projects across all elements of the SOOP system. In addition to our many year-to-date improvements, we have a strong cadence of enhancements in hardware and AI-powered software plans to further advance the image quality, clinical utility, and application of ultra-low-field MRI. On our last call, we mentioned our plan to launch another software upgrade by early 2024. Today, I am pleased to share that we have already received FDA clearance for this software update and plan to launch it before the end of the year, a couple of months ahead of schedule. This is our eighth FDA clearance since our initial system launch in 2020. It includes proprietary AI and deep learning algorithms in the DWI sequence, adding significant value to the clinical utility of our platform. This expands our AI denoising capabilities by incorporating advanced image-cause processing into the DWI sequence. The system's other sequences, T1, T2, and FLIR, previously benefited from this AI feature. Denoising enables a crisper image that potentially helps clinicians more accurately diagnose, further treat, and monitor patients undergoing brain imaging. As we move forward, we are continuously investing in improving our AI-powered imaging quality and usability, leveraging each imaging-focused software release to further improve subsystem performance. As a reminder, the process of launching software updates is straightforward for our team and customers, with most U.S. commercial subsystems operating app-connected sites, where the new updates are downloaded remotely without the need for field team or technician intervention. We look forward to updating you on our innovation roadmap for 2024 on our next call. Now turning to clinical evidence, I would like to update you on the work we are doing on different studies across the breadth of current and future applications for our platform technology. We continue to collaborate with leading US and international institutions on multiple scientific research and clinical studies that support our current and future potential clinical use cases. Relevant to our beachhead use case today, imaging patients in critical care, I'm excited to share that data from the SAFE MRI ECMO study was recently presented at the APELSO meeting in Seoul, South Korea. The study evaluated the benefits of using portable MR brain imaging for monitoring patients on ECMO which is advanced life support, highlighting its post-operative ischemic stroke detection capabilities compared to CT scans, especially in spotting ischemic injuries early. The study further underscores the role of MR-based neuroimaging in acute brain injury detection and the potential for allowing improvement in neurological outcomes. In stroke, we're pleased with the pace of involvement and physician excitement in our action PMR study, a multi-center evaluation to assess the use of soup system in detecting acute ischemic stroke. We remain bullish about this opportunity and look forward to sharing updates in the coming quarters. Looking further ahead, I want to touch on the large new opportunity for the MRI industry in the treatment of Alzheimer's. We believe the portable soup system can offer a highly differentiated, cost-effective, and accessible solution for this new use case. We have committed to conducting a clinical feasibility study led by a soup system key opinion leader who also has a passion for Alzheimer's. The soup system will be placed in the infusion center workflow for the feasibility study, rendering the care navigation of these patients more efficient. We're preparing to begin enrollment in the next couple of months. We have also appointed an Alzheimer's advisory committee comprised of law leaders to help shape our efforts in this area. Turning to commercialization. As our U.S. commercial team gains tenure and experience selling the soup system, They're driving a broader and more robust deal pipeline quarter after quarter. U.S. deals dominated our revenue makeup in the quarter, including the completion of our multi-system sale to the Barnes-Stewart healthcare system we had previously announced. As we have mentioned before, our sales cycle is six to nine months. We implemented a new pricing strategy in early 2023. The heavy U.S. mix we drove in the third quarter, coupled with the realization of our higher U.S. pricing, translated into a record overall ASP and a record gross margin. We are in the early days of building this new market of ultra-low-field brain engines. We are still navigating and understanding the dynamics of the sales cycle and often face multiple reviews and approvals from clinical, new technology, MR safety, legal, IT, and administrative constituents unique to each account, resulting in timeline variability. As I mentioned in our last call, we recently iterated the makeup of our US field force and have established three dedicated teams focused on selling, implementation, and utilization. We are pleased with this new structure and hope to drive greater sales volume and strong reference sites as our teams mature in their roles. As I complete my first year in the CEO role at Hyperfine, I am very pleased to report on the increasing interest in our technology across many different institutions, the strong positive feedback on our images and clinical utility, and the record number of image reviews and demos that we are now running. These are all encouraging indicators strengthening our commercial foundation. Before I turn the line over to Greg, I'm proud of the progress we're making and the continued focus we have on spending discipline and gross margin. Our focus remains on operating lean while investing in innovation, clinical evidence, and commercialization. We continue to see a cash runway for the business through 2025. I will now turn the call over to Fred to review our third quarter performance and discuss the financial outlook in greater detail.
spk02: Thank you, Maria. Turning to our financial results for the third quarter of 2023. Revenue for the quarter ended September 30th, 2023 was 2.3 million, flat compared to the third quarter of 2022. Year to date, we've generated 8.3 million in revenue, of 55% from the first nine months of 2022. Gross profit for the third quarter of 2023 was $1.1 million compared to $0.7 million in the third quarter of 2022 and reflecting a record 48% gross margin. Year to date, we have a 45% gross margin of 34 percentage points from the 11% for the first nine months of 2022. R&D expenses for the third quarter of 2023 were $5.7 million compared to $7.3 million in the third quarter of 2022. Sales, general, and administrative expenses for the third quarter of 2023 were $7.1 million compared to $6.6 million in the third quarter of 2022. Year-to-date total OPEX of $40.2 million is down 34% from $60.9 million in the first nine months of 2022. Net loss for the third quarter was $10.8 million, equating to a net loss of $0.15 per share as compared to a net loss of $13.2 million or a net loss of $0.19 per share for the same period of the prior year. Year-to-date net loss of $33.6 million is down 44% from $60.1 million in the first nine months of 2022. Our cash burn in the third quarter was $8.5 million, and as of September 30, 2023, we have $85.4 million in cash and cash equivalents on our balance sheet. Year-to-date, our cash burn of $32 million is down 43% from $56 million in the first nine months of 2022. Turning to our 2023 outlook, we are narrowing our full-year revenue expectations to a range of $11 to $13 million based on our early Q4 closings and the progress in our pipeline. Looking at gross margin for the year, we are narrowing our range to 44 to 46% as we grow and realize higher average food system pricing. We are very pleased to be driving healthy margins in our business, even at small scale. And lastly, we are narrowing our total cash burn expectations to 41 to 44 million for the full year 2023. This incorporates an expectation for continued investment in R&D and substantially streamlined investments in SG&A versus history, while we maintain customer-facing resources to continue to drive adoption and growth. We will continue to focus on our three strategic pillars and maintain spending discipline, maintaining enough cash to fund the business through 2025. We are excited about the momentum we are building for the remainder of the year and beyond, and we are pleased to have the cash and flexibility to invest in the right areas for continuous group system adoption. At this point, I'd like to turn the call back to Maria for closing comments.
spk04: Thank you, Brett. I'm proud of the progress the HyperFind team has made so far this year, and I remain very optimistic as to what this team can deliver. With that, I want to thank you for your time and open the line up for questions.
spk00: Thank you. If you'd like to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself from the queue, press the pound key. Our first question comes from Neil Chatterjee with B. Reilly. Your line is open.
spk01: Hey, guys. Thanks for taking the questions. Good afternoon. Can you hear me okay?
spk04: Good afternoon. Yes, I can hear you fine.
spk01: Great. Perfect. Just maybe just starting out just on the sales funnel, just Curious if you have any more color and how that's progressing as we kind of get closer to exiting of the year and getting it to 2024 and then just, you know, with the latest software update, you know, how might that help, you know, with the funnel and just future uptake?
spk04: Sure. So, as we just said, we are feeling positive about the early traction with the breadth of the pipeline. We do have more tenured and more experienced reps every quarter that we go by, and that continues to drive sort of the good traction and progress on our pipeline. We have announced the clearance of the new software, but we haven't yet launched it. We're taking a little bit of a different stance this time in which we're doing an early access program with few customers here these weeks to make sure we get all of the feedback so that we can launch with more testimonials and more meat on the bone. So you should expect the release for all customers sort of very early into the new year. So from an innovation perspective, that is going to really drive nice things. As we said, there is enhancements in DWI, which is really the king and the queen sequence, especially in the stroke application, but it also has a nice set of features around usability that I think are going to be well appreciated by existing customers to continue to reinforce usage and by new customers that are contemplating acquiring the system.
spk01: Great. Thanks for that. Just on Alzheimer's, any update on kind of the progress there? I think you were planning for some early feasibility studies, you know, with current swoop users. You know, any update there and any updated thoughts on that potential opportunity?
spk04: Sure. So we continue to be really bullish about that because we believe access and ease of getting these scans is going to really drive a lot of the efficiency and how those patients are going to navigate their way between neurology infusion sites and imaging location. And we are even more pleased that what we're doing is really following the very strong interest that has been formulated to us by some of the physicians that know our system and what it can do. So we're going to start early visibility by the end of this year with one of those aficionados or KOLs that is also someone very involved in Alzheimer's treatment. And as I said in the prepared remarks, what we're doing is trying to place our subsystem in the workflow of the infusion of the drug to make it a lot more convenient for the patient. And the idea is going to be how this really helps assess the risk for these patients. But early flexibility is something that we expect to start in the next couple of months.
spk01: Great. That's it for me. Thank you. Thanks.
spk00: Sure, thank you. Thank you. There are no further questions at this time. I'd like to turn the call over to Maria Sands for any closing remarks.
spk04: Well, thank you for your interest this afternoon, and we look forward to keeping you informed in future calls.
spk00: Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.
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