Lifeward Ltd.

Good day and welcome to the Q1 2025 Life Forward, Inc. earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Lawless, Chief Financial Officer. Please go ahead.

Thank you, Cindy. Good morning and welcome to Life Forward's first quarter 2025 earnings call. I'm Mike Lawless, Life Forward's Chief Financial Officer, and with me on today's call is Larry Jasinski, our Chief Executive Officer, and Al Magadhar, our Vice President of Finance. Earlier this morning, Life Forward issued a press release detailing financial results for the three months ended March 31, 2025, which along with this call discussed certain non-GAAP information. I would ask you to review the text of our forward-looking statements from this morning's press release. We anticipate making projections during this call, and actual results could differ materially due to several factors, including those outlined in our latest filings with the SEC. A replay will be available shortly after the completion of the call accessible from the dial-in information in today's press release. The archived webcast will be available in the investor relations section of our website. For the benefit of those who may be listening to the replay or the archived webcast, this call was held and recorded on May 15, 2025. Since that date, Life Forward may have made subsequent announcements related to the topics discussed, so please reference the most recent press releases and SEC filings for the most -to-date information. And with that, I'll turn the call over to Larry. Thank you, Mike.

Welcome, everyone. Thank you for being with us today. As we've discussed before, Life Forward is laser-focused on defining long-term access to our life-changing technologies and making meaningful progress on our path towards profitability. We continue to make strides on these objectives in the first quarter, so let me break this down into three focused areas, profitable revenue growth, tight expense control and cash management, and a smooth leadership transition. First, profitable revenue growth. Q1 revenues were $5 million. We have a seasonal business, and we set expectations in Q1 that it will be the slowest of the year. Q1 revenues were down 300,000 -on-year, but 2024 included a block of catch-up revenues for 2023. In reality, the life of business was up -on-year. Mike will go into more detail on this in his section. We have made important progress that will propel growth in the subsequent quarters in the United States, including the FDA clearance of the RELOC 7, our next generation exoskeleton, the first approval of a claim for RELOC 7 by a commercial health insurance company, a partnership with Core Life to drive profitable progress in the workers' compensation segment for RELOC, and expansion of our mild cycle distribution rights, which are highly synergistic for our field sales team. Internationally, the RELOC contract with Barmer in Germany is important both in and of itself, as well as a model for working with other insurers in Germany, and we've expanded partnerships with our Alter-G distributors, including four new business partners. We're excited about the metrics for the coming quarters. Key measurements are we have over 120 qualified RELOC leads in our US pipeline, up over 70% from just two quarters ago. We also have a record number of 36 RELOC rentals underway, primarily in Germany, and these rentals are the leading indicator of future sales. Alter-G is growing with the new NEO line and has grown by 19% and 70% in the last two quarters. These measurements give us confidence in the growth we will see in our business going forward. Second category, type, expense control, and cash management. We have taken multiple actions to reduce expenses through efficiency with the highest cost-consumption standardization on the return on investment of the use of cash. Key elements include headcount, facilities, cost of goods, consolidation of functions into a single operating entity, and operating initiatives. This equates to a Q1 25% reduction in operating loss, and we expect that reductions will accelerate as savings phase in and revenue grows during Q2, 3, and 4. For cash management, a key factor is obtaining improved predictability from the Medicare Administrative Contractors, or the MACs. As we have seen more leads moving through our system, we have worked collaboratively with the MACs for definition that will move our submissions more predictably and quickly through all the MACs in parallel. Based on our recent interactions, it is our understanding that the MACs have agreed on a uniform set of claims data and approval criteria which we believe will enable faster and more consistent claims decisions which will result in more timely payment. We expect to resolve a significant amount of our past claims and a shorter cycle timeline for approval and payment of future claims. And then third, smooth leadership transition. On my last conference call, I announced that I would be retiring from life work mid-year and would be assisting in the transition to a new CEO. The company has built the foundation and has the team required and is in a position to execute. The heart and soul for a sustainable business is in place. Although we will not be discussing additional details on this during the call today, this remains my and the company's intent, and we together are excited about what the future will bring. With that introduction, I'd like to turn it back over to Mike.

Thank you, Larry. I'm going to discuss the results on both a GAAP and non-GAAP basis, which excludes the items listed in the reconciliation tables provided in today's earnings release. We believe the non-GAAP results provide a means for investors to better track the underlying performance of the business. I encourage you to reference the GAAP results and the reconciliation tables as I discuss the first quarter results. Life work reported revenue of $5.0 million in the first quarter of 2025 compared to $5.3 million in the first quarter of 2024. This comparison obscures the underlying operational progress that life was making. As you may recall, a year ago, at the end of the first quarter of 2024, CMS announced the final Medicare pricing for personal exoskeletons. This announcement triggered our ability to recognize revenue for all prior Medicare sales that had been made, whether they took place in 2023 or the first quarter of 2024. The portion of revenue recognized in the first quarter of 2024 derived from Medicare sales in 2023 was about $500,000. On an -to-apples basis, to compare results in the first quarter of 2025 versus the activity that actually took place in the first quarter of 2024 results in a comparison of $5 million of revenue in the first quarter of 2025 versus $4.8 million in the first quarter of 2024. Now I'd like to get into a little more detail about the breakdown of revenue. In the most recent quarter, revenue from sales of former Rewalk Robotics products and services, including Rewalk exoskeletons, myocycles, and restore exosuits was $1.6 million, while revenue from Alter-G products and services was $3.4 million. We experienced significant improvement in Rewalk sales to Medicare beneficiaries with over 10 units placed, a higher quarterly total than any in the past year. The pipeline of qualified leads that we have built over the past 12 months totals over 120 cases and is maturing with a greater proportion of cases reaching the later stages of the claims preparation process that can be converted into placements and sales in the future. We delivered a strong first quarter for the Alter-G product line with growth of 19% versus the first quarter of 2024, driven by continued robust performance from sales to international customers. In fact, we had market demand to sell more units, but we experienced temporary supply constraints due to our transition to our contract manufacturer. Alter-G sales are seasonally the lowest in the first quarter, but in spite of this, we continue to see signs that the US market is firming based on the healthy level of high probability leads in our pipeline. Next, I will discuss pipeline metrics for the Rewalk product line, where we see very positive leading indicators for future growth. Our number of Rewalk cases in process in the United States rose to more than 125 qualified candidates for future claim submissions, up over 70% in the past two quarters, while Germany had 47 cases in process at the end of Q1, up three from the end of 2024. Active rentals also represent an important pipeline metric for Rewalk systems. The current pipeline of active rentals increased by nine in the past quarter to 36 cases, which is broken down with 34 in Germany and two in the US at VHA hospitals. These Rewalk rentals, with some attrition, typically convert to sales within a three- to six-month period. For Alter-G systems, we ended the first quarter with orders for 27 systems and backlog and an active pipeline of high probability leads. Moving to gross margin, in the first quarter of 2025, our gap gross margin was .2% compared to .4% in the first quarter of 2024. On an on-gap basis, adjusted gross margin was .2% of revenue compared to .7% of revenue for the prior year's quarter. The margins in the first quarter of 2025 are below our expectations, primarily due to volume and mix of Rewalk products sold in the quarter, which affected our ability to leverage our fixed overhead costs, combined with lower margins for Alter-G products due to some transitional costs for the move of production to a contract manufacturer. Gap operating expenses were $7.0 million for the first quarter of 2025 compared to $7.9 million in the first quarter of 2024. On a non-gap basis, adjusted operating expenses were $6.7 million compared to $7.3 million for the same periods. This improvement is primarily attributable to the realization of cost savings from the closure of two sites and the integration of Alter-G, as well as lower development costs from the completion of the Rewalk 7 and the Alter-G NEO development programs. Our gap operating loss for the first quarter was $4.9 million compared to $6.5 million in the prior year's quarter. On a non-gap basis, adjusted operating loss was $4.6 million versus $5.5 million for the same periods. We ended the quarter with $5.7 million in cash and equivalents and no debt. Subsequent to the end of the first quarter, we raised proceeds of an additional $500,000 through our ATM facility, which added to our cash balance. With that, I'd like to turn the call back over to Larry for future remarks. Thank you, Mike.

Based on the results of Q1, I reaffirm our guidance of sales between $28 million to $30 million for 2025 and our anticipation that the combined effect for the full year of growing revenue and declining operating expenses will result in a Q4 adjusted operating loss of approximately $1 million. Before we open this up to your questions, I would like to reflect again on what we have accomplished at LifeWord. In this life-changing journey, we have provided approximately 1,000 Rewalk systems spread over five generations of the product. We successfully gained regulatory clearances from the FDA and the EU. To establish and grow this industry, we led the path for the development of government policy and insurance coverage that are essential to enable access for the people who desire to walk again. We have built a business with the Rewalk, the Altra G Neo, and the Mile and Mile Cycle that collectively are nearing $30 million in revenue as a medical technology agent of change that is giving people improved health and better lives. The first quarter, with its progress on Rewalk sales and Altra G sales, improvement in operating performance, and the demonstration of key capabilities that we will require in order to succeed in the future show that we are on the right path and we will achieve steady progress towards our goals. This is only the beginning. So thank you for your time today. I would now like to open the

call up to any questions. Operator?

Yes. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily

to assemble our roster. Our first question comes from Yael

Jen of Laidlaw & Company. Go ahead, please.

Good morning and thanks for taking the questions. We have two here. The first question is that given that you have an international business and you have revenue come over the world, what is your initial assessment in terms of the recent tariff situations? I know it is still not fully settled, but nevertheless, any comments on that? And then I have a follow-up question.

We certainly are well spread out for both terms of supply and revenue across the world. So this is something that we have monitored very carefully. What we have done internally is plan on the supply side for alternatives within market. And so that is a pathway that we have. As the rewalk is primarily produced in Israel, it is not being affected at the same level, and we have been reasonably stable there. And then of course the key question for us is impact on revenue, which we have not yet seen. And our primary business for the rewalk is United States and Germany. It is a little more controlled. We do not have much in Asia. And the Altra G is again primarily an international business with the strongest base in Europe. So we are monitoring it closely and preparing for it.

Okay, great. That is very helpful. Maybe just one more question here, which is that you reiterate the guidelines for the year, the top-line guidance for the year, and the first quarter revenue seems to be slightly lower than some of the expected. So what will be the confidence then to support the hypothesis that the full year revenue would be within the D-range, as you stated earlier?

We expect the first quarter is seasonally always a little low for us because we always have strong Q4s, particularly with the Altra G. But our confidence is very much based on the momentum we see first in the Altra G product line, growing as I said 17 to 90% in the last two quarters. And on the rewalk product line between the depth of leads that we have in the United States, the rentals that we see in Germany, and the addition of a significant partnership with CoreLife plus our first commercial pay are all factors that see this growing. So we see our annual totals unchanged and are very comfortable because we have a pipeline better than anything we've ever had before.

Okay, maybe just squeezing one more, sorry about that. Which is you just mentioned that in fourth quarter, you anticipate a just loss could be around a million dollars, which is certainly a good news compared to the models we have at this point. Again, could you give us a little bit more color for that expectation? Yeah, sure. Yeah,

sure, sure. So I think we sort of articulated that we need to get to a certain break-even revenue run rate in order to be able to get to that level that we want. And with the cost actions that we've taken, particularly the one that was most recently at the end of Q4 when we closed the facility in Fremont and the other small facility that we had from the AlterG acquisition, we've been able to bring down our break-even revenue quite a bit. And so the math, the way to think about it I think is that approaching roughly 10 million a quarter or 40 million in a year should enable us to get to break-even level. And so we anticipate that in by Q4 with the natural growth in the business with the backlog and the lead generation that we're experiencing right now, combined with some of the seasonality which favors the back half of our year's performance, that those factors will all contribute to our revenue growth by Q4. At the same time, we're going to be experiencing continued reduction in our operating expenses. We did not see the full impact of the cost savings in Q1 that we will yield from all of the actions that we've taken just because some of them are kind of phasing in over the course of the first half of this year. So we'll see more benefit in Q2 and beyond as we get through the second half of the year. So it's really a combination of the increase in the revenue combined with the rationalization of our cost structure and the leaner, more efficient cost structure that we're going to have, which is going to result in our ability to really narrow that operating loss.

Okay, great. That's very helpful. I appreciate it. And we'll get back to Q2.

Our next question comes from Sohyam Pakula Ramakant. Go ahead, please.

Thank you. This is RK from HCW. Good morning, Larry and Mike. Good morning, RK. A few questions from me. So congratulations on getting the next version of Rework out into the field. So how different is Rework 7 from 6? And in terms of price point, is there a change? And how easy is it to get CMS to pay or to reimburse a little better rate than what you have, what they have signed up for in the last iteration?

Okay, I'll take on most of this one. The product has substantial differences that are part of the lengthy FDA process and the review. There are changes throughout the system. Initially, I will identify in the software area, this is a product that is easier to use for the user as we've been able to modify from things we have known from the experience of all the years of selling these reworks and utilizing them. Mechanically, we have added a number of features that also really came from our customers. They wanted to have multiple speeds and an ability to control this more easily. So we added a crutch control, a device where you can walk slow or fast or stop more easily or more quickly if you need to. So we've made it easier and more functional. We've also made the product, it's a long list, so I won't hit them all, but we've made it more powerful with a greater level of amperage and power within the system with larger batteries. And also we've gone to an -the-shelf battery, which is safer and more predictable and easier to manage. So if you're a person who wants to go for longer walks, you don't have to charge this as often. And then the last area I would say also comes back a little bit to the software. We are now working with a smartwatch on the device, which makes it, A, it gives us immediate communication as to how much they're using it and their walking patterns, but also to help manage the product. And it's also much easier for the user to manage the product with what we put in the apps on the smartwatch. Those are the major ones. The second half of your question, the price point, well, all the customers are getting a great value because it's essentially still the same price and it probably should be higher, would be my mindset. But CMS set the price and it works well. And relative to CMS paying for this, it is fully within FDA coverage. We've just started submitting them, obviously, since we just launched the product in April. The best and first indication we got was a commercial payer, one of the top 10, that's already stepped up and bought the first one. And they have at least one other in process already. So we see the commercial side and getting it paid for builds exactly on what we have had over the years.

Perfect. Great. In terms of the expanded Mile End partnership, I'm just trying to understand how does this help the commercial Salesforce team? And also, what sort of synergies could we see from this expansion? And when would it be visible to us?

I think it's going to be part of the reason we were confident in our forecast. It's going to be visible to us in the latter half of this year, really starting in the current quarter and beyond. If you look at the product line, why this expansion is valuable to us, first, it puts us in a segment that we didn't have access to before. We can sell for home use to everybody now. And that is the first area of importance. The second thing, every single rewalk lead we have ever gotten in the last 10 years is a patient who would have indications for this product. So we are mining our database and can use a lot of historical contacts to place some of these products. But typically, on a more active basis, any rewalker is able to use a Myocycle. The reverse isn't always true. There's a lot more Myocycle users and there are potential rewalk users for us. But it fits quite well with our call point, with our customer, and for the disease state we're treating. So we're pretty happy with that. Internally, we added resource that had expertise in this field with another company in the space and a very strong history. So we built up the team in Q1 and we've expanded that now throughout our entire organization. And we expect that also is what's going to drive its growth in the latter part of Q2, all of Q3, and all of Q4.

Thank you for that. And then on the core life relationship for workers' compensation, I know we have talked a lot about your revenue streams. Workers' Comp was not on the top of the list. So are you trying to get that into a better revenue stream? And how does core life really help in that? And generally, what's the market there for workers' comp in the US?

Well, workers' comp at first from a patient point of view tends to be somewhat ideal because they get to us relatively early post-injury in many of the cases as they are processing the claims. So their patients are frequently in a better condition to be able to get to the product. And historically, we've had good utilization in small numbers because we didn't have great access to this community. The partnership with Core Life is ideal in that this is their expertise. They do the entire effort for their company to take care of patients and work in comp, whether it's for spinal cord injury or many other things. So they have very broad access with all of the workman's compensation groups and all of the patients. So they can bring leads into this and help us process these and get them through. So our ability to get to the number of spots that they could get to was very limited. In their case, it is significant. They cover everybody that does work in comp because of their breadth of product lines. So it's an ideal expansion point for us. Relative to market size, this is a good market in terms of patient profile and payment. It's a sub percentage of the market. It's about 6 to 7% of the market. And that's something that we didn't have the ability to grow into. So we're thrilled with it.

Great. Then on the Barmer statute of health insurance, correct me if I remember this wrong. I thought this was the organization with whom you settled a few years ago. If that is true, how does this new agreement help in delivering better than the previous settlement?

Well, we have been working with Barmer since the court case where they did begin to pay for patients and coverage. But they did it primarily off contract. They just did each patient on a single case agreement type approach. This contract is extensive, as you may frequently see in Germany, but it defines things in ways that I think will help set standards for all insurers, particularly the German insurers. I'll give you some examples. It's got a lot of market development efforts that are paid for by the insurer. And this means basically they have set payment rates with the training programs. They have set up a sustainability example that they have put in the contracts. And we believe it's a good thing. And what does that mean? If you have a patient who has a unit and something unfortunate happens, such as a cancer, and they can't use the unit anymore, we have a contracted agreement that, okay, we will bring it back and they will pay us for storage. We will refurbish it when they have a new user and they will pay us for that. So all these prices are set. And it keeps the product being used in any circumstances. It also defines the replenishment of systems as they wear out and reach their cycle of five years. So the real value of this contract is just very detail-orientated on all scenarios for the German patient population. And we would very much like to see other German insurers do the same thing.

Okay. One last question. I know I'm taking up a lot of air time. On the Alter-G itself, I'm just trying to get more additional color and commentary from you in terms of over the last year and a half or so that you had it in your bag. How has it performed? What's your confidence level regarding the acquisition itself? And what potential areas can you really expand and get better synergies as well with the rest of your business?

Yeah. For us, the early cycle, this didn't grow or do as well as we thought in the marketplace. And we kind of reported we had a couple quarters that weren't as strong early on from a combination of integration and market factors, we believe. But we are very comfortable at this stage with now that we have completed all aspects of the integration about where this goes forward. And I'll break that into categories. First, they had an older product line but some things in development that they weren't able to finish. And last summer, so we're about nine months past, the ability with the new Neo launch and the Neo Plus. So this is a better product at a better price and has a lower cost of goods and gives us a better margin. So that was particularly important. And once we had that launched, it put us in a better position to move it to a contract manufacturer where we believe we also will get continuing efficiency by working with them and reduce the cost that we have in the facility. So from a financial point of view, getting that new product out and getting it to a contract manufacturer really improved and changed the profile to where AlterG is accretive to our business at this stage. The consolidation of the teams to operate as a single entity took some time, but we now have a singular sales force, a singular sales service support group. And those flow quite well for us across the different product lines. I think the evidence that we particularly like is the 19 and 17% growth we saw in the last two quarters that it has stabilized. And one area that we've done better than we expected has been international, as that is roughly half of our business, a little more, for what we're trying to do. So it took a little while to get the integration and the pieces working, but the last two quarters showed adding up exactly as we hoped it would.

Perfect. Thank you very much for your patience with me this morning, Larry. I appreciate it.

Thanks, guys.

The next question comes from Ben Haynor of Lake Street Capital Markets. Go ahead, please.

Good morning, gentlemen. Thanks for taking the questions. First off, for me, on the recent kind of predictability, I guess, or with the DME-MAX kind of trying to define a uniform set of criteria for these claims, is that something that is a formal process? Does that ever get kind of published somewhere so that folks might be able to figure out how many patients this might be applicable to? How does this all kind of come together, I guess?

Well, I think some day it might get published as a Harvard case study, but I'll save that for a different time. I think this is not a formal process, but it was really important what we've seen happen in these past quarters. So we knew it would take some time to shake out and develop the processing that would put in the claims exactly what they wanted, and we'd figure out when they were rejecting them, why they were rejecting them, so we could deal with it. And part of it is the complexity of a radically new product being put in a category that doesn't have the cleanest definition. So we are defined in the brace category as an orthotic, for example, and braces generally can use and operate those at home in 24-48 hours. So we had to educate and learn both ourselves and with CMS the types of work we had to do to properly process it and get it moving through. So importantly, what we've seen in the past few months is Time speaking with the MACs. They really have started to standardize and give us a reason and what they wanted to see in definitions that made this flow through as a brace and an orthotic device. And so we anticipate based on what they've given us working together with us collaboratively that we will be able to submit these things in a predictable cycle going forward because it has not been predictable across all the MACs so far. But we have a pretty good quarter of interaction with them. So they certainly have been trying to work with us. I would just say they're at government speed.

Got it. So in speeding these patients through the whole process, I think you mentioned more of them being at later stages of the claims process. Is it more of a function of knowing what you need to collect for the submission or is it a faster feedback loop from the DMU-MACs than you've historically experienced? What goes into that speed up, I guess?

The speed up really got around some of the definitions of the submission, particularly around home use. So we submitted around a product over a longer cycle life expectation and they were looking for when is this really functional at home where they wanted to submit. So we have determined what they want submitted now relative to home use. So we've established a definition that really wasn't clear before for them and for us because ultimately the products are designed for home use. There's no question about it. But at what point are they ready to pay for it? And so we believe we've established that through the interaction with them for what we will provide for documentation to demonstrate that the patient can do exactly what the regulations pay for. Okay, got

it. And then on the kind of commercial insurance front, obviously Congrats on getting that first re-walk seven through with a commercial insurer. But do you expect them to have kind of similar criteria of what the DMU-MACs are looking for? Is that going to just kind of be one off, varied between commercial insurers or how do you see that developing?

They are not quite bound by some of the categorization things that are part of CMS. Again, we were in a brace category and to the commercial insurers, they're a little more patient focused. And if it works, then will it work for their patient? So no, we have not. Our submission requirements in terms of prescription and clinical data is unchanged. But dealing with the categorization of it as a brace is not as relevant to the commercial insurers. They're just focused on what helps for their patients. So the processing, these initial ones are single case agreements with a focus on clinical value and clinical outcomes. So we like the process a little better. And importantly, as we're developing these centers of excellence, they get all patients. They get the Medicare patients, but they're also going to get some Workman's Comp patients. They're going to get these commercial payers. So we will work to submit to all of those groups as we grow going forward. So our base, yes, started with Medicare and we still have our VA component. But you hear us talking about our growth with Workman's Comp. And we have every intention to grow and work with commercial payers as well. So it is building the entire structure to help this patient population.

Okay, got it. That's helpful. And then, Leslie, for I guess Mike, GNA was up a bit year over year and I apologize if I missed this. Was there any sort of one time items that we should be backing out or considering?

Well, we did have, so in the quarter we did have

approximately, I can just, approximately $300,000 of bad debt expense that we took. And part of that was because of this clarification now of the criteria of the Medicare claims being processed. We identified some very early claims dating back quite a bit that where we did not believe we would be able to satisfy the criteria that was necessary. Because at the time, again, we didn't know. So as a result of that, we did reserve for some of those receivables. And we thought it was the appropriate time to do it now that we had clarity of what the criteria was. But on a going forward basis now, we intend obviously to pursue and get the payment for the remainder of the AR and the claims associated with those.

Okay, got it. That's

all I had, gentlemen. Thanks for taking the questions. Thank you, Ben. Okay. If you have

a question, please press star then 1.

So, Operator, we believe we're set.

I'd like to close the meeting for a moment if I could.

Absolutely. Yes.

So before we formally close, I'd like to make some final comments about the dream of Dr. Mitt Gofer. Mitt was a prolific engineer that became paralyzed and sought to change the world with an exoskeleton. And our team was able to build on his creation and establish an industry and we changed a lot of lives. And the path from an idea to an industry, it took a wonderful village of people within this company and with the clinics and researchers we worked with. And I've been very honored to be able to work with them. And I just want to express thank you on behalf of Dr. Gover, myself, and others that have worked in that community. With that, Operator, thank you for your help today.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.