NANO-X IMAGING LTD

Good day and thank you for standing by. Welcome to the NANUC's fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mike Cavanaugh, Investor Relations. Please go ahead.

Good morning, and thank you for joining us today. Earlier today, Nanox Imaging Limited released financial results for the quarter ended December 31st, 2023. The release is currently available on the Investors section of the company's website. Eris Meltzer, Chief Executive Officer, and Ron Daniel, Chief Financial Officer, will host this morning's call. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements regarding the company's financial results, research and development, manufacturing and commercialization activities, regulatory process operations, and other matters. These statements are subject to risks, uncertainties, and assumptions that are based on management's current expectations as of today and may not be updated in the future. Therefore, these statements should not be relied upon as representing the company's views as of any subsequent date. Factors that may cause such a difference include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-GAAP to GAAP measures is provided with our press release with the primary differences being non-GAAP net loss attributable to ordinary shares, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, and non-GAAP gross loss per share. With that, I'd now like to turn the call over to Erez Meltzer.

Thanks, Mike. And as always, thank you all for joining us today for our financial result call and corporate updates. Before we get started, I would like to take a minute to acknowledge the passing of our founder, Rand Paul Yakin, back in January. We all owe him our gratitude, and I'm proud to lead our team as we seek to realize his vision of making medical imaging more accessible to improve early detection and treatment to help people achieve a better health outcome. My remarks will be a bit longer today than usual, and I will provide a lot of details on the various business aspects of NADOS. As we share our fourth quarter updates and review our financial results, I'm extremely proud of the progress our team made over the course of 2023, highlighted by the exciting milestone of FDA clearance for the Nanux Arc system, a clear validation of our technology and mission, and our first steps in the US commercialization. On today's call, we will be focusing on our fourth quarter activities, as well as some of our achievements in early 2024, a year which I expect will be transformational for Nanux. We are now in the process of expanding our commercialization of the NANUX Arc system and are aiming for a steady increase in deployment as we raise awareness of the NANUX solution. NANUX is dedicated to accelerating the implementation of our commercial infrastructure and future strategic plans in the US. Our mission is to provide healthcare practices with a game-changing advantage through the NANUX Arc an accessible, cost-effective solution that not only provides advanced diagnostic imaging capabilities, but also elevates overall patient care. I'd like to start our call with an update on our U.S. deployment activities. As we have disclosed in the past, we have already deployed the ART at the first location in the U.S. in New Jersey in the New York metropolitan area. Since then, we have launched across five states, marking an advancement in our U.S. deployment, which is going as planned. As of today's call, AHRQ systems have been installed at several medical imaging and diagnostic systems centers in New Jersey, New York, Florida, and Kansas, as well as the Georgia 626 Imaging Academy, which serves as a technical and training center the NANUC's AHRQ system began to scan patients. Clinical operation of the AHRQ system will begin in other sites pending certification from the corresponding states' regulatory bodies. As already indicated in our Investor's Day, back in December, one of the purposes of these installations is to validate our MSAS assumptions. Based on these initial deployments, it seems, that the model is indeed validated, and we are scanning around seven scans per day, as well as the indication for $30 per scan. As part of the establishment of our infrastructure, the Georgia site at 626 Imaging Academy serves as a technical and training center for technicians on the use of the system and they have successfully completed our engineers training program at the Atlanta 626 MIS Woodstock Training Center. We are in advanced negotiation with another installation, maintenance, and service provider in order to expand our service coverage. This is prior to scale. As we increase our footprint across the United States, we continue to expand our U.S. sales and technical teams. We are continuing to expand our professional team and have recruited additional personnel in the US. We aim to grow gradually as needed and are being judicious about our hires to ensure that additional expenditure generate a good return on the investment. At the same time, we are extending our sales network as planned. As we ramp up the deployment, I can share that we have begun realizing revenue streams from ARC imaging scans at the US deployed sites that are utilizing the EMSAS model. I'd like to address one final aspect regarding our commercial operation in the US. As per our standard procedures, NANUC has submitted certification requests to expand the placement of NANUC ARC units to various states across the country. I'm eager to keep you updated on the progress of these future installations. Turning now to our deployment effort in the rest of the world outside of the key U.S. market, as we disclosed in our last call, we are generating revenue from hardware deployments in Africa and have three installations as of the end of March. As previously mentioned, we have had a unit installed at the University of Ghana Medical Center Limited, UGMC, and which has received local regulatory clearance. I can now share that we have signed a Ghana multi-site agreement, which was done as part of our multi-site trial in Ghana. We are conducting the trial, aiming to generate continuous data and clinical evidence on the NANOX ARC. I will describe this trial in a bit more detail later in my remarks. We have also made progress in expanding the Nano-X footprint in Latin America. One recent agreement is with a Peru-based medical equipment distributor, which has partnered with us to distribute the Nano-X Connect in that country. The partner has a strong presence in Peru with good reach into the key local health system and hospitals, and our cloud-based Connect solution should be a complementary product for the product offering as this partner is already actively marketing other healthcare solutions which enable remote patient exams by a clinician. I can also update you that our distributor in Mexico is seeking an import license for the Nanooks Arc and preparing for the first installation. The partner has also received an import license for the Nanooks Connect and we have shipped the first two systems. Similar to the ARC, the distributor has applied to obtain the required registration to sell this solution, and we also anticipate that Connect will also continue generating revenues in 2024. As a side comment, I will say that it is very gratifying to see that the ARC and Connect be marketed together as we have envisioned this complementary imaging solution from the very beginnings. I'd like to provide an update on our hardware revenues, which Fran will review in more details shortly. While we have began generating revenues through our AI solutions in Q3, NanoX began to generate revenue outside of the US for the sales and deployment of its imaging systems. Now I'd like to provide an update on NanoX AI business which has had an increase of 250% in our client base compared to last quarter. We have an installed base of health system who use health CCS and AI-powered solution to detect levels of coronary artery calcium, a proven indicator of future cardiac events. We have digested our experience in the field with this and gathered feedback from users specifically cardiologists and radiologists, to upgrade the solution. Revisiting one of the AI product partners, Corwell Health, formerly Spectrum, which began using our population health solution in mid-2022 and is a large integrated health system. We have consistently received positive feedback from Corwell Health, which has fully integrated this into their standard of care, This has been a productive partnership which has been extended for additional term. Many of you are aware that the Nanux solutions are available on Nuance Precision Imaging Network, a Microsoft company. More than 12,000 health care facilities and 80% of the U.S. radiologists will use Nuance PowerStribe for radiology reporting. I can share that Intermountain Health has signed on to deploy Health CCS and was part of Nuance Bundled. The go-live process started, including training activities and integration of the solution into internal systems. NANUCS also achieved another regulatory milestone last month when we received the 510 clearance by the U.S. Food and Drug Administration, FDA, for Health FLV. an artificial intelligence software that provides automated qualitative and quantitative analysis of liver attenuation from routine CT scans. Health FLD is intended to support clinicians in the detection of fatty liver correlated with hepatic steatosis, an early sign of metabolic dysfunction associated steatotic liver disease, MASLD, formerly referred to as non-alcoholic fatty liver disease. HealthFLD is a new and valuable tool for doctors, as it has traditionally been difficult to assess liver attenuation on contract-enhanced scans, which make up a large proportion of the CT scans. HealthFLD was designed to help clinicians in the assessment and the analysis of fatty liver in general population from routine CT scans. We believe that AI innovative solution and specifically health FLD may deliver substantial advantages to the biopharmaceutical industry to streamline the identification of candidates for clinical trials of much needed therapies for liver diseases, including mesh. This regulatory decision solidifies our leadership as a developer of automated AI software medical devices. We also announced last month early findings from the AI-enabled ADOPT study, which uses a NanoX AI solution, HealthVCF, the previous version of our current HealthLSP solution, to review routine CT scans and identify up to six times more patients with vertebral compression factor that the national average at national health services, NHS, hospitals in the UK. The study is being conducted at various national health service or NHS sites, including the Oxford University's hospitals. The ADAPT data shows that HealthVCF has clearly demonstrated the ability to identify vertebral compression factors in far more patients than previously possible with existing tools, enabling earlier intervention and potentially better patient outcomes. To date, the NANOX AI algorithms has identified over 2,400 patients with previously unknown vertebral compression fractures, and those patients have been designated for follow-up evaluation and treatment. As you can see, we have been very busy not only with the Nano-X Arc system deployment, but also advancing the uptake of Nano-X AI, which is an important component of the complete Nano-X solution. Turning now to our OEM initiatives. After executive partnership kickoff meetings at Varix headquarters in Salt Lake City last year, the company's technical teams are actively engaged in validating the tube design and advancing the roadmap towards production and exploring future development. Expanding on our OEM-related activity, we have issued our first production purchase order to an industrial imaging equipment manufacturer and continue to work towards a multi-year tube supply agreement to ensure an adequate future supply of tubes. Additionally, Our collaboration with the U.S. government agency exploring Nano-XR technology for use in security application in progressing. After their acquisition of chips and tubes for evaluation, we are advancing to our collaboration on a novel tube based on our meter. Finally, as a means of increasing awareness and allowing access to our core technologies, we have created Nano-XR demonstration kits. containing a tube utilizing our emitter. And we have recently received the necessary safety and regulation certifications for the kit, and we'll be delivering our first few to interested party in the coming weeks. Regarding the mass production as recently announced, due to the scale up in commercialization, we continue as planned with our collaboration with the system, a chip maker located in Switzerland. As I mentioned earlier in my comments about Ghana, Nano-X is conducting multi-center clinical trial to enhance Nano-X Arc with the goal of expanding its use with chest and other indications. The trial is scheduled to begin patient recruitment shortly, and Nano-X Arc systems that are being used in these trials are already scanning patients. The system installed at Bellington Hospital is ready The Institutional Review Board, IBR, has approved the trial and we are finalizing the remaining steps for integrating into multi-site. In Ghana, the IRB has been submitted and currently is under review. Additionally, the NanoxARC is being used to scan patients with abnormal lung conditions at Beilincon, one of the world's top academic medical center and an institution that has pioneered advancement in radiology. The system at UGMT is also currently being used to scan patients. Our pursuit of the CE mark in Europe is advancing in partnership with our notified body. Specifically, recently we completed a five-day audit by the notified body as part of the certification process for the CE certificates, the ISO, 13485 plus medical device regulations MDR certificate. During the inspection, hundreds of records, procedures, proofs, reports, and examples were presented. The MDR test was passed successfully. The ISO 13485 test was passed with a great success and without any adverse findings. Sometimes after the audit, the formal review process will begin, which includes examining aspects of the manufacturing process. And although we expect our application process to proceed in a timely manner, I would note the regulatory bodies worldwide are still working through a backlog of applications, which accumulated during the multi-year COVID pandemic and the adjustment for the new MDR regulations. However, as I said, we are well along in the process and will continue to prioritize the work with our partners necessary to complete the MIRA tasks required to bring the C-certification process with the finish line. With that, I'd like now to turn the call over to Ran Daniel for a review of our financial results. Ran?