NANO-X IMAGING LTD

Good day, and thank you for standing by. Welcome to the NANOX Imaging Second Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, we'll open up for questions. 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 it over to your first speaker, 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 June 30, 2025. The release is currently available on the investor section of the company's website. With me today are Eris Meltzer, Chief Executive Officer and Acting Chairman, and Ron Daniel, Chief Financial Officer. 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 and clinical activities, 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.

Thank you, Mike. Good morning, and thank you all for joining our second quarter 2025 call. As we enter the second half of 2025, the entire Nanux team remains focused on disciplined execution and expanding our commercial footprint across our entire ecosystem, including AI and teleradiology solutions, as we pursue our vision of making medical imaging more accessible and thereby improving patient outcomes. In line with the commitments outlined during our May 2025 earnings goal, we are making steady progress toward our goal of 100 NanoX Arc Systems installations. Expanding our commercial footprint remains a top priority, and our sales team continues to expand the pipeline of qualified leads and successfully convert those leads into systems being shipped to customers. While most leads and new customer activity is now being sourced from the U.S. market, we also continue to expand our network in different countries outside of the U.S., including various European countries, such as Romania and Greece, on the heels of attaining the CE mark designation earlier this year. We are well on our way to meeting our target of 100 systems installed or being deployed by year's end. As previously indicated, revenues are expected to grow in the second half of 2025. We are also advancing our clinical strategy on multiple fronts as we seek to strengthen our position as a transformative force in medical imaging. To support this movement, we are acting on multiple fronts. clinical data and publication collaboration with global academic institutes, hands-on clinical education initiatives, and expanding our key opinion leaders network. In other words, our commercial rollout involves bringing new technology to the market while also working to change the habits of healthcare providers. With respect to academic partners supporting our transformative vision, we seek to partner with organizations that are leaders in medical imaging innovation. A prime example in our collaboration with researchers at Duke University Medical Center, which I'll tell you about later in my preferred remarks. Another example can be found in our recent announcement that Kaiser University, has established a flagship training and demonstration site integrating the NanoXARC into the radiology technology graduate program and enabling hands-on education for future imaging professionals. This is particularly exciting as the radiologists of the future are immersed in NanoXARC early in their careers. To raise awareness and drive education on the NanoXAR systems, we created the Clinical Education Program. The clinical education specialists who run this program play a central role delivering structured customer onboarding and ongoing training through site visits, working with the referral physicians, training the site personnel through webinars, and tailor educational plans. We recently launched the NanoX Academy digital platform tailored for our clients, partners, and our NanoX network collaborators, offering full product sales and clinical online training. Extending our clinical evidence, the ultimate output of these studies are peer-reviewed publications and white papers and academic publications derived from data generated by studies such as those currently being conducted with Shamir and Bellison Medical Centers. These papers demonstrate the diagnostic potential of our cold catheter tomosynthesis system and imaging, offering a low radiation cost-effective alternative to CT. Moreover, we are constantly expanding the number of images bank of case studies, which serves to help illustrate the capabilities of the NanoXARC system. This growing bank of scans also serves as a useful tool for our sales team when in discussions with imaging centers about the utility of the NanoXR. The final leg of our clinical development platform is our key opinion leaders network. This strategy is involving into structure segmented model that includes visionary leaders on our advisory board, clinical collaborators, and show sites. This approach enables us to amplify our clinical voice, holding seminars and webinars, talking about the clinical value in conferences while supporting pre-sales activities and beta testing in targeted specialties such as orthopedic and lung cancer screening. These efforts form a cohesive clinical narrative that supports commercializations, enhance credibility, and drives adoption positioning Nano-X as a category-defining innovator in low-cost 3D digital radiography. With that said, let's now move ahead to our operational highlights and updates. Turning now to our installation progress in key US markets. I'm happy to report that our pipeline has grown substantially since our last call. We continue to install systems in various facilities, primarily standalone, multi-specialty, small and medium-sized health clinics. These installations appear to be in line with the industry standard sales cycle. This increase in the sales pipeline is due to our investments in sales development representative initiatives, both internal and external, in order to increase the pipeline and conversion. These efforts are clearly resulting in traction with the medical imaging community, and our commercial ramp will remain a primary focus. On another promising note, a growing number of customers with nanoARC units installed are actively referring and scanning patients. Among the notable customers, the NanoXARC systems will soon be installed at Kaiser University's Sarasota campus for training healthcare professionals, including live demonstrations and incorporation into Kaiser University's Radiology Technology Graduate Program. We have also installed units in several imaging chains in California and New York. Of particular note, one of the largest medical imaging chains in the U.S., with hundreds of locations from which we recently generated revenues, has completed installation of the ARC and began NanoX ARC application training for its technicians in the last week of July. This is the final step before patient scanning begins, and we expect this chain to start scanning patients in the third quarter. The chain is also preparing to extend NanoX ARC deployment to a second site within its network. As many of you are aware, we are supplementing our direct sales effort via channel partnerships in select markets. And in the U.S. distributor partnerships we announced last quarter with ASI and Swiss Ray are both fully completed and are off to good starts. Additionally, we are in advanced negotiation with large distributor and equipment reseller with a presence throughout the U.S. To support these partnerships, we provide comprehensive training and onboarding, covering everything from systems fundamentals and clinical positioning to sales processes and contracting workflows. Our goal is to equip our partners with the tools and knowledge they may need to confidentially re-engage their networks and promote the NanoXR. As part of our efforts to expand our go-to-market strategy, we're working on developing a future project. NANUX is developing a mobile imaging solution that integrates the NANUX ARC system into a commercial vehicle. The mobile NANUX ARC vehicle will serve as a traveling medical imaging center, visiting clinics to provide high-quality diagnostic imaging without requiring patients to travel to central hospitals. The goal is to expand access to high-quality imaging, improving patient reach, and create new opportunities for service delivery and revenue growth. Turning to our rapidly growing Nano-X AI business, I'd like to share details of several product collaborations that we are working on. First, I'm pleased to announce that Nano-X AI and a leading provider of advanced AI-powered medical imaging solutions are collaborating to integrate Nano-X AI's liver and bone products with the provider's advanced visualization software. This new partnership will allow us to extend the benefits of NanoX AI to a larger customer base, enhancing our collective offering and providing greater value to our users. Another commercial collaboration I can share is between NanoX AI and a leading company which provide an AI power health informatics with the aim of empowering breakthroughs in care through imaging. The collaboration leverages advanced AI for operational efficiency and improved clinical outcomes in lung. In another recent example, we have signed an agreement with DeepSea to incorporate cardiac, bone, and liver products onto the DeepSea platform, and DeepSea is a multinational company which markets an infrastructure platform, DeepSeaOS, designed to unify diverse radiology AI workflow across the enterprise. Having NanoX AI solutions integrated within this platform will make our products available on a much larger potential customer base. Another collaboration that I'd like to share today is with TPIS, a leading provider of health informatics solutions with decades of experience partnering with clinical trial and research stakeholders, particularly in support of an age project. NanoX AI and CTIS have joined forces to pursue two NIH grants aimed at analyzing gland cancer in young VAPS users, which is acknowledged to be a looming health problem in the U.S. Needless to say, it is encouraging that a growing group of AI platform providers recognize the value of our technology and are taking the time to integrate the NanoX AI solutions into their open architecture platform offerings. Furthermore, as previously announced, we have finalized the collaboration between Nanox AI and Ezra, a leading provider of full-body MRI screening services. Initially, the collaboration included Nanox AI population health solutions integrated to Ezra medical screening processes at 28 imaging center locations across the United States, which feature AI-powered full-body MRI and CT scans to screen adults for early detection, such as cancer, and other serious conditions at their earliest and often most treatable stages. The solution is now integrated into 50 5-0 sites with both the number of installations and the volume of scans steadily increasing. To continue our updates for Nanox AI, I'm pleased to report that the leading academic institution has launched a major collaboration with Nanox AI, selecting three of our advanced artificial intelligence applications to power a new population health clinical study targeting asymptomatic individuals aged 70 and above. These marks another milestone in our ongoing academic collaboration. We continue to partner with leading academic institutions that are leveraging our AI solution. I can also report that we signed an agreement to provide Nano-X AI solution to customers of Radiology Diagnostic Group, RDG, a network of specialized senior radiologists offering rapid expert imaging interpretation, valuable second opinions, and detailed explanation of imaging findings. In addition, we recently partnered with a reseller in India to market Nano-X AI solution, securing two pilot projects and positioned us to expand our footprint in the region. Moreover, we are strengthening our U.S. presence with the expansion of our service and sales infrastructure to support growing market demand. Turning to deployment and other activities outside of the U.S., we continue to advance along multiple fronts, such as the EU market, and where we feel that distributor models is an efficient way to make initial inroads into the various nations of the EU. We accelerated our effort in the EU after NanoXART was granted the CMART designation under EU MDR standards earlier this year. Our team recently met with our partner in Romania, MedisImaging, which is the leading medical equipment supplier in the country. It was a highly productive engagement, which included a training session for medic sales personnel, Next step is to launch the NanoCSR in the annual radiology congress in Romania with our new partner end of September. The system is ready for shipment for that purpose. This is an exciting step forward in making NanoCSR innovation imaging solutions more accessible across Europe and promising start bringing next generation medical imaging technology to Romania. We are currently working with our local partner in Greece to secure the required import permits and are engaged in advanced discussions with additional potential partners in the region. We will continue to focus on the large EU market and expect that our strong business momentum will continue in many other European countries in 2025 and beyond. In Latin America, we're also pursuing the import license to ship to demo units to the distributor in New Mexico, and I will provide an update when I have something material to share. The company notified the FDA of its intent to submit the TAP2D software module to the FDA through the 510K program. TAP2D submission purpose to receive clearance for 2D review image output for NanoX ART system a practical tool for a geologist to enhance their diagnostic confidence as they become more experienced evaluating BPS images. Step 2D, once cleared, will be part of a wider vision held by NANOX to alleviate adjunctive use limitations in the future. Moving on to the clinical work that helps support all of our efforts by generating data supporting the use of our solutions. As I mentioned in my introductory remarks, we have several successes to share today, including our collaboration with Kaiser University and our ongoing partnership with Duke University Center for Virtual Cloud. We have mentioned the Duke partnership on previous calls, and I'm now able to share that this collaboration has resulted in the publication of a new paper that has just being published. In collaboration with Dr. Eshan Samihim at the Center for Virtual Imaging Trials, CVIT at Duke, we have seen promising results of the potential values of nanosarge digital tomosynthesis, the DTS configuration in handling patient motion, as opposed to standard linear configuration DTS systems. Patient movement during image acquisition can adversely affect the quality of medical imaging, and the study shows the benefit that NanoX-R configuration has the potential to effectively manage this issue. The study addressed various types of patient motions and showed that the NanoX-R configuration is less susceptible to motion-induced artifacts. The data and conclusions of the study have now been published in Biomedical Physics and Engineering Express, making key opinion leaders aware of the value of the NanoXR for sound mounting a common imaging challenge. Earlier, I acknowledged the value of bringing medical imaging experts and key opinion leaders onto the NanoX team. And with that goal in mind, we have recently strengthened our medical advisory board with two new additions. Dr. Lawrence Tenenbaum is an active consultant in the medical imaging space. He is a long-term collaborator with the medical imaging industry and continues to chair advisory boards for imaging, OEMs, pharma, and AI concerns. He has interest in developing applications for AI and machine learning, concert agents, MR, CP, and advanced rendering. Dr. Tenenbaum serves as Vice President, Chief Technology Officer and Director of Advanced Imaging at RadNet from 2015 to 2024. Second, George Espada is a medical imaging executive with over 25 years of global leadership experience. He has held senior roles at Agfa and Philips, specializing in imaging technology and digital health transformation. He is an expert in bringing innovation to market and scaling customer-centric tech-driven healthcare solutions. We are excited to have these talented individuals join the NADAPS team as we seek to innovate and change the medical imaging landscape. Our key opinion leader strategy is evolving into a structured, segmented model that includes visionary leaders, clinical collaborators, and show sites. This approach enables us to amplify our clinical voice while supporting pre-sales activities and beta testing in targeted specialties such as orthopedic, and lung cancer screening. Together, these efforts form a cohesive clinical narrative that supports commercialization, enhanced credibility, and driven adoption, positioning NANOS as a category-defining innovator in digital regulation. We continue close collaboration with our OEM partners to secure the supply of components needed as our ARC deployment continues. Furthermore, We are seeking partnership with additional providers of unique imaging equipment to develop new and innovative uses of our 3D tomosynthesis technology. Additionally, in Q2, we met with multiple companies across a handful of application areas. We believe our technology provides unique and even disruptive technical benefits. These companies were approached based on an exhaustive review of their applications, market position, our perceived product fit, and, of course, the commercial opportunity potential. Having received several requests for additional data and or testing results, we are now reviewing, prioritizing, and formulating responses outlined proposed next steps. New applications and business development efforts take time, but this activity level demonstrates our continuous probing for new use cases and applications for differentiated imaging technology. I'd also like to follow up on my comments regarding Varix from our last call. We are sourcing glass tubes from Varix for our units as they are more economical than ceramic and advantageous for our application. At this time, I shared that Varix had delivered tubes for use in the newly developed NanoX Arc and that NanoX has technical staff at Varix facility for validation and training on multiple source demo units. The ARC team in Israel began system integration of Varix tubes into the ARC-X earlier this month, and we approached the time to start manufacturing the new ARC-X at scale to meet anticipated customer demand. Also, delivery of the first multi-source demonstrator from Varix is anticipated later this month. With regard to mass production, we have recently entered into a multi-year volume supply agreement with FabriNet, a leading global electronics manufacturing services provider, to support the scalable production of non-ex-advanced medical imaging. Under this agreement, FabriNet will provide contract manufacturing services, including assembly, testing, procurement, and quality control, ensuring a reliable and cost-effective product delivery aligned with non-excess specifications. The long-term agreement will help to ensure stable and high-quality manufacturing, as well as flexible production and forecasting to support our anticipated growth. In addition to manufacturing services, Fabrinet will support regulatory compliance, quality assurance, and continuous improvement processes to help us optimize the efficiency of the manufacturing process. We believe this collaboration will drive down our manufacturing costs over time and strengthen our global supply chain, which will in turn support our mission to expand access to innovative, affordable imaging technology worldwide.