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spk11: Good morning, everyone, and welcome to the Rewalk Robotics fourth quarter earnings conference call. All participants will be in a 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 and then one. To withdraw your questions, you may press star and two. At this time, I'd like to turn the conference call over to Mike Lawless, Chief Financial Officer. Sir, please go ahead.
spk19: Thanks, Jamie. Good morning and welcome to Rewalk Robotics' fourth quarter and full year 2022 earnings call. I'm Mike Lawless, Rewalk Robotics' Chief Financial Officer, and with me on the call are Larry Jasinski, Rewalk's Chief Executive Officer, and Amal Ghadar, Rewalk's Vice President of Finance. Earlier this morning, REWALK issued a press release detailing financial results for the three months and full year ended December 31, 2022. This press release and a webcast of this call can be accessed through the investor relations section of the REWALK website at rewalk.com. Before we get started, I'd like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation, or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to REWOC management as of today and involve risks and uncertainties, including those noted in our press release and REWOC's filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. REWOC specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. A replay will be available shortly after 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 the company's website. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on February 23rd. 2022, 2023, excuse me. Since that date, Rewalk may have made subsequent announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings for the most up-to-date information. With that, I'll turn the call over to Rewalk's CEO, Larry Jasinski.
spk01: Thank you, Mike.
spk05: Good morning. Thank you for joining us today. We closed 2022 with positive results in Q4, and more importantly, with progress on each of our major areas of focus to drive the business over the next three years. The goals of 2022 were to move forward with CMS, to expand acceptance of direct supply in Germany, to improve the rewalk system by adding curb and stair climbing features in the U.S., and with an advanced model of the rewalk that can improve the user experience. and to identify additional product offerings to build our critical and strategic mass that improves our financial performance. Sales in Q4 were $2.18 million, driven by new VA activity post-COVID, the provision of systems from direct supply acceptance in Germany, and the growth with the distributed mile cycle product. The mile cycle is an excellent example of the efficiency and value of an adjacent offering and a model for adding more products. Mike will address our results further in the financial discussion. During 2022, we requested a benefit category in the public hearings with the Healthcare Common Procedure Coding Systems, known as HCPCS, under our established coverage code. CMS has not yet provided the category and pricing but instructed us to begin the process of submitting cases. The first Medicare patient received their system during Q4 and has completed their training program. The category and pricing are still in processing with the Medicare Administrative Contractor, the MAC. We are now moving ahead with multiple patient submissions and building the required infrastructure to replicate this for a large number of patients on an ongoing basis. In November, Barmer, the second largest statutory health insurer, the SHI, in Germany, elected to adopt direct supply and withdrew their federal court social court challenge. They immediately supplied the individual from the case with the rewalk system and have moved others forward under the direct supply approach. Our initial submission to the U.S. FDA to expand access for the disabled community by adding STAIR and curb function was reviewed, and we received questions in the form of an additional information request for the submission. Among the questions was a request for usability data as per new FDA guidelines. We promptly set up and conducted the required study, and this additional information was subsequently submitted to the FDA for consideration. In parallel, we also conducted a similar study with the advanced generation of the REWALK system, and we'll include that information in that submission. The next generation of the REWALK system includes additional user controls, provision of additional data on utilization for the user and care providers, and enhanced longer cycle battery system and other design features requested by users over the past few years. Over the course of 2022, we considered a significant number of paths to increase our critical mass and to develop long-term strategic mass. Our goal is to add products that fit within the neural rehabilitation segment and that are adjacent to our call points within the clinics and in the home community after clinic treatment or training is completed. With the emphasis on financial value, we are focused on product lines that will be accreted to our financial position in the 12-month or less cycle, offer leverage and synergy in operational cost, and will contribute to achieving a break-even profitable position with our current capital. I'd now like to turn the call over to Mike for a review of financial details.
spk19: Mike? Thanks, Larry. For most of my discussion of the financial results, I'm going to focus on the Q4 performance as our press release in 10K addressed the annual results. For the fourth quarter of 2022, Rewalk reported revenue of $2.2 million, up $0.9 million, or 75%, as compared to $1.2 million in the fourth quarter of 2021. The increase in quarterly revenue was a result of improved sales performance across product lines and geographies. For our core Exoskeleton product line, we experienced growth in volumes in both the U.S. and E.U., both from a year-over-year standpoint versus Q4-21 and on a sequential basis from Q3-22. We also had strong performance in Q4 from our distributed myocycle FES products. We market these as an exclusive distributor to U.S. rehabilitation clinics, VA hospitals, and to veterans for home use. Since we started distributing this product line in 2020, we have steadily grown it and achieved revenue of over half a million dollars in Q4, marking by far our highest quarterly performance for this product line. I also want to briefly comment on the annual revenue performance. For the full year 2022, we achieved revenue of 5.5 million as opposed to 6.0 million for the full year 2021. The decline in revenue was a result of two factors. First, in 2021, we had a large one-time multiple unit shipment to an academic medical center that was a departure from our typical sales and which did not reoccur in 2022. Second, during 2022, we had a significant foreign exchange headwind due to the erosion of the Euro-dollar exchange rate. Excluding the impact of these two factors, revenue would have increased by 10% in 2022, reflecting growth in our underlying base business. Now I will transition to our pipeline. With the increased revenue performance in Q4, we succeeded in converting some of our near-term opportunities in our pipeline to revenue. During the first quarter of 2023, we will focus our efforts on adding to our commercial pipeline in order to lay the foundation for growth in 2023. These efforts include generating more leads in our traditional reimbursement market segments, such as in the U.S. for individuals covered by the VA or selected workers' compensation insurance, and in Germany for individuals covered under the German healthcare system. Additionally, we are focusing a great deal of resources and planning on an anticipated future new market segment, individuals who are Medicare beneficiaries. Within our traditional market segments for the REWOC product line, the current pipeline of active rentals consists of 16 cases, including 13 in Germany and three VA rentals in the U.S. Our overall number of cases in process currently sits at 65, with 49 in Germany and 16 in the U.S., Importantly, these pipeline figures do not include cases that would be eligible for Medicare reimbursement since, although CMS has established Medicare coverage for exoskeletons, CMS is still in the process of establishing a benefit category designation under which we can be reimbursed. The initial claim that we filed back in November is set in motion process, which we believe will create a mechanism for us to be reimbursed by Medicare in the near future. If we successfully work with CMS to establish an acceptable reimbursement mechanism, we expect to build a pipeline of Medicare eligible patients which could meaningfully supplement our future pipeline volumes. Okay, turning to margins from Q4. Our Q4 22 gross profit was $0.7 million or 30.8% of revenue, up 4.3 percentage points as compared to 0.3 million or 26.5% of revenue. in Q421. This increase was mainly driven by the impact of higher revenue volumes leveraging our fixed production costs. During Q422, we applied an impairment reserve against certain electronic components in our restore inventory due to the potential obsolescence of these parts. If we exclude the impact of this non-cash reserve, gross profit would have been $1.2 million or 53.9% of revenue in Q4. Operating expenses in Q4 were $5.7 million, up $1.5 million, or 36%, as compared to $4.2 million in Q4-21. Within R&D, spending increased $0.4 million, or 59%, primarily due to higher spending on professional services related to the development products for new product introductions expected over the next 12 months. In selling and marketing, spending increased 0.8 million, or 44%, primarily due to higher consulting fees associated with the CMS reimbursement progress and greater commercial activity as COVID-related restrictions are lifted, including trade show, travel, and personnel-related expenses. General and administrative expenses grew 0.3 million, or 17%, as compared to Q4-21. but did decline sequentially from Q3 22 as the last of the professional services expenses associated with the expanded 2022 proxy process did not carry over into Q4. Our net loss for Q4 22 was 5.3 million or 9 cents per share as compared to a net loss of 3.9 million dollars or 6 cents per share in Q4 21. Our non-GAAP net loss for Q4-22 was $4.9 million, or $0.08 per share, as compared to $3.6 million, or $0.06 per share, in Q4-21. We ended the quarter with $67.9 million in cash and cash equivalents and no debt. We continue to have a strong balance sheet with resources to fund our organic growth, including our efforts to expand access for Medicare beneficiaries to our Rewalk exoskeletons as well as to pursue attractive business development opportunities to distribute or acquire additional complementary products with which we can build and scale and supplement our growth. Since the initiation of a share repurchase program in Q3-22, we have repurchased $3.3 million of stock, representing about 6% of total shares issued. Our initial six-month authorization from the Israeli court for the repurchase program expired in January of this year, so we filed a motion with the court for permission to continue with repurchases for a second six-month period, and we received approval of this from the court. Upon exit from our trading blackout two days following the date of this call and the earnings release, we will be eligible once again to repurchase shares, and we expect to monitor equity market conditions and evaluate potential buyback activities as needed. With that, I'd like to turn the call back to Larry for further comments.
spk01: Thank you, Mike.
spk05: Our goals for 2023 are, one, to achieve sales growth via our CMS and VA activity, along with adding more commercial insurers in Germany. Two, to expand our product offering through distribution and acquisition, and to leverage these activities to move towards break-even profitable operations with our current capital. The internal sales growth will build upon the 2022 progress on direct supply in Germany with the placement of systems with U.S. Medicare program with CMS and with expansion to more VA centers. Other growth drivers will be technical and regulatory advancements of the Rewalk Exoskeleton and expansion of the company through the addition of product loans. To measure our progress in 2023, I have seven areas I'd like to highlight. Number one, Expansion of CMS case submissions. We are building our infrastructure for qualifying and processing claims within the expected requirements of the regional MACs with CMS. These are extensive submissions to ensure patient selection is optimal to become successful re-walkers. This approach will benefit the user, CMS, other insurers, and the company with successful use of the product. We will target between 35 to 50 CMS submissions in 2023 by building an infrastructure to expand that significantly in 2024 and 2025. Until late 2022, RUS coverage was limited to the VASOP, which comprised approximately 10% of the spinal cord injury market. Spinal cord injury occurs in a younger population, and five years post injury, approximately 30.9% of the spinal cord injury market is covered under Medicare, and another 25.2% are covered under Medicaid. We also anticipate the progress of CMS will be considered by private payers, and we will begin contacts with private insurers as the market develops. These activities allow us to develop this market with the new access to a larger audience. As an example, many clinicians we speak with have been unwilling to write a prescription for a product that was unlikely to be accessible via coverage to the individual. With coverage expanding through CMS and others, access to this technology is becoming realistic. which will allow the development of referring for their patients who want to ambulate with an exoskeleton system. We currently have over 170 previously screened CMS leads that are being re-qualified for submissions. Our lead base was very limited in the pandemic period, as this population is a high-risk group. We will now seek to expand our lead gathering efforts through digital promotion, trade shows, and by building referral efforts with key opinion leaders. Number two, expansion of VA training centers. As the resources in VA medical centers, the VMACs, are becoming increasingly active post-COVID, We are working closely with the VA to expand both the number of EMACs that can actively qualify and conduct or manage exoskeleton training, and the use of qualified and contracted community-based provider groups that may be more conveniently geographic for veterans. There are currently three active, reliable centers in the United States, and our goal is to expand that by at least six over the remainder of the calendar year 2023. Number three. In Germany, we will seek to add additional groups to our direct supply contracts now that we are post the acceptance of the direct supply from the court proceedings. We also must reestablish our lead base post-COVID with a shift towards digital promotion, working with local societies, and the reemergence of trade shows in full in 2023. Number four, product acquisition. We have identified product lines and entities that have interest and that would financially benefit from operating within a consolidated enterprise infrastructure focused on neurorehabilitation. The profile for this strategy is to work with adjacent, accretive, advanced technologies that support the clinics and the patient community. These considerations have a high priority and we have a banking partner assisting in the analysis, transaction considerations, and completing these efforts. We will report on these initiatives as they reach conclusions. Number five, organic product improvements. A significant user limitation exists when a re-walker is walking and they then encounter a curb or stairs that prevents access. Examples include visiting a friend's home with steps or stairs or locations where curb cutouts, ramps, or elevators are not available. Addition of the curb stair function is under review at the FDA from our submission in 2022. We have responded in full to the FDA's additional information request and are prospectively preparing training programs for a launch in 2023. This is subject to completing a successful FDA review. On the next advancements of the RE-ORG system, we are in finalization of late-stage development and final preparation for FDA submission. We expect to submit this for FDA review and CE review in the second half of 2023. Number six, data expansion. For our stroke technology designs, we are supporting the independent study of a comparison of the motor and cable-driven system of a plant reflection-focused technology to the existing ankle foot orthosis technologies, commonly known as AFOs. Our targeted base technology for a home community use design has been named the Reboot. We have previously been granted a breakthrough designation that would have included some Medicare coverage at that time. That program has since been deferred by the U.S. government, and replacement programs are being considered, but we no longer expect that path as the likely coverage pathway for this innovative design. As we have conducted a parallel reimbursement review, we believe this design may be covered within existing codes if our data demonstrates the benefit of this technical innovation over an AFO. This initial study is a pilot to support consideration of a larger company-sponsored randomized clinical trial. For our REWALK SCI product, we supported a grant to the VA considering the medical cost of a REWALK ambulator to the medical outcome of a matched profile wheelchair user. That data will be presented and published during 2023. And number seven, financially. 2023 includes further investment and reimbursement to complete the submission definitions to provide the processing infrastructure to allow patient access and to provide growth for the company. In addition, as our mission and position expand, we have increased our investment to support investor relations to broaden the communication and reach to the investment community. In conclusion, Our overall direction is to succeed with the core SCI product line as insurance access is more widely accepted and to build both critical and strategic mass as a consolidator that will meet the broader needs in the clinic and in the community for neuro rehabilitation. We understand and are seeking to complete this level of expansion and growth to break even profitability on our current cap. We are going the right direction And I wish to thank the team for the results in 2022 and how they are building upon them in 2023. I also wish to thank our shareholder base for their continued commitment in supporting these life-changing technologies and their support as we expand this business in 2023 and 2024. I look forward to providing further updates during 2023. At this point, operator, we're prepared to take and answer all questions if we can move to that process.
spk11: And ladies and gentlemen, at this time, if you would like to ask a question, please press star and then 1 on a touch-tone telephone. To withdraw your questions, you may press star and 2. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the numbers to ensure the best sound quality. Once again, that is star and then 1 to join the question queue. We'll pause momentarily to assemble the roster. And our first question today comes from Swayam Pakala from Ramankath from R.C. Wainwright. Please go ahead with your question.
spk08: Thank you. This is R.K. from R.C. Wainwright. So, good morning, gentlemen. It looks like you had a fantastic fourth quarter and St. Helgarten started in a really interesting 23 as well. Larry, you stated seven different things that you're hoping to execute over the rest of the year. So, given the two positives from last year, especially from the CMS and also from the German court, can you just highlight some of... some of the progress that you are making beyond the initial success in the sense, you know, you said you submitted one application to the MAC. You know, how well are they progressing? You know, is the progress encouraging enough that you can go forward with the additional submissions? And on the German court side, you said the insurance company over there has given, has started working through the applications for their insured lives. How is that going forward? What is the expectation in terms of revenue run from that particular workers' comp? insurance. Sorry for the long question.
spk05: It was a long question, but I took notes, so I think I'll remember everything, or at least most of it. And first, yes, it was a good quarter, and the seven targets we believe are very achievable for us this year, the things that I highlighted at the back end, and I'll update those every quarter. Regarding, first, the MAC process and the progress, You know, submitting the first case is the hardest because you're interpreting and doing everything and trying to establish the standards for that case. And we use that as a base for, okay, how do we construct the rest of them? And that's really been a lot of infrastructure building and also to make sure that we comply in every way as a Medicare supplier. We are an accredited supplier, and that requires everything must be handled perfectly relative to HIPAA compliance in how we're handling data and in the systems that we have. So there was a lot of internal auditing preparation for the go-live mindset, and that's really the great value of case one. Because case one, we put more effort in than we probably put in anything for a long time relative to a single case to make sure we have that structure. Because we're not trying to set this up for just one case. We're trying to set it up to do, as I said, 35 to 50 this year. So it's been a process development. So from an internal side, we've come a long way. On the MAC side, the case is moving forward, but I don't have anything I can report at this time. The most important thing is the user has their system, they've completed their training, and the completion of the process is now being worked with them. So that's as much as I can give you on the first part. The second part, the German court, the reaction by Barmer was what we'd hoped it would be in that the individual who was the court case got his unit. He's walking. And so that is a big success, at least if you're the view of the individual. And then the other cases they had that were open have been quickly moved forward. So that tells us that, yes, they completely accepted what they said they would do. The contract process in Germany is very important to us, and it is sort of an annualized or periodic thing. And as we are now... redoing our contracts with many groups relative to things such as pricing and some other details that change year over year. We would hope to bring some of these other groups that are not under contract, under contract. So that is our goal and those are the conversations that are underway. And between now and sometime in Q2, those should reach a conclusion with them either joining or not joining the contracts. And fundamentally, there's a benefit to them and to us for them to be under contract. but they still have to make a decision to do it, and it just makes it easier to process. So the German one is moving also forward in a way that we believe will help us for our 2023 revenue.
spk08: Thanks for that, Larry. And then this court case where Barmer, fortunately for you, walked away from the case, does that lay as a strong precedent within Germany's workers' comp so that now you have a potential for success with other workers' comp. Is that the case or is it still going to be individually each workers' comp insurance can make a decision independent of what happened in the Barmer's court case.
spk05: One quick clarity. Barmer is a statutory health insurer, so it's more the general public insurance and private insurance that goes through their German health system. The workman's comp in Germany is the DGUV, and we have a contract with them. So our workman's comp in Germany is well-established. relative to the statutory health insurers in Barmer, which is where your question was, is they will make a decision as to whether they enter the contract, and other groups technically have a decision whether or not they join a contract, but we do not believe there's a strong basis for any of them to challenge whether or not, if they supply these, whether they're under direct supply or not. There is, as Barmer withdrew and accepted There is no formal court case decision, so I can't say there is a court case that is a precedent. However, because that one had gone so far and the number one, two, three insurers in Germany now have all accepted this, it would be difficult for others to claim that it is not the standard in the industry. But I can't say there's a specific precedent, if that answers your question.
spk08: Thank you. I have one more two-part question and then I'll step back into the line. In terms of the VA expansion that you're talking about, VA training center expansion that you're talking about, is there more color you can provide us in the sense, I believe if I took my notes right, there are 16 cases in rentals out there, I'm guessing most of them are from the VA, you know, should we expect that to increase as you continue to expand these training centers? And the second part of the question, a little bit different, on the mile cycle product distribution, which was strong in the Q4, you know, increasing greater than half a million, is that something that that can be sustainable over 23 and beyond? Or is this one of those one-off things that we have to wait and watch as the quarters progress?
spk05: Okay. Thank you. I'll start with the VA. We still have a good number of veterans waiting in line for training or waiting to move through processing at the VA, and a lot of the limitation has been around either available personnel to train or geographic locations. So this expansion with the VA, you know, presently we have three really reliable centers that can take care of patients, but that only covers three parts of the United States, and they're mostly in the central, south, and southeast, which we need to expand it more geographically. So the veterans in places that do not have access are there. And what we've gotten in one of our more recent successes was with the program where the community care networks were able to get a VA to cover it, but the training was done locally at a community care network. So this expansion of six additional centers that are utilizing it will provide us an ability to get to more patients because we just have patients that are in locations that can not currently get their training done. And what's different now, you know, post-COVID, with very few exceptions, the VAs are fully reopened, and we have found them much more open. interested in moving with these community care networks where they didn't have the resource or the people to do it. So the VA, I think, is, if you're a veteran now, it's a good time to go back and reach to these groups where you will be able to get training and move through the process if you're a qualified patient. On the MyoCycle, first, it's a really good product, and it works easily for the exact same patients we already call on. So a rewalk user is very commonly also would benefit with a mile cycle, and the VA covers them. So we do believe it's sustainable. I don't know what the exact quarter to quarter number, but the year-over-year product line has very good potential and expectation that it would grow, and that's the type of products that we think fit nicely with us. So sustainable, yes, on an annual basis.
spk08: Thank you. Thank you very much for that, Larry. I appreciate that.
spk11: Our next question comes from Martin Polak from KMTR. Please go ahead with your question.
spk17: Yes, just several questions. I'll kind of break it down into a couple more about the actual Germany court decision and then maybe talk about a few financial ramifications of actually what we're seeing as numbers. On the German court, is there a way for you to describe, if not immediately, the number of leads that you would be expecting since the insurance coverage area is so broad now? You would think that the German business would be significantly higher, multiples higher than what it is today. So maybe it's a matter of just describing that via leads and what could end up being a 24-25 sales revenue type number. that would be very useful to know because I think that decision was not well received by the marketplace, had very little impact on the company's stock price. In fact, overall, the stock declined somewhat after that period. So please explain that German court decision and its long-term impact.
spk05: Okay, I'll start with this. Well, first, the German court case was withdrawn, so there wasn't a formal decision, but it was a clear acceptance by the number two insurer. So it was a good outcome, especially for the patient. The impact of that is, you know, we saw the court cases that were in line for direct supply, direct process through it. So that's a good sign. Now, I think you have hit the most important point. How does that translate to leads and growth for 23, 24, 25? And we have not done well in leads with Germany during the COVID period. We literally were in a desert for most of the last two years Relative to leads with no trade shows and a population that has, it's a higher risk during the COVID period. So we've got to rebuild that lead element. And that is a lot of our early focus to get those leads going again and get these cases back into the insurers at much higher numbers. So our early focus in 2023 and 2024 is, and we think we're going to have trade shows in full again, is to build back to the lead levels we saw pre-pandemic. Then those would translate into things that are more easily processed through the insurers with the acceptance of direct supply. So the impact is going to be there, but it's going to be there more later this year. Our cycle time for most of these patients still remains six to 12 months, depending on the specifics of all the individuals from the time they think about it to the time they finish training. So that building of leads this year will be an important measurement. It will impact sales some this year, but it will impact sales if we do it effectively more in the out years.
spk17: Yeah, let's deal with some of the financial ramifications of what we're seeing. 2022 closed with about $21 million of operating expenses broken down between R&D, marketing, sales, and SG&A. You know, you look back at 2021, actually even 19, you know, you were running about $13 million, which explains why as bad as things have been at that time, you were generating an operating loss of 12 to 13 million per year. We suddenly, you know, looking at a considerably higher loss, which means that the cash is considerable. So as we look forward, if you could talk about maybe the absolute type number, what is SG&A on a normalized basis going forward with your plans Clearly, you have plans to grow. A number of expenses may be rising, but are you likely to be outrunning revenues during that time? So we should realistically expect further losses this year, even worse than possibly 2022. I mean, I'm really looking to see how you think about SG&A because you also talk about ultimately a model that can go to break even. Without an acquisition, is your model a model that can actually do that and when do you expect that to happen?
spk05: There's parts of that for me and parts of that for Mike. I think looking backward on some of the operating expenses, I'll let Mike start there and I'll pick up on the other side.
spk19: So I would say that, you know, we did see an increase in spend in 2022 versus 2021, and much of that was related to several factors. One was gearing up and entering into this process of submitting claims to Medicare. As Larry had described, that's – quite, you know, for the first time that's quite a costly and time consuming process to do it correctly. And so we had to invest in resources to be able to be in a position to be able to do that. Another factor was that we were completing several product improvements and new product, for new product introductions in 2023 and probably early 2024. So there was some product improvements going on. So there's some R&D spend that increased as a result of that factor. So I would say that those were the two primary things. We're really gearing up commercially for, and then the third thing was gearing up commercially for being able to sell to an expanded market. being the Medicare market in addition to the existing markets that we sell now. So, yes, there was an increase in investment between 2021 and 2022, but that's all related to these key priorities that we've talked about. And it's gotten to this point now where we really feel like we're very close to the finish line or very close to the goal line, if you want to use a football analogy. So, you know, I would expect that, you know, once we can, you know, normalize the process and increase the volumes of patient submissions to Medicare, that, you know, the revenue is going to build off of that and these investments will begin to pay off.
spk17: Are you suggesting that, let's say, the new normal for the SG&A may, in fact, be even lower going forward because of these kind of one-time situations that, you know, we had last year. It would be great to see that because clearly if you continue to be this level even higher, you would have to have a significant growth in revenues just to be able to maintain, certainly not burn more cash than you're doing already. So the only other question is, I will say what I thought was quite positive in these results in terms of the The cash uses I see for this quarter was considerably lower considering you said there were about $3.3 million of spend on the share repurchase. Was that what you said? I think I saw that in the comment.
spk18: Yeah, that's the cumulative amount. That's the cumulative amount.
spk17: Yes. I didn't see the cash use statement, but it looked to me cash use would then – Much better than we saw in the previous quarter or two. Cash juice was more like $3 million maybe for the quarter?
spk19: Well, we had significant also expenses in Q2 and Q3 related to the expanded proxy challenge that we had. So that unfortunately required us to divert a lot of resources that otherwise could have been spent on, you know, growing the business or preserving that capital. So... It's also another factor that drove some of the increase from 21 to 22 that we hope will not repeat itself.
spk17: So would you say that as we're looking at cash burn, which clearly at this point is just the thing that's going to continue, the hope is that we're not going to be running into the kind of numbers we saw in 22 overall, but do you think they call it sustainable growth? uh you know cash use you know x even sherry purchases could be about 12 13 million is that more likely to be the kind of number that you're thinking about um annually are we back to that kind of earlier level um since you've done a lot of that forward spending already i mean there's a big difference in terms of how quickly this cash is is is going away
spk19: Yeah, I think until we get a better sense for the ramp, you know, for the timing and our anticipated Medicare coverage and benefit establishment and the ramp associated with that benefit, it's a little premature for us at this stage to comment, you know, on full year numbers. But I would say that certainly we will be exiting the year in a We anticipate we'll be exiting the year in a much better position than we are right now because we will have that expanded market with that much larger revenue potential.
spk17: Last question. Maybe this is more like Larry. Outlook. Your outlook in previous quarters, that last one, was that based on what you were seeing, revenue growth would continue at and then last quarter apparently that did not happen. When you think about full-year outlook with all these things, you know, going on with all the opportunities, is there any reason why you wouldn't be able to make a more clear statement about growth for 2023? And at the same time, just make a comment about acquisition opportunities. It seems that... an acquisition, another vertical for the company is essential, even if it's an adjacency, clearly would be great, but the ability to integrate a company and provide some stable revenues and maybe income would make a lot of sense, quite a bit of sense while you're building this tremendous growth engine, which I think is very powerful, but, you know, it may still take two, three years for us to see the full effect. So why not in the interim really get down to an acquisition? And is there one or two that you're actually dealing with or negotiating? Because I think we were allowed to understand in previous calls that that's a very big factor in your expectations, locking down an acquisition using the current cash balance that you have.
spk05: Okay, and Marty, I'll try to comment properly on these for you. On 2023 growth, the biggest variable to us is the timing of when CMS will process and pay. So a lot of our focus this year is fill the funnel. That's why you want to do the 35 to 50 submissions. Remember, we placed one last year, and that's one in our whole history relative to CMS. That was the first one. So this year there'll be up to another 49 more. How many of those may make it or not make it through the process, we can't forecast that yet, but there's reason to be optimistic, but I just don't have any timelines that I can give you out of the final details with CMS at this point. On the acquisition side, when we look at the infrastructure we've built, that can manage everything from the complexity of Medicare claims and the complexity of a product for spinal cord injury. We have a particularly strong team. And what we learned under adding a product like the MyoCycle through the distribution agreement was that we were able to very effectively do that, and it helped leverage our cost. So what we're looking to do, part of this is we must grow SCI. We will grow SCI. We've got all the pieces going the right way. Putting some things parallel to that makes a great deal of business sense. We have put in an extensive amount of effort and spoken with many potential groups in the landscape, but there's nothing I can comment more on that at this time that we have interest and others have interest. We've got to see if something makes sense at the end of the day, and we'll report it if we get there.
spk17: Because essentially, and with regard to Outlook at this point, you're not really – things look good, but you're not committing yourself to a growth Outlook for 2023. Is that the way to understand your comments? Or you just don't want to talk about Outlook because you just said that? No.
spk05: Well, I'll try to be more specific. We will grow, we believe. Our numbers will be bigger this year than last year, and we have a particular goal in our plan, but we don't give public guidance on it. The question to us is how much we grow and how quickly. But this will be a growth year.
spk16: We're very confident in that. All right, thank you. Appreciate it.
spk07: Okay, thank you, Marty.
spk11: Once again, if you would like to ask a question, please press star and 1. And our next question comes from Charles Lucario from GTM. Please go ahead with your question.
spk09: Yes, thank you for taking my call. I appreciate it and excellent job on actually the revenue and actually turning the company around. Again, the people out there, the handicap community is probably happy that you guys are doing a great job at everything. My first question comes from the FDA 510 you guys have sitting over there at the FDA. If it does get approved, and again, I hope it does, what kind of an impact will that put on the product and the sales going forward? And is there any competitors out there that are using something similar to what's already out there in the marketplace?
spk05: Well, first, the biggest impact is the user is given access to places they can't go, and that's why we're here. What will it do for sales? I believe as we are expanding, particularly with CMS, that that is an innovative feature and why we were given a breakthrough designation by FDA for that stairs climbing component. It should have an impact and help us pull more patients through the system. Competitively, there is not a product in the world other than ours that can do this. So it puts us also in a competitive position that is advantageous for the home user that wants that type of access.
spk09: Excellent. Thank you. And another quick question would be, I know Brooks Rehabilitation has been a big follower of yours, and they have a lot of your suits. They do a lot of work with it. What's the status with them? Are they still pushing these suits out there, working with it? And also, have you guys ever considered leasing some of the suits out to some of the training tenants to get them in the door and to get more of the public market in mind on that?
spk05: I'm going to ask on the first part of your question, on the leasing suits, that has been an option we've offered at points in time, and that may expand as we get more training centers going under CMS, because I think that would work. The first part of your question, I wasn't sure who you were referencing. I didn't hear that clearly.
spk09: It was Brooks Rehabilitation. I believe they're a big product out there. Are they still doing it, and are they expanding? Are they still pushing it?
spk05: I haven't worked with Brooks recently. They've been a great center, and I know some really good outcomes out of there. I will ask my local rep as to what they've done in the last few weeks or months, but as far as I know, they're still in great standing and are an outstanding center. I know a couple of the patients. In fact, one of them was here and helped us in our usability studies recently, and they were well-trained. Sorry, I can't be more specific.
spk09: No, no, no, you didn't actually. The final question is the acquisitions. I know you had a lot of it. Are you guys looking at the acquisitions outside? I know you've got to be selective, and obviously I know the competitive marketplace out there. It seems like there's a couple of one, two, three of the big players out there, and a lot of the FDA has approved some new suits in the marketplace, and you must see that. The acquisition, are you guys looking for something that's similar to what the product is, or are you looking for something totally different, I mean, to add to your product line?
spk05: We believe we're the market leader with the exoskeleton and the developments we have going around it for SCI that will stay ahead of our competition. So we're not looking to acquire something that's really that close in. But we are in the clinics for spinal cord injury patients, for stroke patients, for MS patients, And companies that have products that can help those populations, we have a good infrastructure to help them be more successful in selling. Those are more the things we're looking at. So we're trying to stay in the neighborhood, in the universe, which we understand and have talent in. But we believe we already have a market-leading technology and can keep advancing that if we can build the referral network and the market creation side of this through access. So we're not looking to add more exoskeletons for SEI. but we certainly want to help other patients in this clinic community that go home. I can't be more specific than that, but those are the types of things we're looking for.
spk09: Well, congratulations. I think your company is in the best shape it's been in in a long time, and I think you guys are going in the right direction. So keep up all the great work, and thanks for helping all the patients out there.
spk04: Thank you. Thank you for the comments. Thank you.
spk11: And ladies and gentlemen, with that, and showing no additional questions, I'd like to turn the floor back over to the management team for any closing remarks.
spk05: Jamie, thank you very much for the call. For everybody that joined us today, I appreciate it. And for anyone who listens to this, please feel free to come forward with us and ask questions. As I've indicated, I laid out seven goals for this year. We're going to report on those quarterly so you can measure how we're doing and the progress that we're making. So I thank you for your time, and please reach out if you have other questions as we are going to expand our outreach to our investors going forward.
spk06: Thank you.
spk11: And ladies and gentlemen, with that, we'll end today's presentation. We thank you for joining. You may now disconnect your lines. Thank you. you Thank you. Thank you. Good morning, everyone, and welcome to the Rewalk Robotics fourth quarter earnings conference call. All participants will be in a 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 and then one. To withdraw your questions, you may press star and two. At this time, I'd like to turn the conference call over to Mike Lawless, Chief Financial Officer. Sir, please go ahead.
spk19: Thanks, Jamie. Good morning and welcome to Rewalk Robotics' fourth quarter and full year 2022 earnings call. I'm Mike Lawless, Rewalk Robotics' Chief Financial Officer, and with me on the call are Larry Jasinski, Rewalk's Chief Executive Officer, and Amal Ghadar, Rewalk's Vice President of Finance. Earlier this morning, REWALK issued a press release detailing financial results for the three months and full year ended December 31, 2022. This press release and a webcast of this call can be accessed through the investor relations section of the REWALK website at rewalk.com. Before we get started, I'd like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation, or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to REWOC management as of today and involve risks and uncertainties, including those noted in our press release and REWOC's filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. REWOC specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. A replay will be available shortly after 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 the company's website. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on February 23, 2022. 2023, excuse me. Since that date, Rewalk may have made subsequent announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings for the most up-to-date information. With that, I'll turn the call over to Rewalk's CEO, Larry Jasinski.
spk01: Thank you, Mike.
spk19: Good morning.
spk05: Thank you for joining us today. We closed 2022 with positive results in Q4, and more importantly, with progress on each of our major areas of focus to drive the business over the next three years. The goals of 2022 were to move forward with CMS, to expand acceptance of direct supply in Germany, to improve the rewalk system by adding curb and stair climbing features in the US, and with an advanced model of the rewalk that can improve the user experience. and to identify additional product offerings to build our critical and strategic mass that improves our financial performance. Sales in Q4 were $2.18 million, driven by new VA activity post-COVID, the provision of systems from direct supply acceptance in Germany, and the growth with the distributed mile cycle product. The mile cycle is an excellent example of the efficiency and value of an adjacent offering and a model for adding more products. Mike will address our results further in the financial discussion. During 2022, we requested a benefit category in the public hearings with the Healthcare Common Procedure Coding Systems, known as HCPCS, under our established coverage code. CMS has not yet provided the category and pricing but instructed us to begin the process of submitting cases. The first Medicare patient received their system during Q4 and has completed their training program. The category and pricing are still in processing with the Medicare Administrative Contractor, the MAC. We are now moving ahead with multiple patient submissions and building the required infrastructure to replicate this for a large number of patients on an ongoing basis. In November, Barmer, the second largest statutory health insurer, the SHI, in Germany, elected to adopt direct supply and withdrew their federal court social court challenge. They immediately supplied the individual from the case with the rewalk system and have moved others forward under the direct supply approach. Our initial submission to the US FDA to expand access for the disabled community by adding STAIR and CURB function was reviewed, and we received questions in the form of an additional information request for the submission. Among the questions was a request for usability data as per new FDA guidelines. We promptly set up and conducted the required study, and this additional information was subsequently submitted to the FDA for consideration. In parallel, we also conducted a similar study with the advanced generation of the REWALK system, and we'll include that information in that submission. The next generation of the REWALK system includes additional user controls, provision of additional data on utilization for the user and care providers, and enhanced longer cycle battery system and other design features requested by users over the past few years. Over the course of 2022, we considered a significant number of paths to increase our critical mass and to develop long-term strategic mass. Our goal is to add products that fit within the neural rehabilitation segment and that are adjacent to our call points within the clinics and in the home community after clinic treatment or training is completed. With the emphasis on financial value, we are focused on product lines that will be accreted to our financial position in the 12-month or less cycle, offer leverage and synergy in operational cost and will contribute to achieving a break-even profitable position with our current capital. I'd now like to turn the call over to Mike for a review of financial details.
spk19: Mike? Thanks, Larry. For most of my discussion of the financial results, I'm going to focus on the Q4 performance as our press release in 10K addressed the annual results. For the fourth quarter of 2022, Rewalk reported revenue of $2.2 million, up $0.9 million, or 75%, as compared to $1.2 million in the fourth quarter of 2021. The increase in quarterly revenue was a result of improved sales performance across product lines and geographies. For our core exoskeleton product line, we experienced growth in volumes in both the U.S. and EU, both from a year-over-year standpoint versus Q4'21 and on a sequential basis from Q3'22. We also had strong performance in Q4 from our distributed MyoCycle FES products. We market these as an exclusive distributor to U.S. rehabilitation clinics, VA hospitals, and to veterans for home use. Since we started distributing this product line in 2020, we have steadily grown it and achieved revenue of over half a million dollars in Q4, marking by far our highest quarterly performance for this product line. I also want to briefly comment on the annual revenue performance. For the full year 2022, we achieved revenue of $5.5 million as opposed to $6.0 million for the full year 2021. The decline in revenue was a result of two factors. First, in 2021, we had a large one-time multiple unit shipment to an academic medical center that was a departure from our typical sales and which did not reoccur in 2022. Second, during 2022, we had a significant foreign exchange headwind due to the erosion of the Euro-dollar exchange rate. Excluding the impact of these two factors, revenue would have increased by 10% in 2022, reflecting growth in our underlying base business. Now I will transition to our pipeline. With the increased revenue performance in Q4, we succeeded in converting some of our near-term opportunities in our pipeline to revenue. During the first quarter of 2023, we will focus our efforts on adding to our commercial pipeline in order to lay the foundation for growth in 2023. These efforts include generating more leads in our traditional reimbursement market segments, such as in the U.S. for individuals covered by the VA or selected workers' compensation insurance, and in Germany for individuals covered under the German healthcare system. Additionally, we are focusing a great deal of resources and planning on an anticipated future new market segment, individuals who are Medicare beneficiaries. Within our traditional market segments for the REWOC product line, the current pipeline of active rentals consists of 16 cases, including 13 in Germany and 3 VA rentals in the U.S. Our overall number of cases in process currently sits at 65, with 49 in Germany and 16 in the U.S. Importantly, these pipeline figures do not include cases that would be eligible for Medicare reimbursement since, although CMS has established Medicare coverage for exoskeletons, CMS is still in the process of establishing a benefit category designation under which we can be reimbursed. The initial claim that we filed back in November is set in motion process, which we believe will create a mechanism for us to be reimbursed by Medicare in the near future. If we successfully work with CMS to establish an acceptable reimbursement mechanism, we expect to build a pipeline of Medicare eligible patients which could meaningfully supplement our future pipeline volumes. Okay, turning to margins from Q4. Our Q4 22 gross profit was $0.7 million or 30.8% of revenue, up 4.3 percentage points as compared to 0.3 million or 26.5% of revenue. in Q421. This increase was mainly driven by the impact of higher revenue volumes leveraging our fixed production costs. During Q422, we applied an impairment reserve against certain electronic components in our restore inventory due to the potential obsolescence of these parts. If we exclude the impact of this non-cash reserve, gross profit would have been 1.2 million or 53.9% of revenue in Q4. Operating expenses in Q4 were $5.7 million, up $1.5 million, or 36%, as compared to $4.2 million in Q4-21. Within R&D, spending increased $0.4 million, or 59%, primarily due to higher spending on professional services related to the development products for new product introductions expected over the next 12 months. In selling and marketing, spending increased 0.8 million, or 44%, primarily due to higher consulting fees associated with the CMS reimbursement progress and greater commercial activity as COVID-related restrictions are lifted, including trade show, travel, and personnel-related expenses. General and administrative expenses grew 0.3 million, or 17%, as compared to Q4-21. but did decline sequentially from Q3 22 as the last of the professional services expenses associated with the expanded 2022 proxy process did not carry over into Q4. Our net loss for Q4 22 was $5.3 million, or $0.09 per share, as compared to a net loss of $3.9 million, or $0.06 per share, in Q4 21. Our non-GAAP net loss for Q4-22 was $4.9 million, or 8 cents per share, as compared to $3.6 million, or 6 cents per share, in Q4-21. We ended the quarter with $67.9 million in cash and cash equivalents and no debt. We continue to have a strong balance sheet with resources to fund our organic growth, including our efforts to expand access for Medicare beneficiaries to our REWOC exoskeletons, as well as to pursue attractive business development opportunities to distribute or acquire additional complementary products with which we can build and scale and supplement our growth. Since the initiation of a share repurchase program in Q3-22, we have repurchased $3.3 million of stock, representing about 6% of total shares issued. Our initial six-month authorization from the Israeli court for the repurchase program expired in January of this year, so we filed a motion with the court for permission to continue with repurchases for a second six-month period, and we received approval of this from the court. Upon exit from our trading blackout two days following the date of this call and the earnings release, we will be eligible once again to repurchase shares, and we expect to monitor equity market conditions and evaluate potential buyback activities as needed. With that, I'd like to turn the call back to Larry for further comments.
spk01: Thank you, Mike.
spk05: Our goals for 2023 are, one, to achieve sales growth via our CMS and VA activity, along with adding more commercial insurers in Germany. Two, to expand our product offering through distribution and acquisition, and to leverage these activities to move towards break-even profitable operations with our current capital. The internal sales growth will build upon the 2022 progress on direct supply in Germany with the placement of systems with U.S. Medicare program with CMS and with expansion to more VA centers. Other growth drivers will be technical and regulatory advancements of the rewalk exoskeleton and expansion of the company through the addition of product loans. To measure our progress in 2023, I have seven areas I'd like to highlight. Expansion of CMS case submissions. We are building our infrastructure for qualifying and processing claims within the expected requirements of the regional MACs with CMS. These are extensive submissions to ensure patient selection is optimal to become successful re-walkers. This approach will benefit the user, CMS, other insurers, and the company with successful use of the product. We will target between 35 to 50 CMS submissions in 2023 by building an infrastructure to expand that significantly in 2024 and 2025. Until late 2022, RUS coverage was limited to the VASOP, which comprised approximately 10% of the spinal cord injury market. Spinal cord injury occurs in a younger population, and five years post-injury, approximately 30.9% of the spinal cord injury market is covered under Medicare, and another 25.2% are covered under Medicaid. We also anticipate the progress of CMS will be considered by private payers, and we will begin contacts with private insurers as the market develops. These activities allow us to develop this market with the new access to a larger audience. As an example, many clinicians we speak with have been unwilling to write a prescription for a product that was unlikely to be accessible via coverage to the individual. With coverage expanding through CMS and others, access to this technology is becoming realistic, which will allow the development of referring for their patients who want to ambulate with an exoskeleton system. We currently have over 170 previously screened CMS leads that are being re-qualified for submissions. Our lead base was very limited in the pandemic period as this population is a high risk group. We will now seek to expand our lead gathering efforts through digital promotion, trade shows, and by building referral efforts with key opinion leaders. Number two, expansion of VA training centers. As the resources and VA medical centers, the VMACs, are becoming increasingly active post-COVID, we are working closely with the VA to expand both the number of VMACs that can actively qualify and conduct or manage exoskeleton training and the use of qualified and contracted community-based provider groups that may be more conveniently geographic for veterans. There are currently three active, reliable centers in the United States, And our goal is to expand that by at least six over the remainder of the calendar year 2023. Number three, in Germany, we will seek to add additional groups to our direct supply contracts now that we are in the, we're post the acceptance of the direct supply from the court proceedings. We also must reestablish our lead base post COVID with a shift towards digital promotion, working with local societies and the reemergence of trade shows in full in 2023. Number four, product acquisition. We have identified product lines and entities that have interest and that would financially benefit from operating within a consolidated enterprise infrastructure focused on neurorehabilitation. The profile for this strategy is to work with adjacent, accretive, advanced technologies that support the clinics and the patient community. These considerations have a high priority, and we have a banking partner assisting in the analysis, transaction considerations, and completing these efforts. We will report on these initiatives as they reach conclusions. Number five, organic product improvements. A significant user limitation exists when a re-walker is walking and they then encounter a curb or stairs that prevents access. Examples include visiting a friend's home with steps or stairs, or locations where curb cutouts, ramps, or elevators are not available. Addition of the curb stair function is under review at the FDA from our submission in 2022. We have responded in full to the FDA's additional information request and are prospectively preparing training programs for a launch in 2023. This is subject to completing a successful FDA review. On the next advancements of the RE-ORG system, we are in finalization of late-stage development and final preparation for FDA submission. We expect to submit this for FDA review and CE review in the second half of 2023. Number six, data expansion. For our stroke technology designs, we are supporting the independent study of a comparison of the motor and cable-driven system of a plant reflection-focused technology to the existing ankle foot orthosis technologies, commonly known as AFOs. Our targeted base technology for a home community use design has been named the ReBoot. We have previously been granted a breakthrough designation that would have included some Medicare coverage at that time. That program has since been deferred by the U.S. government, and replacement programs are being considered but we no longer expect that path as the likely coverage pathway for this innovative design. As we have conducted a parallel reimbursement review, we believe this design may be covered within existing codes if our data demonstrates the benefit of this technical innovation over an AFO. This initial study is a pilot to support consideration of a larger company-sponsored randomized clinical trial. For our rewalk SCI product, we supported a grant to the VA considering the medical cost of a rewalk ambulator to the medical outcome of a matched profile wheelchair user. That data will be presented and published during 2023. And number seven, financially, 2023 includes further investment and reimbursement to complete the submission definitions to provide the processing infrastructure to allow patient access and to provide growth for the company. In addition, as our mission and position expand, we have increased our investment to support investor relations to broaden the communication and reach to the investment community. In conclusion, our overall direction is to succeed with the core SCI product line as insurance access is more widely accepted and to build both critical and strategic mass as a consolidator that will meet the broader needs in the clinic and in the community for neural rehabilitation. We understand and are seeking to complete this level of expansion and growth to break even profitability on our current cap. We are going the right direction, and I wish to thank the team for the results in 2022 and how they are building upon them in 2023. I also wish to thank our shareholder base for their continued commitment in supporting these life-changing technologies and their support as we expand this business in 2023 and 2024. I look forward to providing further updates during 2023. At this point, operator, we're prepared to take and answer all questions if we could move to that process.
spk11: Ladies and gentlemen, at this time, if you would like to ask a question, please press star and then one on a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the numbers to ensure the best sound quality. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster.
spk10: And our first question today comes from
spk11: Swayam Pakala from Ramankath from R.C. Wainwright. Please go ahead with your question.
spk08: Thank you. This is R.K. from R.C. Wainwright. So, good morning, gentlemen. It looks like we had a fantastic fourth quarter and St. Elgort and Stolov in a really interesting 23 as well. Larry, you stated, you know, seven different things that you're hoping to execute over the rest of the year. So, given the two positives from last year, especially from the CMS and also from the German court, can you just highlight some of... some of the progress that you're making beyond the initial success in the sense, you know, you said you submitted one application to the MAC. You know, how well are they progressing? You know, is the progress encouraging enough that you can go forward with the additional submissions? And on the German side, you know, you said the insurance company over there has given, has started working through the applications for their insured lives. How is that going forward? What is the expectation in terms of revenue run from that particular workers' comp? insurance. Okay. Sorry for the long question.
spk05: That was a long question, but I took notes, so I think I'll remember everything, or at least most of it. And first, yes, it was a good quarter, and the seven targets we believe are very achievable for us this year, the things that I highlighted at the back end, and I'll update those every quarter. Regarding first the MAC process and the progress, I You know, submitting the first case is the hardest because you're interpreting and doing everything and trying to establish the standards for that case. And we use that as a base for, okay, how do we construct the rest of them? And that's really been a lot of infrastructure building and also to make sure that we comply in every way as a Medicare supplier. We are an accredited supplier and that requires everything from everything must be handled perfectly relative to HIPAA compliance and how we're handling data and in the systems that we have. So there was a lot of internal auditing preparation for the go live mindset. And that's really the great value of case one. Because case one, we put more effort in than we probably put in anything for a long time relative to a single case to make sure we have that structure. Because we're not trying to set this up for just one case. We're trying to set it up to do, as I said, 35 to 50 this year. So it's been a process development. So from an internal side, we've come a long way. On the MAC side, the case is moving forward, but I don't have anything I can report at this time. The most important thing is the user has their system, they've completed their training, and the completion of the process is now being worked with with them. So that's as much as I can give you on the first part. The second part, the German court, the reaction by Barmer was what we'd hoped it would be in that the individual who was the court case got his unit. He's walking. And so that is a big success, at least if you're the view of the individual. And then the other cases they had that were open have been quickly moved forward. So that tells us that, yes, they completely accepted what they said they would do. The contract process in Germany is very important to us, and it is sort of an annualized or periodic thing. And as we are now... redoing our contracts with many groups relative to things such as pricing and some other details that change year over year. We would hope to bring some of these other groups that are not under contract under contract. So that is our goal, and those are the conversations that are underway. And between now and sometime in Q2, those should reach a conclusion with them either joining or not joining the contracts. Fundamentally, there is a benefit to them and to us for them to be under contract. but they still have to make a decision to do it, and it just makes it easier to process. So the German one is moving also forward in a way that we believe will help us for our 2023 revenue.
spk08: Thanks for that, Larry. And then this court case where Barmer, fortunately for you, walked away from the case, does that lay as a strong precedent within Germany's workers' comp so that now you have the potential for success with other workers' comp. Is that the case or is it still going to be individually each workers' comp insurance can make a decision independent of what happened in the Barmer's court case.
spk05: One quick clarity. Barmer is a statutory health insurer, so it's more the general public insurance and private insurance that goes through their German health system. The workman's comp in Germany is the DGUV, and we have a contract with them. So our workman's comp in Germany is well-established. relative to the statutory health insurers and Barmer, which I agree your question was, is they will make a decision as to whether they enter the contract, and other groups technically have a decision whether or not they join a contract, but we do not believe there's a strong basis for any of them to challenge whether or not, if they supply these, whether they're under direct supply or not. There is, as Barmer withdrew and accepted There is no formal court case decision, so I can't say there is a court case that is a precedent. However, because that one had gone so far and the number one, two, three insurers in Germany now have all accepted this, it would be difficult for others to claim that it is not the standard in the industry. But I can't say there's a specific precedent if that answers your question.
spk08: Thank you. I have one more two-part question and then I'll step back into the line. In terms of the VA expansion that you're talking about, VA training center expansion that you're talking about, is there more color you can provide us in the sense, I believe if I took my notes right, there are 16 cases in rentals out there, I'm guessing most of them are from the VA, you know, should we expect that to increase as you continue to expand these training centers? And the second part of the question, a little bit different, on the mile cycle product distribution, which was strong in the Q4, you know, increasing greater than half a million, is that something that that can be sustainable over 23 and beyond, or is this one of those one-off things that we have to wait and watch as the quarters progress?
spk05: Okay, thank you. I'll start with the VA. We still have a good number of veterans waiting in line for training or waiting to move through processing at the VA, and a lot of the limitation has been around either available personnel to train or geographic location. So this expansion with the VA, you know, presently we have three really reliable centers that can take care of patients, but that only covers three parts of the United States, and they're mostly in the central, south, and southeast, which we need to expand it more geographically. So the veterans in places that do not have access are there. And what we've gotten in one of our more recent successes was with the program where the community care networks were able to get a VA to cover it, but the training was done locally at a community care network. So this expansion of six additional centers that are utilizing it will provide us an ability to get to more patients because we just have patients that are in locations that can not currently get their training done. And what's different now, you know, post-COVID, with very few exceptions, the VAs are fully reopened, and we have found them much more open. interested in moving with these community care networks where they didn't have the resource or the people to do it. So the VA, I think, is, if you're a veteran now, it's a good time to go back and reach to these groups where you will be able to get training and move through the process if you're a qualified patient. On the Myocycle, first, it's a really good product. And it works easily for the exact same patients we already call on. So a rewalk user is very commonly also would benefit with a myocycle, and the VA covers them. So we do believe it's sustainable. I don't know what the exact quarter to quarter number, but the year-over-year product line has very good potential and expectation that it would grow. And that's the type of products that we think fit nicely with us. So sustainable, yes, on an annual basis.
spk08: Thank you. Thank you very much for that, Larry. I appreciate that.
spk11: Our next question comes from Martin Polak from KMTR. Please go ahead with your question.
spk17: Yes, just several questions. I'll kind of break it down into a couple more about the actual Germany court decision and then maybe talk about a few financial ramifications of actually what we're seeing as numbers. On the German court, is there a way for you to describe, if not immediately, The number of leads that you would be expecting since the insurance coverage are so broad now, you would think that the German business would be significantly higher, multiples higher than what it is today. So maybe it's a matter of just describing that via leads and what could end up being a 24, 25 sales revenue type number. That would be very useful to know because I think That decision was not well received by the marketplace, had very little impact on the company's stock price. In fact, overall, the stock declined somewhat after that period. So please explain that German court decision and its long-term impact.
spk05: Okay, I'll start with that. Well, first, the German court case was withdrawn, so there wasn't a formal decision, but it was a clear acceptance by the number two insurer. So it was a good outcome, especially for the patient. The impact of that is we saw the court cases that were in line for direct supply, direct process through it. So that's a good sign. Now, I think you have hit the most important point. How does that translate to leads and growth for 23, 24, 25? And we have not done well in leads with Germany during the COVID period. We literally were in a desert for most of the last two years. relative to leads with no trade shows and a population that has, it's a higher risk during the COVID period. So we've got to rebuild that lead element, and that is a lot of our early focus to get those leads going again and get these cases back into the insurers at much higher numbers. So our early focus in 2023 and 2024 is, and we think we're going to have trade shows in full again, is to build back to the lead levels we saw pre-pandemic. Then those would translate into things that are more easily processed through the insurers with the acceptance of direct supply. So the impact is going to be there, but it's going to be there more later this year. Our cycle time for most of these patients still remains six to 12 months, depending on the specifics of all the individuals from the time they think about it to the time they finish training. So that building of leads this year will be an important measurement. It will impact sales some this year, but it will impact sales if we do it effectively more in the out years.
spk17: Yeah, let's deal with some of the financial ramifications of what we're seeing. 2022 closed with about $21 million of operating expenses broken down between R&D, marketing, sales, and SG&A. You know, you look back at 2021, actually even 19, you know, you were running about $13 million, which explains why as bad as things have been at that time, you were generating an operating loss of 12 to 13 million per year. We suddenly, you know, looking at a considerably higher loss, which means that the cash is considerable. So as we look forward, if you could talk about maybe the absolute type number, what is SG&A on a normalized basis going forward with your plans Clearly, you have plans to grow. A number of expenses may be rising, but are you likely to be outrunning revenues during that time? So we should realistically expect further losses this year, even worse than possibly 2022. I mean, I'm really looking to see how you think about SG&A because you also talk about ultimately a model that can go to break even. Without an acquisition, is your model a model that can actually do that and when do you expect that to happen?
spk05: There's parts of that for me and parts of that for Mike. I think looking backward on some of the operating expenses, I'll let Mike start there and I'll pick up on the other side.
spk19: So I would say that, you know, we did see an increase in spend in 2022 versus 2021, and much of that was related to several factors. One was gearing up and entering into this process of submitting claims to Medicare. As Larry had described, that's – For the first time, that's quite a costly and time-consuming process to do it correctly. And so we had to invest in resources to be able to be in a position to be able to do that. Another factor was that we were completing several product improvements for new product introductions in 2023 and probably early 2024. So there was some product improvements going on. So there's some R&D spend that increased as a result of that factor. So I would say that those were the two primary things. We're really gearing up commercially for, and then the third thing was gearing up commercially for being able to sell to an expanded market. being the Medicare market in addition to the existing markets that we sell now. So, yes, there was an increase in investment between 2021 and 2022, but that's all related to these key priorities that we've talked about. And it's gotten to this point now where we really feel like we're very close to the finish line or very close to the goal line, if you want to use a football analogy. So, you know, I would expect that, you know, once we can, you know, normalize the process and increase the volumes of patient submissions to Medicare that, you know, the revenue is going to build off of that and these investments will begin to pay off.
spk17: Are you suggesting that, let's say, the new normal for the SG&A may, in fact, be even lower going forward because of these kind of one-time situations that, you know, we had last year. It would be great to see that because clearly if you continue to be this level even higher, you would have to have a significant growth in revenues just to be able to maintain, certainly not burn more cash than you're doing already. So the only other question is, I will say what I thought was quite positive in these results in terms of the The cash uses I see for this quarter was considerably lower considering you said there were about $3.3 million of spend on the share repurchase. Was that what you said? I think I saw that in the comment.
spk18: Yeah, that's the cumulative amount. That's the cumulative amount.
spk17: Yes. I didn't see the cash use statement, but it looked to me cash use would then – Much better than we saw in the previous quarter or two. Cash juice was more like $3 million maybe for the quarter?
spk19: Well, we had significant also expenses in Q2 and Q3 related to the expanded proxy challenge that we had. So that unfortunately required us to divert a lot of resources that otherwise could have been spent on, you know, growing the business or preserving that capital. So... It's also another factor that drove some of the increase from 21 to 22 that we hope will not repeat itself.
spk17: So would you say that as we're looking at cash burn, which clearly at this point is just the thing that's going to continue, the hope is that we're not going to be running into the kind of numbers we saw in 22 overall, but do you think they call it sustainable growth? uh you know cash use you know x even sherry purchases could be about 12 13 million is that more likely to be the kind of number that you're thinking about um annually are we back to that kind of earlier level um since you've done a lot of that forward spending already i mean there's a big difference in terms of how quickly this cash is is is going away
spk19: Yeah, I think until we get a better sense for the ramp, you know, for the timing and our anticipated Medicare coverage and benefit establishment and the ramp associated with that benefit, it's a little premature for us at this stage to comment, you know, on full year numbers. But I would say that certainly we will be exiting the year in a We anticipate we'll be exiting the year in a much better position than we are right now because we will have that expanded market with that much larger revenue potential.
spk17: Last question. Maybe this is more like Larry. Outlook. Your outlook in previous quarters, that last one, was that based on what you were seeing, revenue growth would continue at and then last quarter apparently that did not happen. When you think about full-year outlook with all these things going on with all the opportunities, is there any reason why you wouldn't be able to make a more clear statement about growth for 2023? And at the same time, just make a comment about acquisition opportunities. It seems that... an acquisition, another vertical for the company is essential, even if it's an adjacency, clearly would be great, but the ability to integrate a company and provide some stable revenues and maybe income would make a lot of sense, quite a bit of sense while you're building this tremendous growth engine, which I think is very powerful, but, you know, it may still take two, three years for us to see the full effect. So why not in the interim really get down to an acquisition? And is there one or two that you're actually dealing with or negotiating? Because I think we were led to understand in previous calls that that's a very big factor in your expectations, locking down an acquisition using the current cash balance that you have.
spk05: Okay, and Marty, I'll try to comment properly on these for you. On 2023 growth, the biggest variable to us is the timing of when CMS will process and pay. So a lot of our focus this year is fill the funnel. That's why you want to do the 35 to 50 submissions. Remember, we placed one last year, and that's one in our whole history relative to CMS. That was the first one. So this year, there'll be up to another 49 more. How many of those may make it or not make it through the process, we can't forecast that yet, but there's reason to be optimistic, but I just don't have any timelines that I can give you out of the final details with CMS at this point. On the acquisition side, when we look at the infrastructure we've built that can manage everything from the complexity of Medicare claims and the complexity of a product for spinal cord injury. We have a particularly strong team. And what we learned under adding a product like the MyoCycle through the distribution agreement was that we were able to very effectively do that, and it helped leverage our cost. So what we're looking to do, part of this is we must grow SCI. We will grow SCI. We've got all the pieces going the right way. Putting some things parallel to that makes a great deal of business sense. We have put in an extensive amount of effort and spoken with many potential groups in the landscape, but there's nothing I can comment more on that at this time. We have interest and others have interest. We've got to see if something makes sense at the end of the day, and we'll report it if we get there.
spk17: Because essentially, and with regard to Outlook at this point, you're not really, things look good, but you're not committing yourself to a growth Outlook for 2023. Is that the way to understand your comments? Or you just don't want to talk about Outlook because you just said that?
spk05: Well, I'll try to be more specific. We will grow, we believe. Our numbers will be bigger this year than last year. And, you know, we have a particular goal in our plan, but we don't give public guidance on it. The question to us is how much we grow and how quickly. But this will be a growth year.
spk16: We're very confident in that. All right. Thank you. Appreciate it.
spk07: Okay. Thank you, Marty.
spk11: Once again, if you would like to ask a question, please press star and 1. And our next question comes from Charles Lucario from GTM. Please go ahead with your question.
spk09: Yes, thank you for taking my call. I appreciate it and excellent job on actually the revenue and actually turning the company around. Again, the people out there, the handicap community is probably happy that you guys are doing a great job at everything. My first question comes from the FDA 510 you guys have sitting over there at the FDA. If it does get approved, and again, I hope it does, what kind of an impact will that put on the product and the sales going forward? And is there any competitors out there that are using something similar to what's already out there in the marketplace?
spk05: Well, first, the biggest impact is the user is given access to places they can't go, and that's why we're here. What will it do for sales? I believe as we are expanding, particularly with CMS, that that is an innovative feature and why we were given a breakthrough designation by FDA for that stairs climbing component. It should have an impact and help us pull more patients through the system. Competitively, there is not a product in the world other than ours that can do this. So it puts us also in a competitive position that is advantageous for the home user that wants that type of access.
spk09: Excellent. Thank you. And another quick question would be, I know Brooks Rehabilitation has been a big follower of yours, and they have a lot of your suits. They do a lot of work with it. What's the status with them? Are they still pushing these suits out there, working with it? And also, have you guys ever considered leasing some of the suits out to some of the training tenants to get them in the door and to get more of the public market in mind on that?
spk05: I'm going to ask on the first part of your question, on the leasing suits, that has been an option we've offered at points in time, and that may expand as we get more training centers going under CMS, because I think that would work. The first part of your question, I wasn't sure who you were referencing. I didn't hear that clearly.
spk09: It was Brooks Rehabilitation. I believe they're a big product out there. Are they still doing it, and are they expanding? Are they still pushing it?
spk05: I haven't worked with Brooks recently. They've been a great center, and I know some really good outcomes out of there. I will ask my local rep as to what they've done in the last few weeks or months, but as far as I know, they're still in great standing and an outstanding center. I know a couple of the patients. In fact, one of them was here and helped us in our usability studies recently, and they were well-trained. I'm sorry, I can't be more specific.
spk09: No, no, no, you didn't actually. The final question is the acquisitions. I know you had a lot of it. Are you guys looking at the acquisitions outside? I know you've got to be selective, and obviously I know the competitive marketplace out there. It seems like there's a couple of one, two, three of the big players out there, and a lot of the FDA has approved some new suits in the marketplace, and you must have seen that. The acquisition, are you guys looking for something that's similar to what your product is, or are you looking for something totally different, I mean, to add to your product line?
spk05: We believe we're the market leader with the exoskeleton and the developments we have going around it for SCI that will stay ahead of our competition. So we're not looking to acquire something that's really that close in. But we are in the clinics for spinal cord injury patients, for stroke patients, for MS patients, And companies that have products that can help those populations, we have a good infrastructure to help them be more successful in selling. Those are more the things we're looking at. So we're trying to stay in the neighborhood, in the universe, which we understand and have talent in. But we believe we already have a market-leading technology and can keep advancing that if we can build the referral network and the market creation side of this through access. So we're not looking to add more exoskeletons for SCI. but we certainly want to help other patients in this clinic community that go home. I can't be more specific than that, but those are the types of things we're looking for.
spk09: Well, congratulations. I think your company is in the best shape it's been in in a long time, and I think you guys are going in the right direction. So keep up all the great work, and thanks for helping all the patients out there.
spk04: Thank you. Thank you for the comments. Thank you.
spk11: And ladies and gentlemen, with that and showing no additional questions, I'd like to turn the floor back over to the management team for any closing remarks.
spk05: Jamie, thank you very much for the call. For everybody that joined us today, I appreciate it. And for anyone who listens to this, please feel free to come forward with us and ask questions. As I've indicated, I laid out seven goals for this year. We're going to report on those quarterly so you can measure how we're doing and the progress that we're making. So I thank you for your time, and please reach out if you have other questions as we are going to expand our outreach to our investors going forward. Thank you.
spk11: And, ladies and gentlemen, with that, we'll end today's presentation. We thank you for joining. You may now disconnect your lines.
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