ViewRay, Inc.

Thank you for standing by and welcome to the Q1 2022 View Rate Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. As a reminder, today's conference call is being recorded. I will now turn the conference over to your host, Mr. Matt Harrison, Director of Investor Relations, so you may begin.

Thank you, Valerie. Good afternoon, everyone, and welcome to ViewRay's first quarter conference call. Joining me today are Scott Drake, our president and chief executive officer, and Zach Stassin, our chief financial officer. Earlier today, ViewRay issued a press release and presentation for today's call. The presentation can be viewed live on our webcast or downloaded from our website. Today's call is being broadcast and webcast live. A replay will be available on our website for 14 days. Before we begin, I would like to remind you that the discussion during this conference call will include forward-looking statements. Factors that could cause actual results to differ materially are discussed in the company's most recent filings with the SEC. I will now turn the call over to Scott.

Thanks, Matt. Good afternoon, everyone. Welcome to our Q1 call. Today I will highlight our quarterly performance and provide context on our exciting growth journey. In a nutshell, our strategy is working as intended. Our clinical and innovation pipelines are feeding and fueling our commercial progress. I will put a financial lens on our strategy to demonstrate how our industry-leading revenue growth will drive P&L leverage on our path to cash flow breakeven. Zach will go into depth on key metrics, and then we look forward to answering your questions. In Q1, we added seven more orders, and the backlog increased to $331 million, up 25% versus prior year, and revenue grew 22%. Cash use for the quarter was $35 million, and as a reminder, Q1 is our seasonally highest cash use quarter. We finished the quarter with $183 million of cash on hand, which we believe gets us to cash flow break-even. As previously stated, we expect the first half of 22 to look a lot like 2021 and then ramp into the back half of the year. Things are unfolding as anticipated. These results position us well for the balance of the year and set us up for an exciting 2023. Let's take a look at what we've accomplished and where we're going. Turning to slide four, over the last three years, we doubled the number of Meridian systems and more than quadrupled the number of patients treated. During that same period, we made considerable progress on our clinical, innovation, and commercial pipelines. We expect this rapid progress and trajectory to continue and deliver a similar doubling and quadrupling over the next two to three years. Slide five demonstrates why we're confident in our future growth. With current active systems, plus those in process of being installed, plus our backlog, we have clear and pretty quick line of sight to about 120 active Meridian programs. We expect this number will be augmented by the considerable activity in our commercial pipeline. On slide six, we've shared many times that our clinical and innovation pipelines feed and fuel our commercial pipeline. All three are accelerating and our business is gaining momentum. According to key opinion leaders, the clinical data that our customers have generated and that which is forthcoming is unlike anything ever seen in the industry. We are demonstrating survival and local control in the toughest to treat cancers such as pancreas. In more common cancers like prostate, customers are proving and delivering critical quality of life benefits. On the innovation front, A3I delivers the top capabilities and enhancements our customers desire. The clinical proof and product innovations are driving therapy adoption and purchasing decisions. More and more patients are learning about the benefits of Meridian Therapy, and we're actively driving awareness. On slide seven, patients will ultimately write the ViewRay story. Once they are aware that short courses of effective, and virtually side effect-free therapy is available, they will demand it. This movement is happening organically as patients and their loved ones do research. Concurrently, we are actively using our compelling clinical data to drive awareness. As an example, we leveraged Dr. Chung's outstanding pancreatic data that demonstrated 53% two-year survival on Meridian. We engaged with PanCan, a pancreatic cancer patient advocacy group, and spent time educating their patient services team. These efforts are already having an impact. Multiple patients from across the U.S. were informed that their pancreatic cancer was inoperable and their survival outlook was dim. Unsatisfied with their prognosis and lack of options, each patient sought guidance from PANCAN, I'm pleased to say that all of these patients have or will be traveling to various customers across the country to receive life-changing treatment that can only be provided by Meridian. Following our success with the Mirage and Scimitar trials, we've begun to engage with patient advocacy groups for prostate cancer and will utilize this playbook across new cancer types as we continue to clinically differentiate Meridian and change the paradigm of care. We're often asked about the impact of our clinical data on our commercial pipeline. UCLA answered this question on a webinar two weeks ago. They shared that demand for Meridian therapy is quote unquote skyrocketing. Patients traveling for Meridian creates competition which stimulates demand. On slide eight, the most catalytic force on our business is the impact of a successful Meridian program that competitively attracts patients. Our efforts are squarely focused on concentrating more and more programs in target markets. The foundational elements of our strategy include our clinical, innovation, and commercial pipelines, and driving patient awareness. These efforts are yielding more customers by incremental meridian systems, increasing competitive market dynamics, and accelerating therapy adoption. Turning to slide nine. Take Florida as an example. Four successful Meridian programs have led to two more. Patients are traveling to these sites across city, state, and country lines. We are seeing this competitive dynamic play out in an increasing number of markets. Florida, California, the Northeast Seaboard, France, Italy, and the UK are all budding examples of accelerating markets. We are systematically driving this cycle, and it is gaining momentum. The Meridian Value Chain, clinical value leading to strategic and economic value, combined with market competition and augmented by patient awareness are a powerful combination for driving significant future growth. To make this more granular, on slide 10, each order that we take is worth approximately $12 million in future revenue. half from the system sale, and the other half from recurring revenue. Think of the impact of a seven-order quarter. Seven orders represents about 40 million in system revenue and another 40 million in recurring revenue. As such, in Q1, we generated what we anticipated to be about $80 million in future revenue. We did likewise in each of the prior four quarters. In line with this approach, Over the past five quarters, we've generated about 400 million in future revenue. This kind of growth is powerful and striking in light of a business that provided guidance of 84 to 104 million in revenue this year. This growth drives excellent P&L leverage. Let's take a look at the full year 2022 on slide 11. This year, we're set up to grow about 40% on the top line. Our backlog and commercial pipeline put us in a very strong position for rapid top-line growth in 2023. Moving down to the gross margin line, we're set up to drive 750 to 1,000 basis points of improvement in 2022, and likewise, we're set up for significant expansion in 23. From an operating expense standpoint, you will see restraint. We expect a nominal OPEX increase in 22 with revenue growing at many times the rate of OpEx. We are preparing for a capital markets day later this year, where we'll provide more granularity on our revenue growth, gross margin expansion, operating leverage, and very importantly, illustrate that we have the balance sheet we need to get to cash flow breakeven. I will now turn the call over to Zach to walk through our results in more detail.