Vicarious Surgical Inc.

And welcome to Vicarious Surgical's third quarter 2022 earnings conference call. My name is Amber, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Caitlin Bosco with Vicarious. Caitlin, please proceed.

Thanks, Amber. Thank you all for participating in today's call. Earlier today, Vicarious Surgical released preliminary, unaudited financial results for the three months ended September 30th, 2022. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including without limitation those relating to our operating trends and future financial performance, expense management, market opportunity, and commercialization, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors set forth in our annual report on Form 10-K for the year ended December 31st, 2021, filed with the Securities and Exchange Commission on March 31st, 2022, and our other reports we may file with the SEC from time to time. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 7, 2022. Vicarious Surgical disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that, I will turn the call over to Adam Sack, Chief Executive Officer.

Thanks, Kate. Good afternoon, everyone, and thank you for joining us on today's call. With me today is Bill Kelly, our Chief Financial Officer. I'd like to start by sharing my excitement for the progress we made in the third quarter. Since our last call, we completed the integration phase of our Beta 2 system build. As a reminder, Beta 2 represents a significant milestone for the company. Given the strong, positive Beta 1 feedback on the robot itself, the enhancements incorporated in Beta 2 predominantly focused on the ergonomics, surgeon input, and visualization aspects of the surgeon console. Nonetheless, improved imaging and enhanced sensing and motion capabilities were built into Beta 2 to further expand the surgeon's access and ability to move freely within the abdominal cavity and operate seamlessly. Time and again, we see the clinical relevance of these features in our cadaver labs and continue to be very encouraged by the feedback from our preclinical testing. We look forward to formally showcasing the Beta 2 system at our demonstration day in December. I'd like to thank our partners at UH and HCA for their invaluable input on the Beta 2 design. In July of this year, we formalized our work with these hospital systems through the execution of two Center of Excellence agreements. At the forefront of innovation, HCA Healthcare and UH are widely recognized leaders in supporting and developing cutting-edge technology that delivers improved patient outcomes and advances the field of healthcare. Our work with each system extends far beyond post-market surgeon training. Our agreements outline plans for extensive development, clinical, verification, validation, and launch phases of bringing our full product ecosystem to market. In addition to these existing partnerships, We are pleased to share that we recently executed a strategic hospital system collaboration agreement with Pittsburgh Creates, an innovation center that fosters collaboration between surgeons and healthcare professionals with the expansive resources of the University of Pittsburgh and the University of Pittsburgh Medical Center. UPMC and Pittsburgh Creates offer unique access to collaborate with not only clinicians and hospital administrators, but also with the payers of the UPMC insurance umbrella, helping to ensure that our initial product offering meets not just the needs of patients, surgeons, and hospitals, but payers as well. With this agreement, we also gain access to the Advanced Center for Preclinical Studies within the University of Pittsburgh. This institution is a full-service testing and training facility that supports exploratory and preclinical testing of medical devices, and offers on-site capabilities for surgeon training and qualification. The agreement further expands our access to surgeon and administrator expertise across testing, training, and regulatory processes and provides critical clinical insight and support as we advance the development and finalization of our system and progress toward regulatory submission. In that regard, We continue to closely and routinely engage with the FDA as we plan for our upcoming pre-market IDE clinical trial and are encouraged by our interactions with the agency to date. Following our initial filing, we intend to file for three additional indications, inguinal hernia, cholecystectomy, and hysterectomy. By maintaining a close cadence of regulatory submission, we plan to offer an extensive set of use cases relatively early on in our commercial launch. Overall, we remain focused on our number one priority, system finalization, as we look forward to sharing more of our clinical trial strategy over the coming quarters. In October, we announced the appointment of Beverly Huss to our board of directors. Bev is a respected industry veteran with an impressive background and decades of broad medical device experience, ranging across R&D, regulatory affairs, and commercials. We welcome Bev to the Vicarious Surgical team and look forward to leveraging her expertise and insights. Before I turn the call over to Bill, I'd like to say how proud I am of our team's successful execution while remaining uncompromising in our approach. We are intentional in our development with a focus on collaboration between our teams and the healthcare systems who will ultimately institute our final product into their practice. With that, I'll hand it over to Bill for a discussion of our third quarter financial results.

Thank you, Adam, and thank you all for joining us today. Total operating expenses for the third quarter of 2022 were $22.2 million, inclusive of R&D expenses of $12.1 million, general and administrative expenses of $8.1 million, and another $1.9 million in sales and marketing expenses. Operating expenses in the third quarter increased from $8.6 million in the prior year period, primarily due to continued investment in the development of our Theta 2 platform and necessary expansion within our internal teams. Adjusted net loss, which excludes a $3 million adjustment for changes in the fair value of our warrant liabilities, was $21.7 million for the third quarter, equating to an adjusted net loss of 18 cents per share, as compared to an adjusted net loss of $8.6 million or an adjusted net loss of 9 cents per share for the same period in the prior year. GAAP net loss for the third quarter was $24.7 million, equating to a basic and diluted net loss of 20 cents per share, respectively, as compared to a net loss of $45 million or a basic and diluted net loss of 49 cents per share for the same period of the prior year. For additional detail regarding our third quarter 2022 financial results and our reconciliation of all non-GAAP measures to GAAP, please review our earnings press release. Our cash burn for the third quarter of 2022 was $14.5 million, and we ended the quarter with $127 million of cash and cash equivalents. We continue to execute on our development timeline while maintaining strong fiscal discipline. As we enter the fourth quarter, we now expect full-year 2022 cash burn of approximately $65 million to $70 million, compared to $65 to $75 million as previously communicated. As such, we anticipate ending the year with more than $100 million in cash and cash equivalents on our balance sheet. We are excited by the progress we've made to date, and we look forward to sharing further progress in the quarters to come. And with that, I will turn the call back to Adam. Adam?

Thank you, Bill. I'd like to close by reminding everyone of our Analyst and Investor System Demonstration Day coming up on December 6th. We'll showcase our finalized Beta 2 system and host a conversation with surgical luminaries and hospital partners. We hope to see many of you there. With that, I'll turn the call back to the operator for Q&A. Operator?

Of course, thank you. We will now begin the Q&A session. To submit for a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to submit for a question, that's star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. Our first question comes from Josh Jennings with Cohen. Josh, your line is now open.

Hi, this is Eric on for Josh. Thanks for taking the question. Aside from the functional benefits that your system offers during surgery, there's also a compelling economic argument for hospital customers to adopt with some of the cost savings that you're integrating with disposable components and other features. I was just wondering, now that you've had early engagement with surgeons and hospitals. Can you talk a little bit about how receptive they've been to the potential economic benefits you're providing?

Yeah. Thank you so much for the question. It's a really good question. So there's a few different pieces to the answer here. And the punchline, though, is that they've been incredibly receptive. It's been a significant portion of how we're able to gain such engagement and such incredible collaborations with so many hospitals across three different systems now, all of which we're incredibly proud of. So I'd say that these hospital systems, first and foremost, are focused on their patient outcomes and patient care. They're all in it because they believe in patient care and that's what they're there to do. But that being said, they do need to make money or at least make sufficient money in order to provide that care and to pay the people in order to complete the surgeries that they're there for. So at the end of the day, economics is an incredibly important part of our value proposition. They've been very receptive to our general pricing that we have to offer, as well as to the total procedural economics and the potential of saving significant time on procedures that many of them have witnessed in our cadaver labs to date. As I'm sure you know, saving procedural time doesn't just save costs, it actually increases revenue for the hospital system, which at the end of the day, increasing top line is number one priority from an economic perspective.

That's great. That makes a lot of sense. And then just wondering if we get a little more of a preview for the Beta 2 demonstration day. What are you really looking to showcase there, and what is your hope for folks walking away from that event?

Yeah. The Beta 2 demonstration day, which I'm obviously incredibly excited about, is really there, frankly, to showcase our Beta 2 system and to show it off to all of you and to the world. We'll be showing the Beta 2 system in our lab, as well as walking through some video of recent cadaver procedures with surgeon luminaries and some of our COE partners. And we'll give everybody there the opportunity for Q&A, both with the surgeons and the partners. So we think it'll be a really valuable experience.

Okay. Yeah, that sounds great. Thank you for taking the questions. Thank you.

Thank you. Our next question comes from the lineup. Ryan Zimmerman with VTIG. Ryan, your line is now open.

Hi, this is Sam on for Ryan, and thank you for taking my question today. Can you elaborate on what you may or may not learn with the University of Pittsburgh agreement relative to the other agreements with the UHC and HCA health systems? Thank you.

Yeah, really good question. Thank you. As I mentioned on a previous earnings call, we're obviously very excited about HCA and UH And both of those center of excellence agreements and partnerships really provide much, if not all, of what we need from the perspective of learning what the clinicians and hospital administrators need. But UPMC includes something additional, which is the UPMC insurance umbrella. So we're really excited about leveraging that relationship and being able to dive deep, which will make sure that our system doesn't just meet the needs of patients, of surgeons, and of hospitals, but meets the needs of payers as well, ensuring that it really holistically meets the needs of the entire healthcare system.

Thank you, and I have one follow-up. Given the University of Pittsburgh Medical Center agreement and Dr. DiVerti's focus on robotic ENT, are you seeing other opportunities to change how you think about the indication cadence? Thank you again.

Yes, it's a good question. I would say that there are uh are a number of really interesting opportunities uh frankly that you're probably picking up on here but uh outside of just the abdominal surgical space uh that being said there's not anything that we're ready to talk about publicly i would frankly phrase it more as opportunities than plans

Thank you. That's all for me today. Thanks.

Thank you. Our next question comes from the line up. Kyle Rose with Canaccord. Kyle, your line is now open.

Hi, everyone. This is Caitlin on for Kyle Rose. Just a quick question for me. Last quarter, you noted certain supply constraints, such as, you know, semiconductor chip and hardware shortages and have these challenges really continued into the Q3 and Q4? And if so, how are you mitigating the risk? Thanks a lot.

Yes, very good question. I'd say overall we do still see some challenges. You know, we're, as I mentioned, we're not immune to these challenges similar to a lot of our peers. For example, we absolutely do see delayed shipments of semiconductors. That being said, we've been able to fairly effectively plan and mitigate these, and we continue to do that. I will say, though, similar to my messaging the last quarter, it comes with significant time and effort and, frankly, distraction for our team. That being said, all of our mitigations to date have been effective.

Awesome. Thank you.

Thank you.

Thank you. There are currently no further questions in queue, so again, as a reminder, to submit for a question, that's star 1. There are currently no further questions in queue, so I will pass the conference back over to Adam for any additional or closing remarks.

Yeah. Thank you so much for the questions, and thank you for taking the time to join us today.

That concludes today's call.

This concludes today's Vicarious Surgicals 2022 Third Quarter Earnings Call.

Thank you for your participation. You may now disconnect your line.