Hyperfine, Inc. (NASDAQ:HYPR) Q4 2022 Earnings Call Transcript

Hyperfine, Inc. (NASDAQ:HYPR) Q4 2022 Earnings Call Transcript March 21, 2023

Operator: Thank you for standing by and welcome to Hyperfine’s Fourth Quarter and Full Year 2022 Conference Call. At this time all participants are in listen-only mode. After the speakers presentation there will be a question-and-answer session. . As a reminder, today’s call is being recorded. I would now like to turn the conference to your host Marissa Bych, of the Gilmartin Group. Please go ahead.

Marissa Bych: Great! Thank you for joining today’s call. Earlier today Hyperfine Inc. released financial results for the quarter and year ended December 31, 2022. A copy of the press release is available on the company’s website as well as sec.gov. Before we begin, I’d like to remind you that management will make statements during this call that includes forward-looking statements within the meaning of the 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, expectations for hiring, training and adoption, growth in our organization, market opportunity, commercial and international expansion, regulatory approvals, and product development 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 section of our latest periodic filing with the Securities and Exchange Commission. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 21, 2023. Hyperfine, Inc. 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.

And with that, I will turn the call over to Maria Sainz, President and Chief Executive Officer.

Maria Sainz: Good afternoon, and thank you all for joining us. On the call with me is our Chief Administrative Officer and Incoming Chief Financial Officer, Brett Hale. 2022 was a year of significant technological, clinical and commercial progress for Hyperfine. I am pleased to share that we recognize $6.8 million in revenue for the full year, driven by the sale of 35 commercial Swoop systems. We also received multiple clearances for next generation hardware and software upgrades, saw our technology highlighted in 15 clinical publications and 50 peer-reviewed presentations at neurology and imaging meetings, and strengthened our existing partnerships while establishing new relationships with several types and hospital systems.

In addition to these initiatives, we have right-sized our business and implemented spending discipline to extend our cash runway through 2025, including the cessation of the Liminal brain sensing program and associated position. I am very proud of what the Hyperfine team has accomplished in its first full year as a public company, a year of dynamic change internally and in the marketing. Before turning to our 2023 priorities, I would like to provide greater detail on a few of these recent achievements. First, on the R&D side, we continue to advance the field of ultra-low-field MRI and have strengthened image quality through multiple FDA cleared, AI powered software upgrades. These software upgrades enable improved image quality, greater consistency and robustness to motion across key brain imaging sequences for neurocritical care applications.

In mid-2022 we also launched a partnership with Viz.ai, a leading AI-powered disease detection and intelligent care coordination platform, to continue enhancing our diagnostic imaging capabilities as we advance our mission to provide transformational, accessible and clinically relevant diagnostic imaging. This partnership will take us to pilot evaluations in a small number of key sites in 2023. Turning to our recent commercial progress, in 2022 we strengthened several key partnerships and customer relationships yielding new multi-unit contract. For example, as we shared in the fall, we received a purchase order from Kings College London for 20 commercial systems in association with the Bill & Melinda Gates Foundation. We began delivering these units in the second half of 2022 and expect to ship the remainder of the units over the next one to two years.

We also announced a signed letter of intent for seven commercial units from BJC HealthCare in St. Louis, one of the leading hospital systems in the United States. We’ve begun placing these units in 2022 and expect to ship the remainder over the course of 2023. I am also pleased to share that we have completed a restructuring of our U.S. sales team while reengineering our sales and clinical support processes. We have appointed new leaders in both the sales and the clinical support groups, who are focused on instituting a seamless workflow from pitch to purchase order and from purchase order to routine use. We are placing new trails with the introduction of our Swoop point of care MRI system, and we now understand the need for buy-in across multiple stakeholders with complex processes.

Our fourth quarter result of $1.4 million in revenue on five commercial Swoop systems reflects learning and addressing these processes, as well as some distraction due to the restructuring and right sighting of the team and recruiting an onboarding of new talent. Our team is now substantially in place and the strongest it has ever been, lean and hungry, with the right experience and determined focus on execution. This team is coming up on the learning curve, continuing to build relationships and driving new contracts. We remain optimistic in our commercial pipeline for the future. Additionally, a part of our commitment to meeting the highest standards for data protection and information security, we’re pleased to announce that our key platforms have achieved the rigorous high trust, risk based, two years certification.

We believe this will streamline the information security reviews associated with contracting and hospital implementation. This brings me to our priorities for the year ahead. As we progress into 2023, we are focused on three strategic pillars; innovation, clinical evidence and commercial extension, with a strong focus in the United States. On innovation, we are entering the year with a clear roadmap of technology iterations and enhancements to continue improving image quality, as well as the provider and patient experience with Swoop. For example, we recently announced the receipt of two FDA 510(k) clearances for AI-powered software update to the Swoop system. These upgrades significantly enhanced diffusion-weighted imaging or DWI quality and increased the signal-to-noise ratio, further advancing image quality standards in this new, ultra-low field point of care MRI segment.

Despite our heightened OpEx discipline and extended cash runway, we remain committed to driving innovation and have allocated a healthy budget in R&D through the next several years across new hardware, software and AI development programs. Over the course of the year ahead, we expect to receive additional clearances to further advance both image quality and usability of the Swoop system. On clinical evidence, we continue to focus on supporting the adoption of Swoop in the neurocritical care setting with plans to expand inter stroke imaging later in 2023. The company is also exploring other areas of both adult and pediatric brain imaging through research collaborations with leading institutions. The volume and breadth of presentations and publications covering Swoop’s clinical utility and cost effectiveness data is encouraging, and we are excited to continue building on this momentum.

In the field of stroke, we have been seeing independent data and presentations that support Swoop’s value proposition. At the International Stroke Conference in February, we were pleased to see new data showing the potential for Swoop to provide critical brain imaging following thrombectomy in stroke patients. The presentation concluded that Swoop could be used to facilitate a post-treatment baseline for post thrombectomy stroke patients to evaluate the impact of potential changes in blood pressure and heart rate that may impact ongoing brain injury. This validation of the value of Swoop in providing imaging where conventional methods may not be available is promising. The major clinical initiative for Hyperfine in 2023 will be the Action PMR project.

Action PMR is a global multicenter evaluation that will assess the use of the Swoop system in the acute Ischemic stroke use case, and we are fortunate to be working with prominent, experienced and passionate clinical teams in the field of stroke as they set up the foundation for this study. Enrolment is expected to begin in mid-2023 and we are excited to take this important step towards advancing the use of Swoop in stroke imaging. Shifting to commercial expansion, as I described earlier, we have made several changes within our commercial organization in recent months to optimize our focus towards the greatest growth opportunities for our business. First, we have refocused our team on the core U.S. market opportunity, building relationships and executing contracts with U.S. hospital systems, with a specific focus on multi-system placement opportunities.

We have also made changes within our sales and clinical support teams, bringing in high performing, experienced capital equipment sales people and placing greater accountability at the sales leadership level. These teams are coming up the learning curve, working in strong collaboration to ensure increased adoption, successful implementations and to drive routine use at all of our sites, and they are now aligned and ready to execute. I look forward to seeing the progress that we will drive with existing and new customers this year and beyond. We will maintain our international footprint, which is currently small, through distributors in Canada, Australia, New Zealand and Pakistan, in addition to our global partnership with the Bill & Melinda Gates Foundation.

We also see several compelling opportunities to grow our international presence long term. Related to this, we’re excited to have recently received CE Marking, which provides with the opportunity to expand our presence into the European economic area. That said, we are making the choice to launch in Europe later in our commercial life, beyond 2023 as we remain focused on the U.S. as our number one commercial priority in the near to intermediate term. Alongside these initiatives, we remain laser focused on spending discipline. We continue to operate lean and implement initiatives in support of cash runway extension, while investing in our three key pillars of innovation, clinical evidence and commercial expansion. We currently see a cash runway for the business through 2025.

Now, turning to our 2023 revenue outlook, we are initiating revenue guidance for the full year in the range of $10 million to $14 million. In line with our disciplined approach to spending, we are also initiating guidance for cash burn of $40 million to $45 million in the full year 2023. I want to reiterate that our fundamentals of Swoop are access and affordability. To our commercial progress over the past two years, we know that our value proposition with customers is strong, and that pricing is not a key barrier to Swoop adoption. As a result, we are continuing to increase pricing for the Swoop system. Our guidance reflects the continued gradual increase in the Swoop average selling price in 2023 relative to 2022. I will now turn the call over to Brett Hale, our Chief Administrative Officer and Incoming Chief Financial Officer to review our fourth quarter and full year performance and discuss the financial outlook in greater detail.

Brett Hale: Thank you, Maria. Turning to our financial results for the fourth quarter of 2022, revenue for the quarter ended December 31, 2022 was $1.4 million, compared to $0.4 million in the fourth quarter 2021. Gross margin for the fourth quarter of 2022 was $0.3 million, compared to a negative $0.5 million in the fourth quarter of 2021. R&D expenses for the fourth quarter of 2022 were $5.2 million, compared to $8.9 million in the fourth quarter of 2021. Sales, general and administrative expenses for the fourth quarter of 2022 were $8.7 million compared to $16.7 million in the fourth quarter of 2021. Net loss for the fourth quarter was $13.1 million, equating to a net loss of $0.19 per share as compared to a net loss of $26.1 million or a net loss of $13.79 per share for the same period the prior year.

Now turning to the results for the full year 2022. Revenue for the full year 2022 was $6.8 million, compared to $1.5 million in 2021. Gross margin for the full year 2022 was $0.9 million compared to negative $1.2 million in 2021. R&D expenses for the full year 2022 were $28.2 million compared to $25.8 million in 2021. Sales, general and administrative expenses for the full year 2022 were $46.6 million, compared to $37.9 million in 2021. Net loss for the full year was $73.2 million equating to a net loss of $1.04 per share as compared to a net loss of $64.9 million or a net loss of $17.57 per share for the prior year. Cash and cash equivalents totaled $117.5 million as of December 31, 2022. Turning to our 2023 outlook, based on our progress and current trends of the business, we are initiating full year expectations for revenue to be in the range of $10 million to $14 million.

As Maria mentioned, the Swoop value proposition with customers is strong and increased pricing as the company announced in 2022 has not been a main barrier to adoption. Going forward, we will not be providing an exact average selling price for the unit volume expectation, but our guidance is predicated on the assumption that Swoop system pricing will continue increasing in 2023 relative to 2022. To help you with modeling, please note that we currently expect our second half of revenue to be stronger than our first half as our new sales team continues to drive the pipeline. Toward the year we expect gross margins to be approximately 40% And lastly, we anticipate total cash burn of $40 million to $45 million for the full year of 2023. This incorporates in expectations for continued investment in R&D and substantially streamlined investments in SG&A, while maintaining customer facing resources to continue to drive adoption and growth.

In line with this, we are allocating a greater relative portion of OpEx spending to R&D in 2023 versus prior years at approximately 40% to 50% of total OpEx dollars. We will continue to focus on our three strategic pillars and maintain spending discipline as we realize the benefits of our current rightsizing and reorganization. As Maria mentioned, we are laser focused on U.S. commercial expansion. As I’ve come onboard, it is clear we are completing a substantial reset of how we operate, including the team that we have in place, which has caused a near term disruption but presents a worthwhile trade-off for laying the life long term foundation. I would like to reiterate that we are excited about the momentum we are building for the remainder of the year and beyond, and that we are pleased to have the cash and flexibility to invest in the right areas and afford the business, the right runway to execute post reset.

At this point I would like to turn the call back to Maria for closing comments.

Maria Sainz: Thank you, Brad. I am immensely excited to be leading Hyperfine into the year ahead. Before wrapping up, I would like to highlight the positive feedback received from one of our customers during the recent educational webinar hosted for our commercial sites and prospects. This customer noted increased operational efficiency and improved workflow with Swoop, as the system is alleviating the challenge of limited MR capacity and reducing turnaround times at their hospital. He also noted an expectation for the hospital to recognize a positive return on investment in Swoop in a shorter time period that they had anticipated at the time of device acquisition and commented on an improved patient experience. This commentary supports the immense value of our differentiated technology in improving patient and provider experiences and expanding access to diagnostics for hospital systems by complementing their conventional MRI workflow.

With our early success marked by a total global installed base of over hundred systems to-date, we are setting the stage for accessible and affordable point of care imaging to transform care delivery and continue enhancing healthcare around the world. With that, I want to thank you for your time and open it up to any questions.

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Q&A Session

Operator: Thank you. Our first question comes from Larry Biegelsen of Wells Fargo. Your line is open.

Larry Biegelsen : Good afternoon. Thanks for taking the question. Maria and Brett, can you hear me okay?

Maria Sainz: Yes, we can. Hi Larry!

Larry Biegelsen : Oh good. Hi! So let’s start with Q4. It’s usually the strongest quarter for cap €“ in capital businesses, but you came in a little bit below, at least on the revenue side, the low end of your guidance range. I think you’re at the low end of the capital, the placement guidance. So you talked a little bit about disruption Maria, from the sales force organization changes. Could you just talk a little bit more about the trends you saw in Q4 and why you know we saw you come in a little bit below the revenue guidance?

Maria Sainz: Sure. So as I said, I think there was a little bit of distraction, because we made a very significant number of changes in our sales leadership and really our sales team. Overall, we have about two-thirds of all sales and quota bearing people now that have either a new role or are brand new to the company, and most of those transitions started in Q4 and that provided some distraction. I’m also very pleased to say that deals were not lost, deals were just pushed out. So maybe we took our focus a little bit out of just getting the deal closed in the fourth quarter, and things have continued to play out over the course of the subsequent weeks. I also would say Larry, that although it is true that there is a strong push for capital to wrap up the year strong, I’m not sure that I would put us in the same bucket as all other big capital purchases and that we are a brand new category to most of the administrators and the budgets.

We’re not a budget line per se, so I think we follow a little bit of our own rhythm in a way, and didn’t see that need to really get things into the finish line from the hospital perspective before the end of the year. But I would say, organically I think we €“ not purposefully, but we created some transition and some disruption to make sure that we were starting the year with the right people in the right seats, and the right seats on the bus.

Larry Biegelsen : That’s helpful and then transitioning to 2023 and the guidance, help us you know €“ give us you know and tell us why you’re confident in the $10 million to $14 million, given that the Q4 run rate is below that. What needs to happen for you to hit the guidance? What are you assuming for the two large orders that you announced, that you talked about on this call. And just lastly on the guidance, is my math Brett right that OpEx is going to be about $50 million for 2023 to get to that burn rate, which would be a pretty steep decline from ’22. Thanks guys.

Maria Sainz: Sure. So let me take the confidence part of the question and I’ll turn it over to Brett for the OpEx commentary. As I said, it started with making sure that we had the right sales structure with the right people in place. Those people very quickly put in the right processes to make sure that the quality of our pipeline of deals, the breadth of our pipeline of deals, and then the scrutiny around the deals as they progressed with the different gates, any of these deals progresses through is very strong. We do have all positions filled now with what I believe is the right profile of people, and I’m starting to see the green shoots of really the amount of deals that are in the pipeline, the distribution of those deals across all of the geographies, the discipline around the execution on the deals.