Q1 2024 Hyperfine Inc Earnings Call

Participants

Marissa Bych; Investor Relation; Gilmartin Group LLC

Maria Sainz; President, Chief Executive Officer, Director; Hyperfine Inc

Brett Hale; Chief Financial Officer, Chief Administrative Officer; Hyperfine Inc

Young Li; Analyst; Jefferies

Presentation

Operator

Good afternoon and welcome to Hyperfine's first quarter 2024 earnings conference call. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.
I would now like to turn the call over to Marissa Bych from Gilmartin Group for introductory disclosures.

Marissa Bych

Thank you for joining today's call. Earlier today, Hyperfine released financial results for the quarter ended March 31, 2024. 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 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, expectations for hiring, training and adoption, growth in our organization, market opportunities, 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 filings with the Securities and Exchange Commission. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 13, 2024.
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 today is our Chief Administrative Officer and Chief Financial Officer, Brett Hale.
We are off to a solid start in 2024 with healthy top line growth and a $3.3 million revenue quarter. We continue to add flagship institutions in the US and build strong program, giving us a solid foundation to drive the development of these new markets affordable brain MR.
We also recognized significant international contributions in Q1, driven by the addition of select outside of the US market to our commercial focus. And I'm also very excited about the progress we've made in the quarter on our Alzheimer's program and our stroke study.
As a team, we delivered a strong success across all fronts while maintaining spending discipline and preserving capital. I am very proud of the lean execution of the Hyperfine's teams in Q1.
Innovation, clinical evidence and commercialization drive our success near and long term. In 2024, we remain an early commercial stage company while investing healthily in development and clinical activities that will drive commercial growth through expansion into new clinical applications and new sites of care in 2025 and beyond.
We continue to have a significant focus on innovation. We launched our latest AI power software in January and have received very positive feedback from users on the image quality of our DWI sequence, which is clinically important for stroke detection. The latest software includes proprietary AI and deep learning algorithms and expense the noise into all sequences available on the Swoop system.
Looking forward, we continue to invest in all areas of innovation, including hardware, software and AI, we remain committed to launching a steady cadence of AI power software and sequence development improvements, and we expect to release our next AI power software by late summer.
We plan to continue to improve image quality and shorten acquisition time, which is important for the use of the super system in acute settings, technology improvements and image quality and usability make it a portable Swoop brain MR scanner more relevant across more clinical applications and sites of care.
I want to now focus on clinical evidence. As I have mentioned before, we are developing a new market of affordable brain MR. The value of our platform technology is that it enables timely and early clinical decisions at multiple sites of care.
Our clinical work is intended to yield the data to drive awareness and adoption of our differentiated technology across different clinical applications as we already benefit from a very broad, clear indication by FDA for brain imaging patients of any age.
The Swoop system scans are also covered by the same reimbursement codes use for conventional MRI. First, our clinical development aims to position the Swoop system as a clinical tool in the hands of clinicians that perform neuro intervention. In this area, our immediate focus is our study to assess the detection and workflow value of suite in acute stroke triage.
Our second focus is on Swoop position as a tool for clinicians, managing and caring for patients suffering from chronic neurodegenerative diseases. Here, our greatest opportunity is our active Alzheimer's program. These two near-term areas of clinical use expansion, stroke and Alzheimer's are massive multibillion-dollar markets for the Swoop system in the US alone.
These are also markets with net needs that align with the strengths of Swoop technologies, namely Swoop supportability, small footprint, easy access, and high ease of use. As a reminder, our technology aimed to broaden the reach of brain MRI in the new clinical uses and sites of care complementing conventional MRI.
Turning to a more detailed update on our Alzheimer's efforts. MRI is becoming a key component of Alzheimer's care. And there is a strong potential for the Swoop system to become a very valuable tool to enable more scalable patient-centric care model.
Over 50 million people globally suffer from Alzheimer's. Given the vast and compelling opportunity this presents, we have mobilized to build a comprehensive Alzheimer's program beginning with our Alzheimer's utility study CARE PMR.
CARE PMR is led by Dr. Benzinger at Washington University School of Medicine. In the study, clinicians have placed Swoop systems of local LEQEMBI infusion centers. The study comparing high-field MRI and portable ultra-low field MRI to assess the ability of Swoop to detect ARIA complications in patients who are taking this analog targeting therapy.
By bringing imaging closer to the patient than a conventional MRI, we expect to significantly optimize workflow and ultimately open up the opportunity for more patients to be treated safely and efficiently. We expect preliminary data from this study to be shared by the end of 2024.
In stroke, we continue to enroll patients in our ACTION PMR study, which has now surpassed 100 patients. Action PMR is a multicenter evaluation assessing the use of Swoop system in detecting acute ischemic stroke. We remain bullish about this opportunity, which will open up the placement of Swoop unit in emergency departments and the hub unspoke stroke networks and look forward to sharing updates in the coming quarters.
Additionally, our technology was highlighted in four abstracts at the International Stroke Conference, which was held in February. These abstracts highlighted the clinical utility and applications affordable, ultra-low feels great MR imaging.
I also want to provide additional detail on our commercial progress in Q1. In the US we continue to add flagship institutions to our user base, most recently through the addition of MedStar Washington Hospital Center in Washington, D.C.
We remain very focused on building stroke programs. We have newly established a Swoop user community to share best practices for the clinical use of Swoop to propel further adoption of this transformative technology.
In international markets, we have established a distribution infrastructure to support additional commercial efforts. As we announced late last week, we have now appointed distributors in three key European markets, and have hired an experienced market development resource to coordinate our international efforts.
The distributor model allows us to focus on driving international revenue growth without significant OpEx use. I am very pleased with the progress we're making on the three areas of focus and investment for company and doing so while maintaining spending discipline.
Our efforts in innovational clinical evidence and commercialization support a comprehensive strategy, which will yield an acceleration of our business and growth in 2025 and beyond. The opportunities ahead are incredibly large and compelling on our execution is very strong.
I will now turn the call over to Brett to review our performance in the quarter.

Brett Hale

Thank you, Maria. Turning to our financial results for the first quarter 2024. Revenue for the quarter ended March 31, 2024, was $3.3 million, up 25% compared to the first quarter of 2023, driven by the sale of 13 Swoop systems. Although our global average selling price was lower in the quarter, primarily a function of heavier international mix, our value proposition has held very strong with US Institutions.
Gross profit for the first quarter of 2024 was $1.4 million compared to $1.2 million in the first quarter of 2023, resulting in a gross margin of 41.1%. R&D expense for the first quarter of 2024 were $5.6 million compared to $5.5 million in the first quarter of 2023.
Sales, general and administrative expenses for the first quarter of 2024 were $6.4 million compared to $8.7 million in the first quarter of 2023. Our year-over-year reduction in SG&A and flat R&D spend is representative of our focus to fund future growth catalysts while maintaining spending discipline.
Net loss for the first quarter was $9.8 million, equating to a net loss of $0.14 per share as compared to a net loss of $12.2 million for a net loss of $0.17 per share for the same period of the prior year. The improvement in net loss was a result primarily of cost savings initiatives implemented across the business over the past year.
Our cash burn for the first quarter was $12.0 million. And as of March 31, 2024 we have $63.2 million in cash and cash equivalents on our balance sheet. Similar to prior years, our first quarter burn rate is seasonally higher than other quarters of the year. We remain on track to execute our cash burn outlook through 2024 and end the year with a healthy remaining balance of cash and cash equivalents.
Now turning to guidance. We are maintaining our revenue outlook for the full year 2024. We expect revenue in the range of $12 million to $15 million. We continue to expect gross margins to be in the range of 45% to 50% for the year as we grow and scale commercially.
Our current growth margin profile is attractive for an imaging company, and we are very pleased to be driving healthy gross margins even at small scale, putting us in position for future margin expansion. We continue to anticipate total cash burn of approximately $40 million for the full year 2024.
We expect our cash burn to be lower than 2023 levels, and we will execute this plan while sustaining investments in our three focus areas, including our robust Alzheimer's program. We also continue to see a cash runway for the business into early 2026.
At this point, I'd like to turn the call back to Maria for closing comments.

Maria Sainz

Thank you, Brett. I'm proud of the progress a Hyperfine team made in the first quarter, and I remain very optimistic as to what this team can deliver. The next few months will be busy for the Hyperfine's team with important clinical conferences as we will be participating in the American Society of Neuro Radiology in May and the Alzheimer's Association International Conference in July.
We also plan to host an analyst and investor webinar, spotlighting our clinical advancements and strategy to actively expand into outpatient and office sites of care. We are committed to continuing to drive execution at the highest level across technology development, clinical work and commercialization and do so with a strong spending discipline.
With that, I want to thank you all for your time and open up the line for question.

Question and Answer Session

Operator

(Operator Instructions) Larry Biegelsen, Wells Fargo.

Hi, good afternoon this is [Simran] on for Larry, thanks for taking the question. Just, first maybe starting off on guidance you beat the Q1 guide or consensus estimate by about a [quarter of a million] and you're on a run rate now of over $13 million for the year if we just take the Q1 performance.
So why not raise the low end of the guidance range. Was there anything kind of onetime or onetime benefit in Q1? I know on the prior call you had mentioned some capital placements that might have slipped into Q1. So was that sort of beneficial to the quarter?

Maria Sainz

Hi, how are you? So there wasn't anything that was one-time there. There is constantly a rolling of orders and PO's that we get. Sometimes we think they're going to fall off the back end of a quarter and then they followed the beginning of the following. But there was nothing abnormal in Q1.
We issued guidance only seven weeks ago. And I feel really good and I feel we're off to a strong start, but I also don't want to get ahead of ourselves. So it felt prudent to stick with guidance until we get a little bit more time under our belt, especially as we have now activated international partnerships and other things are there. There could be a time to be a little bit more aggressive, but this time it, feels best to not get ahead of ourselves.

Great. Very helpful. And then gross margin in the quarter was maybe a bit softer than the [street] was modeling. And I think part of that was the device [ASP] came in a bit lower than we've seen in past quarters. So I guess, one, what gives you the confidence to reaffirm the full year guide of 45% to 50% and two, how should we think about pricing and pricing durability going forward?

Brett Hale

Yeah. Thanks for the question. So I'll take that. So you're correct. Our ASP, I think we mentioned in our prepared remarks was a bit lighter than our historical. If you recall, in the second half of the year, we had several US dominated quarters. With this quarter, we had a more international mix added to the portfolio.
So that's lower ASP, that was the direct impact for margin, which was up from Q4, but maybe a little bit lighter than the full-year guidance. And given the how we see how the year playing out, we feel very confident that the margin will fall in the 45% to 50% range.
The ASP that we had in Q1, you think about that maybe has a lower end, the gross margin or the ASP that we had is perhaps Q4 of last year, maybe at a higher end, but we'll bring that up from the lower end into the middle of those two ranges.

Got it. That that's very helpful as well. And maybe just one last one for me on the international kind of distributors that you guys have signed. So the initial focus is France, the UK and Italy. So maybe talk about some market opportunity and level of demand first Swoop in these geographies?
And it sounds like you have placed initial systems there. So how should we think about revenue contribution from these three geographies in 2024? And is this contemplated into the guidance?

Maria Sainz

Sure. So let me take that. I think we mentioned that in our last call where some international revenue was already in the guidance that we're issuing as we were planning to do exactly what we just did, which is set up some relatively small, but some infrastructure to start being more commercial in Europe and potentially other select outside of the US market.
Remember that we have received CE certification as well as UKCA certification already in 2023. And we had a little bit of a pipeline of interest that had actually represented or activated for us from a number of different countries, many of which now have a distributor in place accountable for our business.
So we were able to accelerate some of these the placements that came out of interest over the last several weeks or short months with the appointment of these distributors, they may not be the only distributors we appointed, those markets tend to be the larger medical technology markets.
We are also actively looking at finding a partner in Germany. We just haven't done that just yet. We want to make sure that we are signing the right partner. The other thing that actually was very helpful was the appointment of our own business development manager, who is a seasoned and very experienced person that was very quickly able to facilitate the number of distributors that we were able to sign up relatively quickly.
All of these markets have the same level of opportunity that the US, there's nothing different there, they have less penetration of conventional MRI, they have the Alzheimer's drugs coming to those markets this year. So probably about double the a 6 to a 12 month delay from the US. They have a lot of neuro intervention that needs follow up with that brain MR. So we feel that go into those markets is just strategically an extension of what we're doing in our direct market here in the US.

Brett Hale

And the only thing I'd add to that is I think we commented in our last call as well as today's call is that the distributor targeting and going to distributors versus direct makes a lot of sense for us at this stage. We -- it's very OpEx friendly and helps us drive the top line without a significant amount of spending. So it shows that mostly that investment in the gross margin line item.

Understood. Thank you.

Maria Sainz

Sure. Thank you.

Operator

Yuan Zhi, B. Riley Securities.

Hi, this is Anderson on for Yuan. A couple of questions on our end. First, congratulations on the first patients enrolled in the Alzheimer's study. Could you provide us with an update on the studies enrollment and remind us when we can expect to see imaging and data updates from this study?

Maria Sainz

Sure. So we're not going to provide sort of a month by month enrollment update. We have two sites actively enrolling. And I would say we're very pleased with the cadence of enrollment, I think it isn't a big secret out in the inter -- in the Alzheimer's field that [WashU] is one of the probably most active like can be infusion sites in the country.
So we're very pleased to have partner with Dr. Tammie Benzinger to lead this study, given the fact that it does look like a lot of the activity only can be is happening, right there. I would there are a couple of Alzheimer's meetings we are participating in this year, AAIC, which is in Philadelphia at the end of July. And then there is a CTAD, the clinical trials in Alzheimer's disease, which is at the end of October in Madrid.
So for sure by the fall meeting in Madrid, we should see something it could well be as early as the July timeframe. And until you have confirmation that abstracts and papers have been expected, just not prudent to give you any more granularity.

Got it. Thank you. And then also we have seen a new AI laws introduced in Connecticut and the Utah considering the role of AI in Swoops imaging, can you just help us understand the potential impact of these laws on Swooping adoption in these states?

Maria Sainz

Okay. I think I'm going to have to get back to you on that question because it's not anything that our technical team has bubbled up as of concern for us, I would say, all of our deep learning algorithms are proprietary.
We do not use anything that is external, and we are primarily using it not with any kind of patient influence, but more around the denuding of the images as well as the reconstruction of images. But if okay, let me check with our technical team and get back to you and see if there's anything else that I am just not aware of.

Okay. Thank you. I'll hop back in the queue.

Maria Sainz

Sure. Thank you.

Operator

Young Li, Jefferies.

Young Li

Hi, great. Thanks very much for taking the question. I guess the follow up on the system ASP questions. So I mean, heavier US mix drove the lower ASPs. I guess I'm kind of curious and how with US ASP, was it still similar to prior record quarters as well?

Brett Hale

Yeah, so I'll take that one. So we don't disclose the individual ASP by different segments. We did comment, I think, in Q3 and Q4 that those were US dominated ASPs. I think in our prepared remarks, we talked about the ASP in US remaining very strong and the strong value proposition.
So the ASP for the US, you can think about it very similarly, I think what we're doing is we're entering into a period where we have a little bit of a mix that takes place between US and international in this particular quarter, we had a little bit heavier of an international mix versus prior quarters.

Young Li

Okay. Got it. Very helpful. I guess it seems like given the mix here ASPs overall is kind of lowering a little bit versus prior expectations or maybe our models and kind of suggest that, you maintained revenue guidance for that, there should be more system sales, to sort of offset some of that.
I guess I'm kind of curious about the visibility for orders in the US or globally, the thoughts on as your reps get more experience and the visibility they have in the business for the I guess for the rest of the year ordering trends, if you have any color or visibility on that'd be really helpful.

Maria Sainz

Sure. So I remain very strong about the pipelines. You are correct that our team in the US, our direct team continues to gain experience and driving a broader pipeline. I would still say that the variability we have pointed to in previous quarters around when exactly deals close remains real, but the pipeline is richer and richer by the quarter.
We also have now a mix component, which is why you are rightfully pointing that there is some variability on our ASP because as we said by choosing to use gross margin and operating through distributors to build our international, initial sort of stream of revenue. We've paid a small price with our ASPs since we transact at distributor margins. But we now have also a number of additional sales channels in international markets that are driving their own individual pipeline.
So overall, it's a richer set of opportunities. It's more people playing on our behalf out in the marketplace. But again, there is this variability around mix, which is going to play some variability around ASP. And there is always a little bit of that variability about the closing of the deals because we're still in complicated our hospital buying, our processes that involved multiple functions from the legal connecting as well as our clinical stakeholders.
We have now line of sight to continue to build our stable of flagship institutions, and that applies both adult and pediatrics. So I know we mentioned some adult flagship institution that we landed last quarter. The previous quarter, we had a big stuff also pediatrics and adults and I can tell you now we're working on something in the Southeast of the country that involves one of each and they are also going to be a pretty important reference center for us in the Southeast.

Young Li

Great. Thank you very much.

Maria Sainz

Sure. Thank you.

Operator

Thank you. And I'm not showing any further questions that in queue. I'd like to turn it back over to Maria for closing remarks.

Maria Sainz

Thank you all for attending today's call and for your questions, we look forward to subsequent update over the coming weeks and in our next call. Thank you.

Operator

Thank you for your participation in today's conference, it does conclude the program. You may now disconnect. Everyone have a great day.