Participants

Marissa Bych; IR; Gilmartin Group LLC

Maria Sainz; President & Chief Executive Officer; Hyperfine, Inc.

Brett Hale; CFO & Chief Administrative Officer; Hyperfine, Inc.

Yuan Zhi; Analyst; B. Riley Securities, Inc.

Presentation

Operator

Thank you for standing by, and welcome to the Hyperfine fourth-quarter 2023 and fiscal year 2023 earnings conference call. (Operator Instructions)
As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Marissa Bych from the Gilmartin Group. Please go ahead.

Marissa Bych

Thank you for joining today's call. Earlier today, Hyperfine, Inc., released financial results for the quarter and year ended December 31, 2023. 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 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 filings 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, 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.
In the fourth quarter, we achieved revenue of $2.7 million, up 89% compared to the same period last year. For the full year 2023, we achieved revenue of $11 million, up 62% compared to 2022. I am pleased with the growth we delivered as we continue to see the development of this new category of ultra-low-field MRI with our unique portable Swoop system.
We drove adoption in our beachhead markets inside the hospital, which are critical care and pediatrics. We have made significant progress to expand our use cases through clinical evidence and innovation. In the fourth quarter, we sold seven Swoop systems, predominantly US direct sale and once again recognized a record average selling price.
And we have highlighted in previous calls, our deals require alignment with multiple constituents and can often demand long and variable sell cycle. I am pleased with the deal traction we have seen so far in 2024, many of which started and were cultivated in 2023.
We're exiting 2023 with many commercial accomplishments. We have now sold Swoop systems into flagship institutions such as Weill Cornell in New York, Stanford, and Children's Hospital of Philadelphia. Further, our Swoop implementation programs run by our clinical support team are yielding strong user advocates and champions across different department inside the hospital setting.
We now have Swoop pioneers across multiple settings inside the hospital, such as the operating room, critical care unit, neurology clinics, emergency departments, and pediatric wards. We entered 2024 with a table of reference sites and a deeper understanding of how to target and build strong Swoop programs, which positions us well for further expansion.
Overall, the past year has been transformative to how we manage our business. We have exercised strong spending discipline, and we are doing more with less across our operating expense lines without compromising investments in our three strategic pillars: innovation, clinical evidence, and commercialization. with the outmost focus on execution and operating team.
I'm proud of the execution of the team, the transformation of our financial profile, and the strong foundation we have established for the future of our business. This brings me to our priorities for the year ahead. In 2024, we remain committed to our three pillars and plan to maintain a robust cadence of innovation. While many clinical evidence supporting the use of Swoop, especially evidence focused on stroke and in Alzheimer's, and to grow commercially, including through our strategy to expand to select international markets.
Before I cover each of these in greater detail, let me highlight the opportunity for our technology in Alzheimer's. One of the greatest catalysts I see for the adoption of our technology is using Swoop in the Alzheimer's treatment workflow. There is a strong potential fit for Swoop to assist in reducing barriers to accessible and equitable Alzheimer's care.
As many of you know, there are currently over 15 million people suffering from Alzheimer's disease globally. And the cost and burden to patients and health care systems is enormous. 2023 was a breakthrough year for advancements in the fight against Alzheimer's. With the FDA approval and CMS reimbursement of Biogen-Eisai LEQEMBI, an amyloid targeting therapy or ATT as well as advancements in blood testing for the diagnosis of Alzheimer's, and separately, milestones related to additional coverage of PET scan to enable Alzheimer's diagnosis.
Lilly's donanemab, another ATT, is also expected to be FDA approved later this year. These approvals are opening a new category for therapy, which show significant promise to delay the progression of the disease and potentially offer patients and their families additional years of independent living.
The developments have also brought two issues to the forefront. The first one is associated with the FDA labeling for amyloid targeting therapy, which requires at least three monitory MRI during the patient's initial year on this medication. The monitored MRIs must be conducted at prescribed intervals to screen for amyloid-related imaging abnormalities, also known as ARIA.
As a result of these scanning requirements, the industry is seeing significantly greater demand for brain MRI technology against what is already [aclock], burdensome, and time consuming imaging workflow that patient experience. This scanning requirements also creates significant care navigation challenges for patients on these drugs who must add imaging to the already complex monitoring and infusion schedule.
The second issue is one-off access and equity for patients in low resource settings, globally. By 2050, it is estimated that over 70% of the people suffering from dementia will live in low- and middle-income countries. We believe that our portable Swoop system can play a significant role in addressing the pragmatic hurdles to getting treatments to patients in these low-resource settings and care for them appropriately.
Together, these advancements to address Alzheimer's disease offer an enormous. incremental opportunity for brain imaging. Affordable Swoop system is highly differentiated for this use case and the ideal technology for patients taking ATT, providing a versatile, convenient, and streamlined alternative to conventional MRI.
Our positioning -- we're positioned to offer a unique solution by placing our portable MRI in an easy location to support patients through their treatment. On a global scale and affordable and portable, brain MRI tool is highly desirable to improve equity in our primary care and increased access to the latest treatments available in low-resource settings. Given the vast and compelling opportunities this represents for Hyperfine, we have mobilized to build a robust and comprehensive Alzheimer's program quickly, which is a key focus for us in 2024.
Before I discuss the aspects of the program, I want to remind everyone that scanning brains of Alzheimer's patients of any age is already covered under our current FDA wing. Therefore, we do not need any additional regulatory clearances to access these new business verticals. Our work on Alzheimer's is to focus specifically on the opportunity to simplify and streamline the imaging workflow for patients who receive LEQEMBI and donanemab, making portable Swoop brain MRI available in a convenient and less-burdensome location for patients and care partners.
Our Alzheimer's program has several components, including data generation, market building, and optimizing workflow. For the most part, clinicians caring for Alzheimer's patients are not familiar with portable brain MRI as these clinicians have not been within our initial commercial targets.
Today, we're most focused on the data generation and clinical evidence element of our program. On that front, we're excited to share that we have initiated a new study called CARE PMR. CARE PMR is a utility study led by Dr. Benzinger at Washington University School of Medicine, in connection with BJC Healthcare. In this study, clinicians have placed Swoop systems at local infusion centers and are comparing high-field MRI and portable ultra-low-field MRI to assess the ability of Swoop to detect ARIA complication.
By bringing imaging closer to the patient than a conventional MRI system, we hope to significantly optimize workflow and ultimately open up the opportunity for more patients to be treated safely and efficiently. We expect to see a readout of CARE PMR data before the end of the year. Alongside our investment in Alzheimer's, we remain committed to our three strategic pillars, which I will provide an update on right now.
Starting with innovation, in the fourth quarter, we received FDA clearance for our latest AI power software update and launched it in the past few months across our installed base. Systems now have our updated DWI sequence, an additional ease-of-use features designed to aid users with patient provisioning and faster image upload properties.
This is our eighth FDA clearances since our initial system launched in 2020. It includes proprietary AI and deep learning algorithms in the DWI sequence and expands our AI denoising capabilities by incorporating advanced image post processing into the DWI sequence. The system's other sequences, which are the T1, the T2, and FLAIR already incorporated these AI feature.
Denoising enables a crisper image that potentially help clinicians more accurately diagnose and make clinical decisions for their patients undergoing brain imaging. As we move forward, we will continuously invest in improving our AI-powered image quality and system usability, leveraging each image focused software release to further improve the performance of our Swoop system.
In 2024, we have a strong cadence of technology iterations across hardware and AI-powered software plans to further advance the image quality, the speed of image acquisition, clinical utility, ease of use, and clinical applications of ultra-low-field MRI. I look forward to sharing updates here throughout the year.
Turning to clinical evidence, starting with stroke, we have now enrolled over 100 patients in our ACTION PMR study, in multicenter evaluation to assess the use of the Swoop system in detecting acute ischemic stroke. We remain bullish about this opportunity, which will open up the placement of Swoop unit in ED and hub and spoke -- stroke network and look forward to sharing updates in the coming quarters.
Additionally, our technology was highlighted in four abstracts at the recent International Stroke Conference in February. The abstracts spoke to the depth and breadth of research into the clinical utility and applications, affordable ultra-low-field brain MR imaging.
Now relevant to the detailed use case today inside the hospital: imaging patients in critical care. Three studies highlighting ultra-low-filed imaging data were presented at the RSNA meeting in November. These studies analyze how portable MR brain imaging may assist physicians in the diagnosis and management of neurological conditions in critical care studying.
With these in addition to data from the stage MRI XML study that was presented at the [epelsa] meeting in Seoul, South Korea, and has now been accepted for publication. This study further underscores the role of MR-based neuroimaging in acute brain injury detection and the potential for enabling improvements in neurological outcomes.
And turning to our final pillar, commercialization. With the more tenured and experienced commercial team in the US, our deal pipeline is definitely growing. As I mentioned earlier, our recent Swoop sales include system additions we see several flagship US institutions. For verity, we are continuing to build traction with new US institutions.
This year, we're also expanding our commercial focus to select international market. We have strong track record of international clearances, including CE and UKCA approval of our latest AI-powered software. And we have now begun building up commercial infrastructure and relationships in certain countries where we see immense opportunity. I am very encouraged by the level of interest and activity we are seeing for the Swoop system internationally, and I remain excited about global expansion as a growth opportunity this year and beyond.
Before I turn the line over to Brett, I would like to reflect on the strong progress we have made over the past year and the fact that we have demonstrated our ability to drive meaningful progress on our three strategic pillars while significantly reducing spending. It has translated into strong growth, gross margin improvement, and cash burn reduction.
I will now turn the call over to Brett to review our recent performance and discuss our 2024 financial outlook in detail.

Brett Hale

Thank you, Maria. Turning to our financial results for the fourth quarter of 2023, revenue for the quarter ended December 31, 2023, was $2.7 million, up 89% compared to the fourth quarter of 2022. For the full year 2023, we generated $11.0 million in revenue, up 62% from the prior year.
Gross profit for the fourth quarter of 2023 was $1.0 million compared to $0.3 million in the fourth quarter of 2022. For the full year, we generated $4.8 million in gross profit compared to $0.9 billion in the prior year 2022. For the full year, gross margin was 43.1%, up 30 percentage points from the prior year.
R&D expenses for the fourth quarter of 2023 were $6.0 million compared to $5.2 million in the fourth quarter of 2022. Sales, general, and administrative expenses for the fourth quarter of 2023 for $4.2 million compared to $5.8 million in the fourth quarter of 2022. For the full year, R&D expenses were $22.5 million, down from $28.2 million in the prior year, representing a 20% reduction. For the full year, SG&A expenses were $20.3 million, down from $32.4 million in the prior year, representing a 35% reduction.
Net loss for the fourth quarter was $10.7 million, equating to a net loss of $0.15 per share as compared to a net loss of $13.1 million for a net loss of $0.19 per share for the same period of the prior year. For the full year, net loss of $44.3 million is down 39.5% from $73.2 million in the prior year.
Our cash burn in the fourth quarter was $10.2 million and as of December 31, 2023, we have $75.2 million in cash and cash equivalents on our balance sheet. Our full-year cash burn of $42 million is down 40% from $71 million in 2022.
Now turning to our financial guidance, beginning with our 2024 revenue outlook, we are initiating guidance for the full year in the range of $12 million to $15 million. Although, we do not typically provide quarterly guidance and do not to intend to do so on a regular basis. We want to provide you some visibility into our first-quarter performance given where we stand in the quarter.
For the first quarter of 2024, we expect revenue to be over $3 million. Looking at gross margins, we are initiating a range of 45% to 50% for the year as we grow, continue our commercial sales traction, and realize strong Swoop system pricing. We are very pleased to be driving healthy gross margins in our business, even at small scale.
Lastly, we are initiating total cash burn expectations of approximately $40 million for the full year 2024. We expect our cash burn to be below our 2023 levels, and we will execute this plan while sustaining investments in our three pillars, including our robust Alzheimer's program. We see a cash runway for the business into early 2025. We are excited about the catalyst for our business in 2024 and we are pleased to have the cash and flexibility to invest in the right areas for continued Swoop system adoption.
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 that Hyperfine made in 2023, and I remain very optimistic as to what this team can deliver. I look forward to seeing many of you at upcoming industry as well as investor conferences, providing updates across our three pillars and the Alzheimer's program.
Given the immense excitement we have and the potential we see for our system in the use case of Alzheimer's, I would also like to share that we are working to plan an analyst and investor webinar with a spotlight on this topic. We're trying to host this webinar midyear. We look forward to sharing more details with you over the coming months and accessing more of your questions at that time.
With that, I want to thank you for your time. We'll open up the line for questions.

Question and Answer Session

Operator

(Operator Instructions) Larry Biegelsen, Wells Fargo. .

Hi, Maria. Hi, Brett. This is Simran on for Larry. Thanks for taking the questions here. Maybe to start off with Q4. it's usually the strongest quarter for capital businesses, but you did come in a little bit below, at least on the revenue side, the low end of your guidance range. So could you talk a little bit more about the trends you saw in Q4? And what led you to deliver at the low end of the revenue guide?
And just following up there, I appreciate the Q1 color. So maybe just talk about some of the trends that you've typically seen on the system side in Q1 thus far?

Maria Sainz

Sure. So I'll start by addressing the Q4 question and then talk a little bit about the early 2024 traction. We do not fall exactly under the traditional capital budget where you do see a little bit of that bolus at the end of the year. More often than not, given our price point in that $400,000 range for MSRP, we are funded through strategic fund dollar funds or some other mechanism that have more variability throughout the year, but also more availability throughout the year.
I still believe that we have to continue to work towards higher predictability and less variability in our deal flow. So I'm very confident in telling you that we do not lose deals that we end up with a very strong and predictable process to what we call the clinical, yes, from the initial stage. But we do go into a relatively variable phase of deal in the administrative collection of deals all the way to closing, which sometimes goes into quiet mode for a bit and coming back up.
So it was more around the variability on deal closure that hurt us a little bit in coming a little shy on Q4. And that is why we were also stating here in our prepared remarks that some of those deals have taken a little longer, but now have come to fruition. And that's why we were confident in providing more color than we usually do and that you should expect going forward around where we were tracking in the Q1 timeframe.

Understood. That's very helpful. And then maybe just looking at the 2024 guidance, $12 million to $15 million, I think the Street was modeling around $18 million heading into the print. So maybe help us to bridge the gap there? Can you just walk through key puts and takes to consider? What gets you to the low end versus the high end of the guide? And Brett, it appears that you should continue to see OpEx growth step down nicely to get to that burn rate in 2024. Is that the right way to think about it?

Maria Sainz

Okay. So maybe I'll lead and turn it over to Brett. I like to think ourselves a little bit of a hybrid-stage company with one half of our activity around, what I would call, the early commercial stage kind of company, but the other half of our activity being more of a late stage deal developmental company, thus, forming 130 of us.
So we're trying to be balanced in how we're allocating our bandwidth to continue to make steady progress on our today's business, but definitely investing what we believe are incredibly compelling and very large near term, not very future, but near term on new opportunities. So Alzheimer's and stroke being not too really big one.
So when I think about our priorities, there is a steady progress on adoption and commercialization, which continues to drive very healthy growth. But that's not the only thing on our board to do. We are heavily investing in R&D and clinical evidence. And we are also investing in programs really to flush out these revenue opportunities, which are likely going to take that into customer target site of service, potentially, business models that might be different than incremental from where we are today.
So I'd rather be balanced and moderate in our expectations so that we can keep doing all of the above, which I think is the right way of thinking about the kind of business we want to build.

Brett Hale

On the question regarding cash burn, as I commented in the earlier remarks, we are giving guidance of approximately $40 million, which is down from 2023. We continue to be very laser focused in our spending discipline. In terms of the mechanics of getting to that number, as I highlighted, we have a margin guidance of 45% to 50%, so an improvement from where we have been in 2023. And we'll continue to be very laser disciplined in our spending. We'll continue to find the innovation and the growth opportunities that we see going forward.

Got it. That's very helpful. And sorry, last question for me, but I know you're not giving placement guidance, but any color on device versus service in that $12 million to $15 million?

Brett Hale

Yeah, we don't provide specific guidance but I think you have seen perhaps the posting of our service revenue. You can think about that as kind of a steady and predictable and kind of consistently increasing overtime line item in our P&L. So I think you can think about that in 2024, very similar to probably the trend rate you've seen in prior quarters.

Operator

[Yuan Zhi], B. Riley.

Yuan Zhi

Thank you for taking our questions. I think some of those have been addressed, but maybe we talk about the cash flow. So the cash flow from operation was negative $42 million in 2023 and then the current 2024 guidance, our cash burn is about $40 million, while we have increased revenue and potentially lower costs. Brett, can you help us reconcile this understanding you have completed the reorganization in early 2023?

Brett Hale

Thank you, Yuan, for the question. So you're correct, our guidance is increased revenue from '23 to '24. And as I highlighted in the previous questions, we're improving margin from -- we posted 43% gross margin in 2023, and our guidance is 45% to 50% for 2024. And then we will have continued investments in the growth drivers, but we'll be keeping our spending very laser focused and really tied to our growth initiatives. So we feel comfortable with the approximately 40% -- excuse me, $40 million of net cash burn for the year.

Yuan Zhi

Got it. I'm also curious about the visibility in 2024, given the performance in 4Q 2023. Maybe another way to ask about this question regarding the 2024 guidance, how confident are you guys to convert the current lease into revenue in 2024? Any pushback you are hearing from the customer right now?

Maria Sainz

Well, thank you, Yuan. I feel confident in the guidance we have provided. We are exiting 2023 with important accomplishments that feed my confidence. They are our ability to really land the deal in flagship institutions and then translate those into very powerful initial successes with their use of our device in patients that otherwise would have had a very different prognosis or outcome or timeframe. Some of those have actually been public from the likes of the wired Cornell accounts that we implemented just a few weeks ago.
So I feel really good about the kind of names that are now potentially reference sites for other sites to follow. I feel very confident in the way our customers success team is implementing program. I'm also incredibly enthusiastic by the international expansion that we have mentioned, which is not a peanut butter approach. We are definitely selecting market to really put in incremental effort to grow commercial success from them. We're bringing the product that we're commercializing today in the US and we have a lot of inbound interest from clinicians that I think are going to contribute to the revenue profile for 2024 and that actually allow me to feel that guidance is reasonable, given where we're tracking on US plus the select international opportunities.

Yuan Zhi

Got it. And maybe on the last point, a follow-up question there. How are you guys standing on the direct-to-consumer approach versus distributor approach in the international footprint, considering the need to really preserve the cash and the investment -- invest where it matters the most?

Maria Sainz

Excellent question. Thank you, Yuan. I would consider our international expansion to be a light investment as we are primarily going to operate international through third-party distributors. We are very fortunate that we have been in the background working to give ourselves the international optionality as we have made a lot of progress on regulatory clearances with the CE mark under MDR, not the old MDD, and the UKCA certification, which is now, of course, required after Brexit. So that gives us a bit of a readiness point in CE and UK's geography.
But again, we will operate through third-party distributors. We will see that affect our OpEx very marginally. However, as we go forward, we feel very proud of record ASPs. We're going to be posting more of a blended ASP where the distributor pricing is, of course, going to be a different price point that's direct to the customer sales that we do in the US with the two price increases that we've had over the last couple of years.

Brett Hale

Yeah, I would add point to that. Going back to the, I guess, confidence in the guidance, so our international expansion is included in our guidance. So I think that's kind of further gives us confidence in the range that we provided here at the beginning of the year.

Operator

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Maria Sainz for any further remarks.

Maria Sainz

Thank you, operator, and thank you, everyone, for listening into our call today. I remain incredibly optimistic about what we're building and the future of our business. I look forward to providing additional reports and updates to all of you in the coming weeks.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program you may now disconnect. Good day.