Hello, and welcome to the Q3 2023 ReWalk Robotics Ltd. Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note today's event is being recorded. I'd now like to turn the conference over to Mike Lawless. Please go ahead, sir.

Thank you, Keith. Good morning and welcome to ReWalk Robotics third quarter 2023 earnings call. I'm Mike Lawless, ReWalk Robotics' Chief Financial Officer, and with me on today's call is Larry Jasinski, our Chief Executive Officer. Earlier this morning, ReWalk issued a press release detailing financial results for the three and nine months ended September 30, 2023. The press release and a webcast of this call can be accessed through the Investor Relations section of the ReWalk website at rewalk.com. Before we get started, I'd like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation, or intent regarding future events, and the company's future performance may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to ReWalk management as of today and involve risks and uncertainties including those noted in our press release and ReWalk's filings with the Securities and Exchange Commission. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. ReWalk specifically disclaims any intent or obligation to update these forward-looking statements, whether as a result of new information, future developments or otherwise except as required by law. A replay will be available shortly after the completion of the call accessible from the dial-in information in today's press release. The archived webcast will be available in the Investor Relations section of the company's website. For the benefit of those who may be listening to the replay or the archived webcast, this call was held and recorded on November 14, 2023. Since that date, ReWalk made subsequent announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings for the most up-to-date information. And with that, I'll turn the call over to ReWalk's CEO, Larry Jasinski.

Thank you, Mike. Good day to all. Since our last financial call, a number of very important events have occurred that we believe have the potential to dramatically change our revenue trajectory and will put ReWalk on a path to profitability. These events are the strategic acquisition of a growing profitable entity, material decisions by the Center for Medicare and Medicaid Services CMS on our path to ensure Medicare beneficiaries have access to our life changing products, progress with the Veterans Administration to make our systems available and FDA clearance introduction of truly breakthrough technology advancements to our system. Let me talk through each of these in order. Together, these represent a watershed moment for the company. Equally important, we will be better positioned to fulfill the mission of our founder, which was to empower a large segment of the spinal cord engineering community with the ability to stand eye-to-eye and walk down the street with all of us. The importance of our successful integration of AlterG is significant in having both the financial size and infrastructure to succeed by building on the government policy decisions. From a financial perspective, from August 11th through the end of Q3, AlterG was profitable and we anticipate it will continue its profitability in Q4. As we combine the ReWalk and AlterG sales organizations on January 1st, 2024, we will have the largest U.S. field organization in the exoskeleton industry. This expanded team provides us with the infrastructure for the furthest reach and highest quality of support for the industry. The reimbursement, working closely with multiple systems at the Center for Medicare and Medicaid Services and CMS, we received a Healthcare Common Procedure Coding System, HCPCS Code in 2020. Then on November 2nd, 2023, we achieved an assignment to a benefit category for lump sum payments to begin in January 2024. On November 6, a preliminary pricing proposal was published with a request to provide more data as a basis to finalize current market pricing by the start of Q2 2024. During this process, we continued to aggressively enroll Medicare patients, submitting about 20 cases in 2023 and a similar number being submitted in Q1 2024. With the Veterans Administration, we focused in 2023 on reestablishing strong supply pathways post COVID with the core spinal cord injury centers as we progressed from three fully active centers to nine. Some VA centers are conducting direct patient selection and control, but then allowing contracted local training in institutions or clinics close to the home of the veteran. This is through the Choice Program, which allows funding for localized training.

This proposed legislation requires that each spinal cord injured veteran be offered the potential supply of an exoskeleton if they are medically qualified as determined during their annual exam. It also adds reporting metrics for SCI centers to document their process in evaluating the disabled veterans that use their services. From a technical perspective, our breakthrough designated FDA clearance allows us to supply Medicare beneficiaries and injured veterans with a product that allows the greatest utilization in daily life as they can now navigate stairs and curbs when they're out walking. In parallel, we have two new products planned for launch in 2024. The 1st is a new ReWalk exoskeleton design that has many improved features and adds cloud connectivity, all of which will aid utilization and make the system easier to use. The other is a new AlterG model that will offer a model for greater penetration into an untapped segment of the independent clinic market. Before we move to the financial metrics for Q3, I want to give a few business measurements that we will discuss in both the financial and operating detailed discussions for the quarter and period ahead. Q3 sales of $4.4 million represents a nearly 400% increase over Q3 2022 that is comprised of a 65% increase in ReWalk revenue and the balance is the addition of AlterG for the last six plus weeks of the quarter. Q3 and Q4 expenses include meaningful investment in CMS and VA policy support along with the integration expense, which are all expected to substantially decrease in 2024, but are essential now to set the stage for future patient access and for ReWalk's success. The combined U.S. field team will be approximately 50 individuals, including a clinical evaluation group, a sales team covering the entire country, a clinical training team, a reimbursement team and a field service team. And as per our strategic direction, meaningful growth is now occurring in both the ReWalk and AlterG product lines. I'd now like to turn the call back over to Mike for some more financial detail. Mike?

Thanks, Larry. Before I review the results of the quarter, I want to first comment that our Q3 '23 GAAP results reflect purchase accounting adjustments, transaction expenses and integration costs from the acquisition of AlterG, which can obscure investors visibility to the underlying operational performance of ReWalk. In order to facilitate understanding of both the GAAP and the operational results of ReWalk, I'm going to discuss Q3 on both the GAAP and also on a non-GAAP basis, which excludes the purchase accounting adjustments, transaction expenses, integration costs and stock compensation expense. The reconciliation of the non-GAAP to GAAP results is provided in today's earnings release. Okay, first to revenue, ReWalk Robotics reported revenue of $4.4 million in the third quarter of 2023 compared to $0.9 million in the third quarter of 2022, up $3.5 million. The biggest factor in our growth in the third quarter was the acquisition of AlterG, which contributed revenue of $2.9 million, which was the revenue generated from the date of the acquisition on August 11th through the end of the quarter. AlterG's revenue performance was in line with our internal expectations. For the legacy ReWalk product lines, Q3 '23 revenue was $1.5 million compared to $0.9 million for Q3 '22, up $0.6 million or 65%. The increase in legacy ReWalk revenue was a result of continuing sales momentum in the United States and sequential improvement in Germany. In total, Exoskeleton revenue was up 70% in Q3 '23 versus Q3 '22, while our distributed product line, the MyoCycle FES training cycles had another strong quarter with revenue up over 50% from Q3 '22. Turning to our pipeline metrics within the current markets for the ReWalk product line, which includes individuals covered by the Veterans Administration and Workers Compensation insurance in the U.S. and by private insurance…

Thank you, Mike. I'd like to provide a little more detail on our CMS activities, VA implementation efforts and our financial operating direction. In 2023 with CMS Medicare, we have submitted about 20 Medicare claims and paused new submissions momentarily to implement claims using the newly assigned benefit category with lump sum payment beginning January 2024. We are not yet including these deliveries in our revenue forecast until the timing and payments are established.

Historically, once the interview process is complete, a final price will be published in late January or early February, with an effective date of April 1st, 2024. In parallel, we will begin to educate physicians on the specific inclusion and exclusion criteria so they can determine which of their patients may potentially benefit with this technology. We have aggressive plans to collaborate with commercial payers and the spinal cord community to increase awareness of these achievements and access to the technology. We will also work with the spinal cord community directly to ensure they understand that access has become a reality after all the years with no available pathway. We will utilize a mix of online effort, media publicity and telephonic or zoom support to provide information to the community as well as planned targeted approaches with engaged payers. Our large sales presence will be also a key part of our educational efforts in the market. We're also excited about the support we are seeing with our new VA centers and the initiatives by Congress and the Senate to broaden awareness and consideration of walking once again. The support in parallel for the STAND Act by the Paralyzed Veterans of America and the Disabled Veterans Community is fantastic advocacy for this community. The VA remains the leader in research on spinal cord injuries and although it has taken some time with the individual spinal cord injury centers to provide products, they are leading the way in enabling walking in everyday life. The STAND Act that is moving through Congress has four key elements. One, annual exoskeleton evaluations are codified in law for those veterans who seek their care through the VA. Two, the VA provides Congress updates on progress in terms of numbers of evaluations, training and device approvals. And…

Yes, thank you. [Operator Instructions] And the first question comes from Swayampakula Ramakanth from H.C. Wainwright.

Thank you. Good morning, Larry and Mike. Let’s start off with AlterG. So in terms of the new business, as you said, the first quarter that you have under your belt, it has been profitable, which is good news. Can you comment a little bit about how AlterG is progressing in your hands? And also, how do you see cross selling from AlterG to ReWalk? Because ReWalk is also entering the execution phase, as you call it.

Okay. I think there’s parts of that for me and for Mike. First, we are really thrilled with how this is progressing and how it’s come together. And our favorite measurement of this is how well we hit the ground running the day after the acquisition for revenue results and for beginning to integrate. We have taken this period to focus on hitting the numbers for Q3 and Q4, and in parallel to do a lot of work on the proper structural setup for this combined organization that will go into place on January 1. And we outlined a very extensive program to have everybody trained. But what we’re going to wind up having is a sales organization whose reach is just dramatically broader than it was as two standalone entities. And the synergistic component of this is all of the 600 spinal cord injury centers in the United States have AlterG’s in them. So they’re very good connection points. And the larger organization for AlterG’s benefit, as they will now have more territories as they launch a new product in 2024, they can get to the smaller clinics on a better geographic basis. So the operating structure that is taking effect as of the 1 January is what we believe is the right structure to benefit both companies, us to work on CMS and VA from the ReWalk end, and us the other part of us, to be able to get to these clinics with the new product and broader reach on AlterG’s line. Did you want anything further on the financial side of this or did that answer your question RK?

No, this is good. I’ll come to the finance in a minute. But before we get there, in your prepared remarks, you also made comments on a new AlterG model as well as a new ReWalk model. Can you give some highlights about what is new in these two models that you are planning to start commercializing?

Yes, we haven’t completely advertised what we’re bringing to the market in a big sense, but internally there’s slightly different goals in both. For AlterG, we have a model that will play to a broader and newer audience. It’s a device that is designed really specifically to meet the needs of smaller private clinics. And now with a larger team that we can call in those clinics that’s why we believe this fits well. So it’s an additional product line in their offering for a segment that they really haven’t pursued at a high level. And it is a very economic and very good operational system for the small private clinic. So that’s the AlterG model, and we’ll begin that launch in the first – late first half of the year, is our intention. On the ReWalk side, we have a product with a number of improvements that we’re focusing on making them easier to use. So it’s not a radically different product, but as a product that is powered differently in terms of battery structure and life, it can offer multiple speeds, which makes it easier to use in the community. And we’ve improved the cloud connectivity, which frankly we want to use to help drive utilization, because data will be available and we can help users understand use and we can encourage them to use it even more with these metrics. So products are a little bit different. One driven at utilization. The other one is a new market segment.

So one more question for you on the operational side. So as we enter into potentially good growth rate in the U.S. with ReWalk, do you think Europe will also contribute to that growth in 2024?

Yes, we do expect growth in Europe. I think the rate of growth in the United States because of the CMS size of the segment and the VA is going to be the majority of our growth. I think growth in Europe will be driven a little bit by them just reopening a little more. They’ve been slow to get their clinics going at the highest levels from a personnel point of view, over the course of the year, personnel shortages and things of that type. But we do see expansion in Europe, specifically within the ReWalk side and on the AltarG side they have a very good distribution network that we believe we’ll be able to build on as well.

Thank you. A couple of quick questions on the financial side. So ReWalk sales came in at $1.5 million for the quarter. What drove that growth within the ReWalk business? And also for AlterG sales, you stated $2.9 million this quarter. So what are we comparing that against to say, sequentially, how much has it grown? And I’ll stop right there.

Sure. Good questions. First, I want to clarify. I think I misspoke on the call about the cash balance. The correct cash balance is $32.6 million, in case I misread that, as I was describing the cash balance. So in terms of the growth on the ReWalk side, it was really across the board in terms of, there was, like I said, sequential improvement in Germany and Europe. But I would say that the majority of the growth was really driven by the U.S. and VA, sales to the VA for the exoskeletons, as well as continued strong performance by the MyoCycle product line.

Thank you. And then on the AlterG sales?

Yes. So the AlterG sales, I would say they don’t necessarily -- it’s not a levelized level of sales through the quarter. It is -- it tends to be, as with a lot of capital equipment products – tends, or a lot of business in general, tends to be towards the second half, more toward the second half of the year. So you can’t sort of just take the $2.9 million and just assume that that was level throughout the quarter. So we’ve described in the past the business as being about a $20 million business. So you can sort of –we’re purposely giving a guidance at this stage. So I’m being a little bit coy, but you can make a determination of what you think the business would do based on how we’ve described it on an annualized basis. I think we’d like to own it for one more quarter and kind of go through the full quarterly cycle of our internal forecasts and then realizing the results before we start to provide external guidance for that business line because it’s still new to us, but you get the gist of the scale of that business.

Thank you. Thanks for taking my questions.

Thank you. And the next question comes from Martin Pollock [ph] with FMR Holdings.

Yes. Wonderful to see we’re finally becoming operational company with real business. Just two questions to start with. You’ve talked about the two entities now AlterG and ReWalk. When will we see some segment reporting that will truly get into at least the operating line for both companies? At this point should we expect that by fourth quarter? Or did you say beginning next year we will see segment reporting? That will be the first question please.

Hey, Marty, how are you? Good question. So I think right now we’re making that determination with our auditors. There are certain accounting requirements around when segment reporting is justified. We plan to run the businesses as one business. This is not a case of two separate business entities that are just running in separate silos. There’s going to be a lot of cross pollination of our cost structure, and our entire commercial team is really supporting all of the product lines. So at this point, I don’t know yet if we will, in fact, need to provide segment reporting, because our intention is that we’re not running these as separate segments they are going to be one consolidated business line. But we still need to do more research into that, and certainly we’ll provide an update in terms of what the final determination is.

It seems that if that’s the case, we’ll never really get a chance to see what that on a transparent basis. What is the profitability of AlterG separate from ReWalk? I don’t know that there would be a reason not to separate them to different products, but I think that also ends up creating questions about where the cash? Where the earnings are coming from? It seems to me the two products are still discreet enough. So I really think it’d be very, very wise for you to provide more of that type reporting, not just on the revenue line, but as it filters down to the EBIT line. You’re suggesting already that you made some money even in that period that you reported that AlterG is profitable. What is that level of profitability then? What would you be expecting for that, even if it came in a matter of discussion as opposed to the segment breakdown? Because I think we need to know that. Second question is, when it comes to the cash burn, it seems for the first time I’ve heard real aspirational comments that suggest that cash burn is coming down dramatically. You said significantly, but when you say we’re expecting higher revenues, we’re expecting a significant decline in cash use or cash burn, are we still holding out to the notion that you’ll never need additional financing and the cash on hand will be sufficient to go through 2024 and 2025? But give us a little bit more perspective on that cash burn going into Q4 and then into next year? Certainly, I know you already make a full year forecast, but what does significant decline mean? Can you amplify that? Because this is just, it seems, not enough to really get a good handle. Is it a burn rate of $2.5 million per quarter or is it $4 million or is it, what number is that? I’d appreciate if you give us some kind of clue into that.

Okay, I’ll give some comments on this, this is Larry. First on the things that are really going to reduce our investment to succeed with CMS has been very large, be it legal, be it other advisors, be it data collections, be it building infrastructure. We’ve succeeded. The investment paid off relative to getting to the endpoint that they were charged for. But we don’t need and will not require the majority of those activities any longer as we go into next year. So you’re going to see a significant reduction in efforts on government spend. We’ve talked a little bit about the VA, and we believe as this new act goes through again, there’ll be a significant reduction on some of our activities there as well in terms of government policy. We also see a lot of operational efficiency. As we pointed out, our sales forces are going to be one sales force. It’s no longer broken out. The same rep is going to the hospital selling multiple product lines. And that has its efficiency to it in a significant way with more territories, less travel. And to your point, do we believe we have sufficient cash to get to profitability? The answer is absolutely, we do. We see growth with CMS, with the VA, with new product lines, with AlterG. We have one this year. We look to do another one in 2025 as well. In the AlterG product line, they didn't have the cash to do those. That is some of the synergistic effect of this we have to execute, but we believe that we can. Relative to the amount of burn rate, that's a hard one. We'd like to finish all of our specific plans, but I'll scale it at least at some level, we're looking at reductions in burn rates in the direction of half year-over-year, the actual numbers will make visible as they occur. Revenue is going up; some of our expenses are going down. We know what we have to do and we're going to do it.

Larry, clearly, I think in previous quarters you both have said, you and Mike, that to some extent, a lot depends on the revenue growth at this point. And it seems that that continues to be the case. But now you're also pointing out to certain expenses, real expenses that will not be there because of all the costs of integrating the companies, putting them to making the acquisition, and what costs you no longer have to incur. So I don't want to put words in your mouth, but if you're saying by the time half of the burn rate could be mitigated, or maybe burn rate could be down 40%, 50%. I mean should one assume that at some point a run rate on cash burn in 2024, maybe a quarter, one quarter, two on our run rate will be down to that two, $2.5 million. Is there any reason why your comments aren't pointing us to that direction?

We clearly expect our burn rate to go down quarter-over-quarter-over-quarter. We haven't quantified it. I'd like to quantify the exact dates. I'm getting paid by CMS so I can see the top line that's going to offset some of that bottom line, and that's going to become apparent to us. But that's why we can't give more specific guidance. But we expect to report reductions in burn rate every quarter in the year ahead.

Okay. Because it does seem that these comments are, for the first time, comments that really point us to the lower expenses that will be incurred. That alone is very different than what you've said in the past, where you've said, well, a lot will depend on revenue growth. You've implied there will be some costs that will be lower, but this seems to be. These comments are really more significant as I'm hearing you. One more question with regard to this legislation, the new bill that's being proposed for the VA, I found it curious that for anybody that read this for the first time would have thought, oh, this is something brand new. Well, you've been selling to the VA from the very beginning, and there was never a notion of this, what accelerated ability to generate even more activity out of VA, what that is. I would like to know whether when you're talking about the VA itself, independent of CMS, assuming this bill goes through, and I don't know when that does happen, the number of cases that could literally end up being new sales at some point. Obviously, there is a sales cycle that takes place six months or so, but could the VA sales be exponentially much higher with the bill being approved?

Well, the bill being implemented and followed will change it. The best way to look at this is CMS for Medicare/Medicaid is 56% of the spinal cord injury population in the United States, and if you just. Medicare alone, it's 31%. The next largest single block in the United States is the veterans, which is roughly 9%. So this opens up the door for us if we get it properly integrated into the VA processes access to our two biggest markets, the VA, I can only compliment how wonderful they've been on the R&D side. It didn't translate as well as we would have hoped on the execution side. COVID got in the way, frankly, in a big way. by: We'll provide the process for it. But General Bergman in particular, along with the others that co-sponsored this bill, and they brought a U.S. Marine who was paralyzed and walking to the Hill with them. They're quite serious about supporting this and supporting the veterans, and we think we'll build on that.

Just assuming that, let's say the bill goes through the moment that happens, how does that change your strategy with regard to allocating some of those resources also straight towards the VA potential patients? Does any change that takes place immediately recognizing this could open up a huge number of new cases?

It will open more cases and I think it'll do it gradually. But what we've done structurally and part of the whole design of both organic and inorganic growth through acquisition was to have a field preference that could implement well. The VA is really good in how they manage veterans, but they need support. They need good support for training. They need good support on a day-to-day basis in making sure these veterans get through the system, at least from the product supply end and the elements that we have to give them. With the larger sales organization, the design of that is to be able to call on more VAs and help them and with any support that they require from industry and also to do the same with CMS. We needed that larger organization to implement on our sales goals. And that's why the combination of all these factors go together. The larger organization and Team plus VA plus CMS are all favorable to allow growth. It'll never be fast enough, but it will grow.

Yeah. Last question, if I may, Larry. Certainly when you announced the price per unit, $186,000, that you were essentially putting into your expectation, or at least your request with CMS stock took off stock then retreated significantly. When we saw the number 94,000 or 600 or so, you expressed that you were quite pleased. You also indicated that the possibility now is that there will be a baseline to grow from with the hope that you'll be getting some consideration for the stair climbing approval as well as turning sharp corners. The number sounds like it's going to be higher than that 2024. Obviously, in the implementation, is there a number that you think one could expect that the CMS will provide additional funding for recognizing that they've said exactly that? What is the number that you would say is one that would make you pleased? I would imagine you're not looking for $50,000 for that per unit, but what kind of number is reasonable to expect?

Well, Marty, what I'm very pleased about is that CMS came forward and said we want to use current market pricing as part of our consideration for a formula, and that's the right way to do it from a government policy point of view. So I actually endorse big government policy, which I don't do very often. I don't want to put a specific number to it. We will go back and give them the invoices of the current model. They will put it in a formula or consider it, and we will work with that number, we being covered for 56% of the population and 31% specifically being the Medicare, with the 25% being Medicaid matters. So we're going to be able to grow at whatever number they give us. But they came and asked for the right data. We're going to give them the right data, and maybe slowly, but government policy is working. We're making progress in the two largest government entities that make up our business, and it's taken a lot of time and a lot of investment, but we're done with the investment and now it's time to move forward.

When you said market price or market data, you're clearly indicating it's higher than the 94,000. You're implying some number that you would say that is more reasonable. What is that number? I mean is there a way for us to gauge what kind of market data you're thinking about, or what is that kind of price? Whether you at least what is the market?

The number is going to be CMS's number, not our number, and it'll be for every person who's paralyzed. We believe it's going to be a number that works for our business, but I've got to let them do their process before I put a number out there, and that's not going to take too long. We get to present on November the 29th. Historically, they have given answers to those deliberations, roughly late January, early February. And also they have a lot of pending claims. They could choose to pay one before that or not. We're not far away from getting a good number.

That good number is a number that you would say is a step up from the 94,600. Right. That seems to be what you're suggesting whatever that number is. Okay. But that is the way I think their initial release suggested that they're willing to go back to the 2020, beyond the 2020, recognizing their new improvements. Clearly, the FDA approval for both stair climbing being the case, as well as turning corners. So you would say that the 94,600 plus. I think that's what seems to be what one should assume. Right.

Well, clearly we're presenting a 2023 number, which is they used a base number that they were very clear about. It was 125,000 and it was published in the public documents. We have a list price of 186,000. They will consider that from our material we provide them and they will put it in their formula, which is a fairly complex formula that is available on the CMS website, if you could pursue that, and it should give us a number that we can work with. That's all the data I can give you because it's all I have today.

Okay, listen, thank you very much. I do want to -- it seems things are really moving in the right direction. After all these years, we're finally getting closer to seeing the light at the end of the tunnel. I hope that clearly this is a new day for ReWalk, all the best.

Thank you very much. We appreciate that.

Thank you. And this concludes the question-and-answer session. I would like to turn the floor to Mike Lawless for any closing comments.

First, I'd like to thank everybody for participating. And as I closed the call, I talked about us moving into a new phase of execution, and that's what we're going to be able to start reporting on as we go into 2024. And it's time to pay attention to us in a different phase of where our company is, and it's a phase of revenue growth and being prudent in managing our financial position to get this company to reduce its burn rate and to get to break even on the cash we have, I want to emphasize that's where we are pointing ourselves and that's where we're committed. So I look forward to future calls because I get to talk about these things and I'll do the best we can with those. So with that, thank you, everyone, for your time today and please reach to us if you have further questions.

Thank you. The conference has now concluded. Thank you for attending today's presentation and you may now disconnect your lines.