Ladies and gentlemen, thank you for standing by. Welcome to the Nano-X Third Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Mike Cavanaugh, Investor Relations. Sir, please go ahead.

Good morning, and thank you for joining us today. Earlier today Nano-X Imaging Limited released financial results for the quarter ended September 30, 2024. The release is currently available on the Investors section of the company's website. With me today are, Erez Meltzer, Chief Executive Officer and Acting Chairman; and Ran Daniel, Chief Financial Officer. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements regarding the company's financial results, research and development, manufacturing and commercialization activities, regulatory process operations and other matters. These statements are subject to risks, uncertainties, and assumptions that are based on management's current expectations as of today and may not be updated in the future. Therefore, these statements should not be relied upon as representing the company's views as of any subsequent date. Factors that may cause such a difference include, but are not limited to those described in the company's filings with the Securities and Exchange Commission. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-GAAP to GAAP measures is provided with our press release, with the primary differences being non-GAAP net loss attributable to ordinary shares, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, and non-GAAP gross loss per share. With that, I'd now like to turn the call over to Erez Meltzer.

Thank you for joining us today for our financial results call. I'm happy to share the progress, we have made deploying our innovative Nanox.ARC technology, as well as further progress with Nanox.AI, and the other components of the full Nanox solutions. Since its commercial deployment at the beginning of this year, there are now 47 units, almost 50 that are in various stages of shipments and deployments, for both commercial and clinical use. In the U.S., we are deployed across seven states. Our strategic growth plan is well underway, and we are committed to accelerating our efforts to expand our footprint, and enhance our technology. This is a multipronged effort, which includes doubling our pipeline, expanding our sales, service and support teams on the ground in the key U.S. market to drive sales, raise awareness with imaging centers and hospitals, as well as supporting our growing customer base and the installations and ongoing use of Nanox solutions. Hand-in-hand with these efforts, we also continue to advance our regulatory efforts with the U.S. FDA, for additional clearances and securing the CE mark in European Union, while also continue to generate trial data supporting the use of the Nanox.ARC. The positive feedback from healthcare providers and patients alike, reinforce our belief in the transformative potential of Nanox.ARC. We are confident that our continued focus on innovation and strategic partnership, will drive significant value for our shareholders. We also signed several new deals for Nanox.AI solutions, including Oxford University Hospital's, NHS Foundation Trusts in the U.K. I will share more detail on this and other agreements later in my remarks, but I would say that all of the Nanox.ARC, are excited to partner with such prestigious institutions. We at Nanox were also humbled and proud to have Nanox.AI, selected for a special mention…

Thank you, Erez. We reported a GAAP net loss for the third quarter of 2024 of $13.6 million, which I will refer as to the reported period, compared with a net loss of $21.4 million in the third quarter of 2023, which I'll refer as to the comparable period. The decrease was largely due to a decrease of $7.4 million in expenses, related to impairment of goodwill, which were recorded in the comparable period and not in the reported period. Revenue for the reported period was $3.0 million, and gross loss was $2.8 million on a GAAP basis, compared to a revenue of $2.5 million, and a gross loss of $1.7 million on a GAAP basis for the comparable period. Non-GAAP gross loss for the reported period was $0.2 million, as compared to a non-GAAP gross profit of $0.9 million in the comparable period, which represents a gross loss margin of approximately 6% on a non-GAAP basis, for the reported period as compared, to a gross profit margin of 37% on a non-GAAP basis in the comparable period. Revenue from the teleradiology services for the reported period, was $2.6 million with a gross profit of $0.3 million, on a GAAP basis in the reported period, which represents a gross profit margin of approximately 15% on a GAAP basis for the reported period. Non-GAAP gross profit of the company's teleradiology service for the reported period was $0.9 million, which represents a gross profit margin of approximately 35% on a non-GAAP basis. Revenue from the teleradiology services for the comparable period was $2.2 million with a gross profit of $0.2 million on a GAAP basis, which represented gross profit margins of approximately 11% on a GAAP basis. Non-GAAP gross profits of the company's teleradiology services, for the comparable period was $0.8 million,…

As we conclude our discussion today, I'm filled with confidence about the future of Nanox, our initial deployment of the Nanox.ARC technology across multiple states in the U.S., along with our expanding footprint in international markets, as being a testament to our unwavering commitment to making advanced medical imaging accessible and affordable worldwide. The positive feedback from healthcare providers and patients reaffirm their transformative potential of our solution. Coupled with a robust infrastructure, we have established this past year, we are well positioned to accelerate our progress in 2025. On the regulatory front, we are diligently working with the FDA and European Union bodies, to secure the necessary approvals, which will further solidify our position in the market. Our ongoing trials and collaboration with leading health system, demonstrates the clinical utility and the value of our AI solutions, paving the way for broader adoption of groundbreaking advancement to medical imaging. We take pride in our robust clinical performance. By prioritizing clinical needs and development efforts in close collaboration with the medical community, we ensure that our innovations are not only advanced, but also deeply relevant to those we serve. Our commitment to providing advanced diagnosis imaging capabilities, continues to elevate market needs and utilization, setting new standards in the industry. Moreover, we're constantly working, to improve and innovate with solutions designed, to meet and exceed market expectations. Thank you for your continued support and confidence in our vision, together we will drive significant value for our stakeholders, and make a lasting positive impact on global healthcare. As always, we welcome your feedback and are happy to meet with the interested investors, please contact our Investor Relations partner at ICR, and they will assist. With that, operator, let's now open the call for questions.

Thank you. [Operator Instructions] Our first question will come from Ross Osborn with Cantor Fitzgerald. Your line is open.

Hi guys. Thanks for taking our questions and congrats on the progress. So starting off, how many systems did you deploy in the U.S. during the quarter? And how many were operating. And as a follow-up, what types of imaging centers are adopting ARC [ph]?

So, I think it was mentioned altogether, the number was 47. The -- I would say, majority of the medical centers are imaging centers, small and medium. Another part are imaging medical imaging chains that we mentioned, and we added a few right now. And we have a few in hospitals, or I would say, multi-functionality medical centers and some chiropractors' clinics or in orthopedic clinic, altogether in terms of the locations in the place, by far, our pipeline and deal flow is far bigger than what we have indicated, and we continue to work.

Okay. And then looking at placements to date, how has average utilization trended in terms of scans per day or month for ARC?

I think it's similar to what we reported last time that in the operating in the places, which are operating, this is around the number that we've indicated in the past in working days, seven days - seven scans per day.

Okay. And then lastly for us, I'll jump back in queue. You mentioned ongoing conversations with FDA, but could you parse out how those conversations are going? And any updates on [ARC-X] and then the label expansion for full body?

As you know, Ross, we don't give any indication on something that is not in our hands. From our point of view and the best we can judge all the information, all the answers, all the questions were answered. From our point of view, the indication is positive. And from the FDA point of view, I don't see a reason why it will not be in the short future. In terms of the ARC-X, this is something that we are going to submit in a few months, next early next year. And the ARC-X is anyhow scheduled to be deployed sometimes during the next year. I would say, probably second half, if everything goes well. But from the FDA point of view, right now, the process seems to be in line.

Great, thanks for taking our questions.

And our next question comes from Jeffrey Cohen with Ladenburg. Your line is now open.

Good morning, Erez and Ran. How are you?

Good.

So a few questions from our end. Congrats on the progress. I know you called out Medica, that you were at, can you talk about Europe generally speaking [ph] how that may play out throughout the first year or two of commercialization after a CE Mark. Are you anticipating that, that will also become 30 or 40 or 50 commercial folks on the ground across Europe? Or do you imagine that will be more clinical and related to agreements by country as far as distribution?

So if you remember from what we presented as a strategy for the company for sales and distribution. Europe main - maybe with the exception of the U.K., Europe will be based on distributors, we have already a few agreements with the distributors that were signed. The Medica actually indicated a very high interest from other countries, new distributors. And based on the - right now, the current indication, I think that I don't want to give a number. But it will be hopefully similar to the one that we currently have, and we're going to deploy. We have already a few purchase orders which are concrete. And once we get the CE, I think we have already a plan, or the action plan for the go-to-market is already in place, and we're going to start. One of the things, which is important with respect to the Europe, we have indicated that we are planning to do another clinical trial in a prominent institution in Europe, which will help us to get clinical samples and have a lot of clinical data to help us to work in Europe. But in terms of the salespeople, our channel management directors, the agreement with the distributors and the contract and the promotion and the marketing, we are already in place, and we are running fast forward. Bear in mind that another country that, is related to EDC is Australia, which we have already an agreement over there.

Got it. And Erez, carried that over for a moment to APAC and LATAM as far as those territories and walk us through plans there, and also - talk about the regulatory and who's carrying that burden, and where that's being pursued currently besides Mexico and Chile?

Okay. So LATAM is also going to be based on distributors, the process is already in place in these countries, in Mexico and Chile. So the request for the regulation approvals was already submitted - and submitted by the distributors. They carry actually the process. We are in touch with them actually with Mexico, just now it's another call. And it's going to be similar in terms of the efforts that we do there. We have a channel manager that is responsible for this area. The beauty of what we can do is we bring people from Latin America, to see the demos that we have in the U.S. in order to take them all the way to Israel. So it's good for them to make a short trip, and see the system operating, see the clinical value that we had discussed the economic value that we can contribute, et cetera.

Okay. That's helpful. And then lastly for us, a quick one. I didn't hear any mention about the Nanox.CONNECT. Was there any update there or any anticipation for that platform for '25?

We'll probably have more clarity on 2025. But right now, I think the next one on the agenda will be Mexico. And that we're going to get orders once we get the approval. We have submitted already a request for regulation approvals in a few other countries for the CONNECT as well.

Perfect. Erez, thanks for the color.

Thank you.

[Operator Instructions] The next question comes from Scott Henry with Alliance Global. Your line is now open.

Thank you and good afternoon. For starters, when we think about Europe and the rest of the world, how should we think of that opportunity relative to the U.S. I know you used to think of all of that comparable to the U.S. as far as potential revenues. But I just wanted to get your thoughts on that.

I cannot say that we don't have any internal thoughts about it, an indication, what's the split between the U.S. and the rest of the world, and especially Europe. But I would say that I will be smarter to indicate, or to give an answer to your question once we get the CE approval. And we know that we can move fast forward. In terms of strategy and the go-to-market, we have definitely - as we have mentioned a few times last year in 2023, and in 2024. In the beginning when we started the deployment in the U.S., we have put the U.S. as a priority, mainly, because of the FDA approval, and the fact that we can get easier access to customer and customer base, and to generate big deal flow and the pipeline. And so right now, U.S. would be a priority and Europe will follow after.

But Scott, in terms of modeling, you should think about it like the way that we did with the U.S. just we have learned more lessons from the past. So you can think about more efficient thought process.

Okay. Great. And then I noticed revenues for AI solutions were higher than the trend line, is that a signal that AI solutions revenue should continue to be higher, and is there a little bit of seasonality? Because I know they were strong in third quarter of last year as well. Just trying to get a sense of that line?

So the first question, I will start, then Ran will continue. The first question is yes. You can anticipate that the number will continue to grow. In terms of seasonality, usually relates to the budget-related decisions, especially in the U.S., in the public health market. But since part of it is in the U.K., and it's not necessarily related to the U.S. budget processes then I wouldn't say that it's a seasonality, there is seasonality impact on this. Ran, would you like to add anything else?

Yes. Thank you. So as we explained in the PR, this - the increase in the revenue of the AI division was due to a completion of a project of where we installed our solution, as for what the second part of your question is, we do continue to build up our customer base and backlog, whether it's existing or expand the scope with existing customers. So it's not related to seasonality and there's no linear expansion over here, but you do, with this, we do see some expansion in the scope of the businesses the AI division does.

Okay. Thank you for the feedback. A final question, which is very much a big picture question. When we think about the revenue trajectory, when do you think we would start to see an inflection point? Would that be the expanded indication? And then obviously, we get Europe coming in. I mean are we thinking kind of middle of 2025, we should start to see kind of that hockey stick upward turn. Just trying to get your sense of when we should look for the inflection point? Thank you.

Ran?

Yes. So without specifying any specific point of time, it's connected for various factors. Of course, first of all, unveiling the clinical value of our devices, the commercialization - it's -- of course, it's also related to expanding the fluencies for the general use in the U.S. and the CE Mark, so it's really a combination of many things, which we hope that will come to fruition in the near future.

I would actually look at it more - not as an inflection point, but more of a kind of milestones that each one of them can make it be a game changer. So one will be the chest and the full body. Another one will be the CE later on, sometimes 2025, the FDA approval of the ARC-X, the ARC-X launch. So, we have a lot of milestones along the way that each one of them will be a game changer. That's the way at least we see it internally.

Okay, thank you. That is helpful. Thank you for taking the questions.

Thank you.

I am showing no further questions at this time, and I do want to thank you for participating today's call, and you may now disconnect.