ReWalk Robotics Ltd. (now Lifeward Ltd.) — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. The filing was submitted under the name ReWalk Robotics Ltd.; financial amounts below are in U.S. dollars unless stated otherwise.
Business context
The company develops and sells mobility and rehabilitation medical devices, including ReWalk exoskeletons, the ReStore exo-suit, and—following its August 11, 2023 acquisition of AlterG—anti-gravity rehabilitation systems. The interim financial statements are unaudited and prepared under U.S. GAAP.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $4.403 million | $0.886 million | $6.970 million | $3.332 million |
| Gross profit | $0.863 million | $0.221 million | $2.010 million | $1.232 million |
| Gross margin | 19.6% | 24.9% | 28.8% | 37.0% |
| Operating loss | $7.942 million | $5.433 million | $17.475 million | $14.097 million |
| Net loss | $7.531 million | $5.460 million | $16.494 million | $14.256 million |
| Basic and diluted loss per share | $0.13 | $0.09 | $0.28 | $0.23 |
Q3 revenue rose by $3.5 million year over year, primarily from AlterG after acquisition and higher U.S. sales of ReWalk Personal and MyoCycle. Nine-month revenue increased by $3.6 million, mainly reflecting AlterG and higher U.S. product sales. Reported gross margins declined year over year, which management attributed to $0.6 million of acquisition-related inventory accounting impact and $0.5 million of acquired-intangible amortization. Excluding those items, management reported gross margins of 45.2% for Q3 and 44.9% for the nine-month period.
Operating expenses were $8.805 million in Q3 and $19.485 million for the nine months. Nine-month sales and marketing expense was $9.076 million, up from $7.119 million; general and administrative expense was $7.579 million, up from $5.282 million. The latter included $2.3 million of M&A-related expense. Financial income was $1.047 million for the nine months, primarily from interest income after a change in cash management practices.
At September 30, cash and cash equivalents were $32.590 million; cash, cash equivalents, and restricted cash totaled $33.286 million. Nine-month operating cash use was $16.183 million; investing cash use was $18.070 million, including the AlterG acquisition; financing cash use was $0.992 million, primarily treasury-share purchases. The company reported $69.219 million in assets, $17.443 million in liabilities, and $51.776 million in shareholders’ equity. It reported no bank debt in the presented balance-sheet liabilities; lease liabilities totaled $2.101 million and the AlterG earnout liability was $3.647 million. Management said available funds were sufficient for more than 12 months following issuance of the statements, while cautioning that losses and cash use are expected to continue and additional funding may be needed until profitability or positive cash flow is achieved.
Material changes and significant transactions
- AlterG acquisition: Closed August 11, 2023, for approximately $19.0 million in cash, with potential additional earnouts. Preliminary total consideration was $22.1 million, including a $3.607 million estimated earnout liability. The acquisition added $7.538 million of goodwill and $14.133 million of identifiable intangible assets before amortization. The purchase-price allocation remains preliminary.
- Cash and equity: Cash and cash equivalents declined from $67.896 million at December 31, 2022 to $32.590 million at September 30, 2023. The share repurchase program expired August 9, 2023; no shares were repurchased in Q3. The company had 60,024,517 ordinary shares outstanding at September 30.
- Product development: ReWalk 7’s FDA submission was targeted for the end of 2023. Further ReBoot development investment was temporarily paused in 2023 pending assessment of its clinical and commercial opportunity.
Outlook, risks, and contingencies
- Medicare reimbursement: Subsequent to quarter-end, CMS’s 2024 Home Health Final Rule confirmed personal exoskeletons in the Medicare brace benefit category beginning January 1, 2024. CMS proposed a preliminary $94,617 payment determination for HCPCS code K1007; the filing said a final determination was expected in early 2024, with an April 1, 2024 effective date. The proposed amount was not final, and reimbursement and claim outcomes remain uncertain.
- Operating outlook: Management expects growth from ReWalk Personal reimbursement and sales, AlterG systems, ReStore, and distributed products. It expects gross margin could improve with greater scale and AlterG’s product mix, but noted potential offsets from lower-margin products and higher manufacturing costs. No quantified revenue or earnings guidance was provided.
- Listing risk: The company had not regained Nasdaq’s minimum bid-price compliance by October 9, 2023. Following a hearing, Nasdaq granted an extension through January 31, 2024, potentially requiring a reverse stock split; failure to regain compliance could result in delisting.
- Israel and supply chain: The filing described the Israel-Hamas war and potential regional escalation. Operations had continued without material interruption as of the filing date, but the company’s legacy ReWalk products are manufactured by Sanmina at a facility in northern Israel. The company also cited geopolitical risk involving Taiwan, where it sources some components.
- Other exposures: Non-cancelable purchase obligations were approximately $2.2 million. The company disclosed a contingent $1.6 million Israel Innovation Authority royalty obligation, payable based on applicable product sales, and $3.647 million of potential AlterG earnout payments. It reported no material litigation other than matters described in the filing and no off-balance-sheet arrangements.
- Acquisition and funding risks: Integration costs, failure to realize expected AlterG benefits, continued operating losses, and the ability to raise additional capital could adversely affect results and liquidity. Management stated there was no assurance of future financing or profitability.
Important facts for investors to verify
- Whether CMS finalizes the proposed K1007 payment amount and how Medicare coverage translates into approved claims and actual sales.
- AlterG’s post-acquisition revenue, margins, integration progress, and the final purchase-price allocation and earnout valuation.
- Cash-burn trends and whether the stated runway remains adequate as operating losses continue.
- Nasdaq bid-price compliance status and any reverse-stock-split action.
- Any disruption to Israeli operations or the Sanmina manufacturing facility, and the availability of Taiwan-sourced components.