Lifeward Ltd. quarterly report, Q3 FY2022

Business context and reporting period

ReWalk Robotics Ltd. (now identified in the request as Lifeward Ltd.) filed this unaudited Form 10-Q for the quarter ended September 30, 2022. The company develops and sells robotic exoskeletons and related rehabilitation products, including ReWalk Personal and Rehabilitation, ReStore, MyoCycle and MediTouch. Amounts below are in U.S. dollars; financial statement figures are in thousands unless noted.

Key financial metrics

At September 30, 2022, cash and cash equivalents were $74.0 million, down from $88.3 million at December 31, 2021. Total current assets were $78.9 million and current liabilities $4.2 million. Total liabilities were $5.2 million, including operating lease liabilities; the filing reports no conventional borrowing balance. Shareholders’ equity was $75.6 million.

For the first nine months, operating cash use was $14.0 million, investing cash use $25,000, and financing cash use $183,000. Cash, cash equivalents and restricted cash ended the period at $74.7 million. The company stated that available funds were sufficient for more than 12 months after issuance of the statements, while also expecting continued losses and future financing needs.

Material changes versus the prior comparable period

• Q3 revenue fell 55% year over year; nine-month revenue fell 29%. Management attributed the declines to fewer ReWalk Personal units sold in Europe and fewer personal and rehabilitation units in the United States. Q3 personal-device sales were also affected by reimbursement decision timing and training delays.
• Gross margin contracted to 25% from 58% in Q3 and to 37% from 54% for the nine-month period. Management cited lower sales volumes leaving fixed production costs spread across fewer units, as well as higher production costs.
• Operating expenses rose 49% in Q3 and 34% for the nine-month period. Higher R&D reflected personnel and development costs; sales and marketing increases reflected CMS-related consulting, greater trade-show activity and staffing; G&A growth was mainly due to professional services related to the 2022 proxy process.
• Nine-month operating cash use increased by about $5.1 million from 2021, to $14.0 million. The prior-year period included substantial equity and warrant proceeds; 2022 financing cash flow was negative $183,000.
• Weighted-average shares rose to 62.8 million in Q3 from 46.6 million, and to 62.6 million for nine months from 43.0 million. The filing also lists 19.4 million outstanding warrants excluded from diluted loss per share as anti-dilutive.

Outlook, management commentary, risks and unusual items

• No numerical revenue or earnings guidance is provided. Management expects future revenue growth to depend on broader third-party reimbursement for ReWalk Personal and sales of ReStore and other products. It expects gross profit to benefit if volumes increase, but notes potential offsets from lower-margin products and higher component costs.
• CMS affirmed that Medicare Administrative Contractors may determine coverage and reimbursement for ReWalk. The company submitted its first case in early November 2022 and planned further submissions; CMS had not yet made a final benefit-category designation.
• The FDA was reviewing the company’s June 2022 510(k) submission seeking clearance for ReWalk Personal use on stairs and curbs. No outcome is reported.
• Management cited continuing COVID-19 effects on customer access, rehabilitation activity, training, demand and forecasting, along with supplier delays and component cost increases. Sanmina is identified as the company’s sole manufacturer for ReStore and SCI products.
• On October 10, 2022, Nasdaq notified the company that its share price had been below $1 for 30 consecutive business days. The company had until April 10, 2023 to regain compliance, with a possible additional cure period subject to requirements. Delisting could harm trading liquidity, financing access and share value.
• The board authorized repurchases of up to $8 million. Through September 30, the company had repurchased 184,629 shares for approximately $184,000; after quarter-end it repurchased a further 719,893 shares for approximately $680,000.
• Other obligations include $1.6 million of non-cancelable purchase commitments and a contingent $1.6 million Israel Innovation Authority royalty liability, payable based on applicable product sales. The company reported no material litigation at the filing date. It expects future net losses and may need additional capital; there is no assurance financing or profitability will be achieved.

Important facts for investors to verify

1. Whether Medicare contractors grant coverage and reimbursement in submitted cases, and whether CMS later establishes a benefit category.
2. Revenue recovery, unit placements and gross-margin trends, particularly given lower sales volumes and production-cost pressures.
3. Cash burn and the duration of the stated operating runway, including the effect of ongoing share repurchases and any additional financing.
4. Progress toward Nasdaq’s minimum-bid-price compliance deadline and the effect of any cure plan on shareholders.
5. The size and potential dilution from outstanding warrants and equity awards, and the company’s reliance on a sole manufacturer.