Filing summary
Reporting period: Quarterly report for the three and six months ended June 30, 2016; financial statements are unaudited. The filing identifies the registrant as ReWalk Robotics Ltd., although the request metadata names Lifeward Ltd.
Financial performance and position
| Metric | Q2 2016 | Six months 2016 |
|---|---|---|
| Revenue | $0.817 million, up 34% year over year | $2.878 million, up 131% |
| Gross profit / margin | $0.085 million / 10% | $0.578 million / 20% |
| Operating loss | $8.588 million | $15.003 million |
| Net loss | $9.117 million; $0.74 per share | $16.039 million; $1.30 per share |
| Operating cash flow | Not presented for the quarter | $(13.513) million |
At June 30, cash and cash equivalents were $15.686 million; current assets were $22.080 million and current liabilities were $9.835 million. Debt under the Kreos loan was $10.307 million on the balance sheet, including $3.963 million current and $6.344 million long-term. The loan bears 10.75% annual interest and is secured by a first-priority lien over substantially all assets, including intellectual property. Total liabilities were $16.588 million; shareholders’ equity was $8.050 million.
Material changes and operating developments
- Personal-device placements increased to 24 in Q2 from 7 a year earlier; 18 Q2 placements were covered by insurance reimbursement. Total placements were 25, versus 12 in Q2 2015. Six-month total placements rose to 57 from 25.
- Management attributed revenue growth primarily to more Personal devices placed and higher insurance reimbursement. Rentals increased substantially: 16 units in Q2 versus 2 a year earlier. Rentals can increase placements without producing equivalent immediate revenue growth.
- Gross margin improved for the first half to 20% from 7% in 2015, but remained 10% in Q2. Operating expenses rose to $8.673 million in Q2 from $5.903 million, driven by R&D, sales and marketing, and general and administrative costs.
- R&D expense included $1.1 million related to the Harvard research and license agreements. Six-month financial expense was $1.006 million, primarily reflecting Kreos loan costs.
- Operating cash use increased to $13.513 million from $12.039 million in the prior-year half. Financing provided $11.725 million, principally from the $12 million Kreos draw and $0.691 million of net ATM proceeds; cash declined $2.183 million during the period.
Outlook, commitments and risks
- No quantified revenue, earnings or cash-flow guidance is provided. Management expects near-term net losses and negative operating cash flow to continue, with spending focused on reimbursement and commercialization, sales and marketing, clinical studies, and next-generation products.
- Management said it expects available cash, operating cash flow, Kreos borrowing, ATM sales, or other financing to meet anticipated cash requirements for the next 12 months. This depends on estimates of revenue, spending and financing access.
- The ATM program permits up to $25 million of share sales; by August 2, 2016, 100,075 shares had generated $0.437 million net. The company could draw up to a further $8 million under the Kreos facility only if it first raised at least $10 million through qualifying capital-stock issuances before December 31, 2016.
- Contractual obligations totaled $26.374 million, including $2.713 million of non-cancelable manufacturer purchase commitments, $6.282 million for Harvard agreements, $3.896 million of operating leases and $13.483 million of scheduled loan principal and interest. Contingent Harvard milestone and royalty payments were excluded because their timing or amount was not estimable.
- Harvard agreements cover research and an exclusive worldwide royalty-bearing license for lightweight “soft suit” exoskeleton technologies. Management recorded $1.1 million in related costs during the first half; the agreements’ stated total payment obligation was $6.3 million.
- FDA risk remains material. The FDA approved the post-market surveillance study protocol in May, and the company began the study June 13. After quarter-end, on July 22, the FDA made a substantial-equivalence determination for a special 510(k), permitting continued marketing. Further FDA requests or unfavorable study results could still lead to warnings, labeling limits or marketing restrictions.
- The business depends on one contract manufacturer, creating exposure to capacity, component availability, delivery, yield and cost risks. The filing also highlights uncertainty in the developing exoskeleton market and the availability of reimbursement.
Key facts for investors to verify
- Whether insurance coverage and reimbursed placements can grow, and how rental activity affects revenue conversion and gross margins.
- Cash runway against the company’s stated 12-month needs, and the availability and conditions of additional Kreos borrowing or ATM financing.
- Progress and results of the FDA-required surveillance study, including any subsequent FDA communications or restrictions.
- Actual spending and remaining obligations under the Harvard agreements, including contingent milestones and royalties.
- Whether manufacturing concentration, rising operating costs and continuing losses can be managed as sales scale.