Hyperfine, Inc. — Q1 2023 Form 10-Q Summary
Reporting period: Three months ended March 31, 2023; financial statements are unaudited. Hyperfine develops and sells the Swoop portable brain MRI system and related services. The company reported one operating segment. In February 2023, it received FDA 510(k) clearance for a software update that improves diffusion-weighted imaging and image quality.
Financial performance
Amounts below are in millions of dollars unless otherwise noted.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Device revenue | $2.132 | $1.192 |
| Service revenue | $0.503 | $0.317 |
| Total revenue | $2.635 | $1.509 |
| Gross profit | $1.155 | $0.084 |
| Gross margin | 43.8% | 5.6% |
| Operating expenses | $14.190 | $23.855 |
| Operating loss | $(13.035) | $(23.771) |
| Net loss | $(12.160) | $(23.775) |
| Basic and diluted loss per share | $(0.17) | $(0.34) |
| Cash used in operating activities | $(13.491) | $(27.289) |
- Revenue increased 74.6% year over year. Device revenue rose 78.9%, which management primarily attributed to higher average selling prices; service revenue rose 58.7%, reflecting more installed devices.
- Gross margin improved substantially as revenue grew while cost of sales increased only 3.9%.
- Operating expenses fell 40.5%, with reductions across R&D, general and administrative, and sales and marketing. Management attributed much of the decrease to lower headcount and stock-based compensation following restructuring.
- Interest income was $0.869 million, compared with $0.001 million a year earlier, mainly reflecting higher interest rates and money-market balances.
Balance sheet and liquidity
- Cash and cash equivalents were $104.027 million at March 31, 2023, down from $117.472 million at December 31, 2022. Cash, cash equivalents and restricted cash totaled $104.740 million.
- Current assets were $117.138 million and current liabilities were $8.001 million, implying working capital of approximately $109.1 million.
- Total liabilities were $9.365 million; the filing reports no borrowings or debt balance.
- Accumulated deficit was $221.644 million. Management expects existing cash and cash equivalents, together with product and service proceeds, to fund planned operations for at least the next 12 months, while warning that continued losses and cash burn are expected.
- Operating cash use improved year over year, but was still $13.491 million for the quarter. Investing cash use was $0.061 million; financing provided $0.049 million.
Material changes, outlook and risks
- In December 2022, Hyperfine suspended development of its Liminal brain-sensing program and announced a restructuring that reduced its global workforce by approximately 13%. The restructuring was substantially complete by March 31, 2023; cumulative charges were $1.016 million, including $0.014 million recorded in Q1. Management did not expect significant additional costs from this plan.
- As of March 31, 2023, 116 Swoop systems were installed, versus 85 a year earlier: 72 commercial, 20 grant-fulfillment and 24 research units. Commercial installations were 72 versus 38 a year earlier.
- Remaining performance obligations were $8.675 million; the company expected to recognize approximately 51% in fiscal 2023 and the balance in fiscal 2024 and thereafter. No specific revenue or earnings guidance was provided.
- Key risks include reliance on a single-source manufacturer and suppliers, uncertainty around adoption and commercialization, inflation and manufacturing-cost pressure, and the possibility that additional capital may be needed. The company cautioned that financing may not be available on acceptable terms.
- Disclosure controls and procedures were deemed ineffective at the reasonable-assurance level because of two previously identified material weaknesses in internal control over financial reporting. Management described remediation efforts but said the weaknesses would remain until controls operate effectively for a sufficient period and are tested.
- Hyperfine reported no material legal proceedings. It disclosed a new 12-month Palo Alto office lease beginning May 1, 2023, with future minimum payments of $0.194 million.
- On March 31, 2023, former CFO Alok Gupta entered into a severance agreement providing $0.200 million in separation pay, possible employer-paid COBRA coverage for up to six months, and continued exercisability of vested options through June 30, 2024.
Important facts for investors to verify
- Whether commercial installations, system utilization and recurring service revenue continue to grow, and how pricing changes affect revenue per unit and margins.
- Whether the $104.0 million cash balance and stated 12-month runway remain adequate given ongoing operating cash use and planned commercialization and development spending.
- Progress in remediating the two material weaknesses and improving disclosure controls.
- Manufacturing capacity and exposure to single-source suppliers, inflation, and cost increases.
- Execution of grant deliverables and timing of recognition of the $8.675 million in remaining performance obligations.