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HELIUS MEDICAL TECHNOLOGIES, INC. (HSDT)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 revenue was $0.134M, down 52% year over year and 6% sequential as cash-pay demand waned post-PTAP expiration; net loss improved sharply to $1.0M on favorable non-operating items .
  • CMS assigned unique HCPCS Level II codes for the PoNS controller and mouthpiece (effective Apr 1, 2024); management aims to secure Medicare reimbursement as soon as Oct 1, 2024, a key catalyst for sequential revenue growth once implemented .
  • Stroke registrational pathway advanced: FDA alignment on development plan, second site added, open-label study initiated; targeting early 2025 regulatory submission and potential commercialization by year-end 2025 .
  • Cash runway extended into Q3 2024 via $1.3M ATM proceeds in Q1 2024; no debt outstanding as of year-end 2023 .
  • Street estimates from S&P Global were unavailable for Q4 2023; comparisons to consensus could not be made and estimates likely sparse given micro-cap coverage [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

  • CMS assigned HCPCS codes for PoNS components, enabling payer negotiations and case-by-case claims; “We are pleased to have reached a key milestone toward Medicare and broad third-party reimbursement...” with a plan to secure Medicare reimbursement by Oct 1, 2024 .
  • Regulatory progress in stroke: open-label study enrollment began, second site added, and FDA alignment to streamline size, timeline, and cost of the registrational program; management is “targeting an early 2025 regulatory submission with possible commercialization by the end of next year” .
  • Operating discipline: Q4 OpEx fell to $2.3M from $2.8M YoY, with SG&A and R&D down; operating loss improved YoY by ~$0.4M to $(2.2)M .

What Went Wrong

  • Revenue declined to $0.134M vs $0.282M YOY and $0.143M in Q3; gross profit slipped to $0.044M, reflecting limited cash-pay demand and Canada softness .
  • CFO noted sales are currently cash-pay and “not feasible for a vast majority of the patients… Until we receive reimbursement, we expect that our revenues will continue to be fairly anemic and fluctuate quarter-to-quarter” .
  • Despite OpEx reductions, margins remained deeply negative given small revenue base; net loss margin was ~−779% in Q4 (derived from $1.045M loss on $0.134M revenue) .

Financial Results

MetricQ4 2022Q3 2023Q4 2023
Revenue ($USD thousands)282 143 134
Cost of Revenue ($USD thousands)150 187 90
Gross Profit ($USD thousands)132 −44 44
Gross Margin (%)46.8% (132/282) −30.8% (−44/143) 32.8% (44/134)
SG&A ($USD thousands)1,967 2,196 1,632
R&D ($USD thousands)794 722 650
Operating Loss (EBIT) ($USD thousands)−2,669 −3,153 −2,246
EBIT Margin (%)−946.1% (−2,669/282) −2,205.6% (−3,153/143) −1,676.1% (−2,246/134)
Net Loss ($USD thousands)−4,886 −3,663 −1,045
Net Income Margin (%)−1,733.3% (−4,886/282) −2,561.5% (−3,663/143) −779.1% (−1,045/134)
Diluted EPS ($USD)−$8.66 −$5.49 −$1.47

Segment/Revenue Components

Revenue Components ($USD thousands)Q4 2022Q3 2023Q4 2023
Product Sales, net281 132 123
Other Revenue1 11 11
Total Revenue282 143 134

KPIs and Liquidity

KPIQ2 2023Q3 2023Q4 2023
Operating Cash Burn ($USD millions)2.7 2.5 2.0
Cash and Equivalents ($USD millions)8.6 6.6 5.2
Debt OutstandingNone None None
Weighted Avg Basic Shares28,219,824 667,809 708,603

Estimates vs Actuals

MetricPeriodConsensus (S&P Global)Actual
Revenue ($USD)Q4 2023NA (unavailable via S&P Global)134,000
EPS ($USD)Q4 2023NA (unavailable via S&P Global)−1.47

Note: Wall Street consensus via S&P Global was unavailable at time of review; comparisons to estimates could not be made [GetEstimates error].

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
CMS/Medicare Reimbursement2024 timelinePursuing HCPCS; UPC listed in Medi-Span enabling payer talks HCPCS Level II codes assigned; plan to secure Medicare reimbursement as soon as Oct 1, 2024 Raised/achieved key milestone
US Stroke Authorization2025 timelineMUSC trial expanded to 60 pts; pursuing breakthrough pathway FDA alignment; open-label study started; target regulatory submission early 2025; possible commercialization by end-2025 Added explicit timeline
Revenue OutlookNear termQ3 and FY23 revenue expected above prior year; Canada mix to offset U.S. decline post-PTAP Revenues to be “fairly anemic” until reimbursement; sequential growth expected post CMS reimbursement Lowered near-term qualitative outlook
OpEx2024NASeasonal pattern (Q1 highest for audit/legal), modest increases with revenue ramp Maintained/clarified
Cash Runway2024Into Q2 2024 Into Q3 2024 after $1.3M ATM in Q1 2024 Extended

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023, Q3 2023)Current Period (Q4 2023)Trend
CMS Reimbursement PathwaysDMEPOS accreditation; TCET pathway context HCPCS codes assigned; aiming for Oct 1, 2024 Medicare reimbursement; begin payer negotiations and case-by-case claims Progressing/accelerating
Stroke Registrational ProgramMUSC expanded to 60 pts FDA alignment; second site added; open-label enrollment; ~100 participants across studies; early 2025 submission target Accelerating
VA ChannelNot highlightedInitiating VA engagement via MS Centers of Excellence; establishing authorized supplier partnership New initiative
Commercial Model (Telemedicine/Hub)UpScript e-commerce/telemedicine funnel tracking Scalable hub, rapid fulfillment; online PT training to expand registered PoNS therapists Building leverage
Canada AdoptionNear-term market larger; timing of orders slipping to H2 Québec LOI execution timeline: sites contracts in Q2–Q3 with deliveries following Advancing deployments
Cash & FinancingATM program established up to $2M $1.3M raised in Q1 2024; runway into Q3 2024 Extended liquidity

Management Commentary

  • CEO: “We are pleased to have reached a key milestone toward Medicare and broad third-party reimbursement last month when CMS assigned HCPCS codes for the PoNS mouthpiece and controller… objective of securing Medicare reimbursement… as soon as October 1, 2024.”
  • CEO: “We… met with the FDA to optimize our overall stroke development plan. We are now targeting an early 2025 regulatory submission with possible commercialization by the end of next year.”
  • CFO: “Sales are currently on a cash pay basis… not feasible for a vast majority… Until we receive reimbursement, we expect that our revenues will continue to be fairly anemic and fluctuate quarter-to-quarter.”
  • CFO: “As of December 31, 2023, we had $5.2 million in cash and no debt… $1.3 million… under our ATM program… extends our cash runway into the third quarter of 2024.”

Q&A Highlights

  • Reimbursement hurdles: With HCPCS codes effective Apr 1, 2024, management plans payer negotiations and case-by-case claims to inform Medicare pricing; VA channel development underway to support MS veterans .
  • Clinical program design: Open-label stroke study is single-arm focusing on gait, balance, fall-risk, durability; no expected cannibalization of MUSC placebo-controlled enrollment .
  • OpEx cadence: Seasonal pattern with higher Q1 costs (audit/legal), stepping down in Q2, flattening later; modest incremental costs with revenue ramp .
  • Québec LOI execution: Site contracting in Q2–Q3 2024 with deliveries following; process extended to end of September to finalize five sites across regions .
  • Commercialization model: Emphasis on scalable OEM manufacturing, telemedicine/e-prescribing hub with UpScript, rapid fulfillment, and free online PT certification modules to expand therapist network .

Estimates Context

  • Wall Street consensus via S&P Global for Q4 2023 revenue and EPS was unavailable; the company’s micro-cap profile and limited coverage likely constrain consensus formation. As a result, we cannot assess beat/miss vs Street this quarter [GetEstimates error].
  • Near-term model implications: Management’s explicit caution that revenues will remain “anemic” until reimbursement suggests downside bias to any interim estimates, with potential for upward revisions post CMS reimbursement and payer coverage progression .

Key Takeaways for Investors

  • The assignment of HCPCS codes is a pivotal milestone; securing Medicare reimbursement as early as Oct 1, 2024 is the main near-term stock catalyst, with expected sequential revenue growth thereafter. Boldly position for reimbursement timing risk and potential upside on a positive CMS outcome .
  • Stroke pathway momentum (FDA alignment, open-label enrollment, early 2025 submission target) expands TAM materially; authorization could be followed by expedited CMS coverage via TCET-like mechanisms given breakthrough status .
  • Revenue base remains small and volatile until coverage; management’s candid “anemic” near-term outlook implies caution on quarterly prints and emphasizes liquidity/dilution management via ATM usage .
  • Canadian deployments (Québec LOI, UdeM order) provide real-world evidence and potential reimbursement precedents that can support U.S. payer discussions and the stroke registrational dossier .
  • Scalable go-to-market (telemedicine hub, rapid fulfillment, online PT training) should support efficient demand capture post reimbursement without heavy fixed-cost build, improving operating leverage prospects .
  • Balance sheet is debt-free with $5.2M cash at year-end and runway into Q3 2024 post ATM; monitor cash burn (~$2.0M in Q4) and further financing needs tied to the reimbursement/authorization timeline .
  • Trading setup: The name is highly sensitive to regulatory and reimbursement headlines; risk/reward hinges on CMS pricing/coverage decisions and stroke submission progress across 2024–2025 .