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Rockley Photonics Reports Third Quarter 2021 Financial Results

Revenue of $1.8 million and backlog1 of $23.0 million

Broadened and accelerated commercial opportunities for VitalSpex™, Rockley’s end-to-end non-invasive biomarker sensing platform, by signing multiple partnerships across key markets, including tier-1 consumer electronics manufacturers, global medtech companies, and leading healthcare research institutions

OXFORD, England & PASADENA, Calif.–(BUSINESS WIRE)–$RKLY #earnings–Rockley Photonics Holdings Limited (NYSE: RKLY) (“the Company” or “Rockley”), a global leader in photonics-based health monitoring and communications solutions, today announced its financial results for the third quarter ended September 30, 2021.

“I’m very excited about our progress in the third quarter as our product development and commercial activities exceeded internal expectations. Rockley’s VitalSpex™ biomarker sensing platform has been well-received by our customers in both the consumer and medtech markets, we’ve signed new agreements with a wide range of partners, and we continue to make substantial progress with our ongoing human studies toward optimizing our biomarker algorithms,” said Dr. Andrew Rickman, founder and chief executive officer of Rockley. “This progress reinforces my belief that our VitalSpex platform has the potential to improve individuals’ health and well-being and help enable the transition from reactive to proactive healthcare.”

Dr. Rickman continued, “Representing a significant step toward our goal of bringing real-time, non-invasive biomarker sensing to a wider and more diverse market, today we announced new partnership agreements with multiple additional consumer electronics companies, including some of the most prominent companies in the smartphone and wearables markets. In medtech, we announced partnerships with two of the world’s largest medical device companies and expanded our development efforts to include wearables and full-stack data analytics solutions. And we continued to develop relationships with healthcare research institutions with the announcement of our partnership with Caltech. I believe that working with Caltech and other institutions will accelerate the development of future healthcare applications using our sensing platform. Each of these new partnerships provides further validation that our non-invasive biomarker sensing solutions are uniquely positioned to transform personal healthcare.”

“We strengthened our balance sheet with the completion of our business combination and our financing arrangement with Lincoln Park Capital,” said Mahesh Karanth, chief financial officer of Rockley. “We continue to make good progress on our commercialization efforts and are scaling our organization to address the large market opportunity ahead of us.”

Business Highlights:

  • Completed its business combination with SC Health on August 11, 2021, and commenced trading on the NYSE under the ticker “RKLY” on August 12, 2021
  • Extended the Company’s leadership in providing biosensing solutions for the consumer electronics market with the addition of five global consumer electronics companies, bringing its total to six of the top ten consumer wearables manufacturers, and reducing the Company’s exposure to any single customer
  • Expanded and accelerated its commercial strategy in medical devices and healthcare by signing multi-year partnerships with two of the world’s top-ten medical equipment and device manufacturers, enabling Rockley to evaluate and incorporate the next generation of non-invasive biomarker sensing technology into a range of medical device applications
  • Based on increased healthcare customer demand, began to scale up capacity for high-volume production of stand-alone wearable devices, including full-stack data analytics solutions, for widescale human studies, remote patient monitoring, and diagnostic and treatment support
  • Entered into a research partnership with the California Institute of Technology (Caltech) to collaborate on the development of next-generation solutions that combine advanced sensors with AI to enhance insights into health and well-being
  • Completed preliminary stages of multiple human studies using Rockley’s wearable wristband, producing encouraging results across a range of biomarkers and refining the overall performance of the VitalSpex sensing platform
  • Began the qualification process of a second source for its silicon photonics chip supply, putting it on track to qualify in the first quarter 2022
  • Retired all convertible notes and expect to retire the remaining debt obligation of $28.6 million in 2022
  • Signed financing agreement with Lincoln Park Capital, providing an equity line of credit of up to $50 million to strengthen the balance sheet and add flexibility in the commercialization of its non-invasive biomarker sensing solutions

Third Quarter 2021 Financial Highlights:

  • Revenue of $1.8 million, compared to $2.2 million in the second quarter of 2021
  • Gross profit of $(1.6) million, compared to $(2.4) million in the second quarter of 2021
  • GAAP selling, general, and administrative expenses of $13.6 million, compared to $6.7 million in the second quarter of 2021. Non-GAAP selling, general, and administrative expenses of $9.4 million, compared to $5.8 million in the second quarter of 2021
  • GAAP research and development expenses of $26.4 million, compared to $17.6 million in the second quarter of 2021. Non-GAAP research and development expenses of $24.3 million, compared to $15.7 million in the second quarter of 2021
  • GAAP net loss of $58.0 million, or $0.54 net loss per share, compared to a net loss of $30.6 million, or $0.36 net loss per share, in the second quarter of 2021. Non-GAAP net loss of $51.4 million, or $0.48 net loss per share, compared to a non-GAAP net loss of $27.4 million or $0.33 net loss per share, in the second quarter of 2021
  • Adjusted EBITDA totaled $(35.6) million, compared to $(23.4) million in the second quarter of 2021
  • Cash, cash equivalents and investments of $125.0 million as of September 30, 2021
  • Cash used in operations of $37.4 million, compared to $29.6 million in the second quarter of 2021

A reconciliation of GAAP financial measures to Adjusted EBITDA (Non-GAAP) financial measures is included in the financial statement tables included in this press release.

Conference Call Information

Rockley will host a conference call and webcast to discuss its third quarter 2021 results at 5:00 p.m. Eastern Time today, November 15, 2021. The live audio webcast along with accompanying presentation materials will be accessible on the Company’s Investor Relations website at investors.rockleyphotonics.com.

The U.S. dial-in for the call is 877-407-0784 or +1 201-689-8560 for international callers. Please reference access code 13724627. A replay of the conference call will be available until November 29, 2021, at 11:59 p.m. Eastern Time, while an archived version of the webcast will be available on Rockley’s Investor Relations website for one year. The U.S. dial-in for the conference call replay is 844-512-2921 or +1 412-317-6671. The replay access code is 13724627.

About Rockley

A global leader in photonics-based health monitoring and communications solutions, Rockley is developing a comprehensive range of photonic integrated circuits and associated modules, sensors, and full-stack solutions. From next-generation sensing platforms specifically designed for mobile health monitoring and machine vision to high-speed, high-volume solutions for data communications, Rockley is laying the foundation for a new generation of applications across multiple industries. Rockley believes that photonics will eventually become as pervasive as micro-electronics, and it has developed a platform with the power and flexibility needed to address both mass markets and a wide variety of vertical applications.

Formed in 2013, Rockley is uniquely positioned to support hyper-scale manufacturing and address a multitude of high-volume markets. Rockley has partnered with numerous Tier-1 customers across a diverse range of industries to deliver the complex optical systems required to bring transformational products to market.

To learn more about Rockley, visit rockleyphotonics.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release that are not historical facts constitute “forward-looking statements” for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding Rockley’s future expectations, beliefs, plans, objectives, and assumptions regarding future events or performance. The words “anticipate,” “believe,” “continue,” “could,” “develop,” “enable,” “estimate,” “eventual,” “expect,” “future,” “intend,” “may,” “might,” “opportunity,” “outlook,” “plan,” “possible,” “position,” “potential,” “predict,” “project,” “revolutionize,” “seem,” “should,” “trend,” “will,” “would” and other terms that predict or indicate future events, trends, or expectations, and similar expressions or the negative of such expressions may identify forward-looking statements, but the absence of these words or terms does not mean that a statement is not forward-looking. Forward-looking statements in this press release include, but are not limited to, statements regarding the following: (a) the potential of the Company’s solutions to improve individuals’ health and well-being and enable the transition from reactive to proactive healthcare; (b) the anticipated retirement of the Company’s remaining debt obligation and timing thereof; (c) the Company’s financing agreement with Lincoln Park; (d) the status and timing of the Company’s qualification of a second source for its silicon photonics chip supply; (e) backlog; (f) the anticipated and potential features, scope, goals, and benefits of the Company’s platform, products, technology, and partnerships with third parties; (g) the Company’s continued development of a range of photonic integrated circuits and associated modules, sensors, and full-stack solutions; (h) Rockley’s belief that photonics will eventually become as pervasive as micro-electronics; and (i) Rockley’s potential to support hyper-scale manufacturing, address a multitude of high-volume markets, and deliver the complex optical systems required to bring transformational products to market.

Forward-looking statements are subject to several risks and uncertainties (many of which are beyond the Company’s control) or other assumptions that may cause actual results or performance to differ materially from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following: (i) the Company’s ability to achieve commercial production of its products and technology, including in a timely and cost-effective manner; (ii) the Company’s ability to achieve customer design wins, convert memoranda of understanding and development contracts into production contracts, and achieve customer acceptance of its products and technology; (iii) risks related to purchase orders, including the lack of long-term purchase commitments, the cancellation, reduction, delay, or other changes in customer purchase orders, and if and to the extent customers seek to enter into licensing arrangements in lieu of purchases; (iv) the Company’s history of losses and need for additional capital and its ability to access additional financing to support its operations and execute on its business plan, as well as the risks associated with any future financings; (v) legal and regulatory risks, including those related to its products and technology and any threatened or actual litigation; (vi) risks associated with its fabless manufacturing model and dependency on third-party suppliers; (vii) the Company’s reliance on a few significant customers for a majority of its revenue and its ability to expand and diversify its customer base; (viii) the Company’s financial performance; (ix) the impacts of COVID-19 on the Company, its customers and suppliers, its target markets, and the economy; (x) the Company’s ability to successfully manage growth and its operations as a public company; (xi) fluctuations in the Company’s stock price and the Company’s ability to maintain the listing of its ordinary shares on the NYSE; (xii) the Company’s ability to anticipate and respond to industry trends and customer requirements; (xiii) changes in the Company’s current and future target markets; (xiv) intellectual property risks; (xv) the Company’s ability to compete successfully; (xvi) market opportunity and market demand for, and acceptance of, the Company’s products and technology, as well as the customer products into which the Company’s products and technology are incorporated; (xvii) risks related to international operations; (xviii) risks related to cybersecurity, privacy, and infrastructure; (xix) risks related to financial and accounting matters; (xx) general economic, financial, legal, political, and business conditions and changes in domestic and foreign markets; (xxi) the Company’s ability to realize the anticipated benefits of the business combination; (xxii) changes adversely affecting the businesses or markets in which the Company is engaged; and (xxiii) risks related to the Company’s backlog, including the risk that backlog may not translate into future revenue, as well as other factors described under the heading “Risk Factors” in the registration statement on Form S-1 filed by the Company on October 7, 2021, and declared effective on October 19, 2021, and in other documents the Company files with the Securities and Exchange Commission in the future. The forward-looking statements contained in this press release are based on various assumptions, whether or not identified in this press release, and on the Company’s current expectations, beliefs, and assumptions and are not predictions of actual performance. If any of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, actual results may differ materially from those discussed in or implied by these forward-looking statements. There can be no assurance that future developments affecting the Company will be those that have been anticipated. These forward-looking statements speak only as of the date hereof and the Company does not intend to update or revise any forward-looking statements, whether because of new information, future events, or otherwise, except as required by law.

Third Quarter 2021 Financial Results

ROCKLEY PHOTONICS HOLDINGS LIMITED

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited and in thousands, except share and per share amounts)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2021

 

June 30,

2021

 

September 30,

2020

 

September 30,

2021

 

September 30,

2020

Revenue

$

1,839

 

 

 

$

2,195

 

 

 

$

4,517

 

 

 

$

5,805

 

 

 

$

19,061

 

 

Cost of revenue

3,459

 

 

 

4,549

 

 

 

5,015

 

 

 

11,742

 

 

 

18,100

 

 

Gross profit

(1,620

)

 

 

(2,354

)

 

 

(498

)

 

 

(5,937

)

 

 

961

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

13,568

 

 

 

6,715

 

 

 

5,354

 

 

 

27,588

 

 

 

12,603

 

 

Research and development expenses

26,418

 

 

 

17,551

 

 

 

10,790

 

 

 

59,949

 

 

 

27,007

 

 

Total operating expenses

39,986

 

 

 

24,266

 

 

 

16,144

 

 

 

87,537

 

 

 

39,610

 

 

Loss from operations

(41,606

)

 

 

(26,620

)

 

 

(16,642

)

 

 

(93,474

)

 

 

(38,649

)

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Forgiveness of PPP loan

 

 

 

2,860

 

 

 

 

 

 

2,860

 

 

 

 

 

Interest expense, net

(1,587

)

 

 

(179

)

 

 

1

 

 

 

(1,913

)

 

 

(73

)

 

Equity method investment loss

40

 

 

 

(597

)

 

 

(689

)

 

 

(720

)

 

 

(941

)

 

Change in fair value of debt instruments

(14,255

)

 

 

(6,008

)

 

 

(3,325

)

 

 

(59,916

)

 

 

(5,547

)

 

Change in fair value of warrant liabilities

515

 

 

 

 

 

 

 

 

 

515

 

 

 

 

 

Gain (loss) on foreign currency

(481

)

 

 

97

 

 

 

285

 

 

 

150

 

 

 

(1,369

)

 

Total other income (expense)

(15,768

)

 

 

(3,827

)

 

 

(3,728

)

 

 

(59,024

)

 

 

(7,930

)

 

Loss before income taxes

(57,374

)

 

 

(30,447

)

 

 

(20,370

)

 

 

(152,498

)

 

 

(46,579

)

 

Provision for income tax

598

 

 

 

110

 

 

 

154

 

 

 

808

 

 

 

374

 

 

Net loss and comprehensive loss

$

(57,972

)

 

 

$

(30,557

)

 

 

$

(20,524

)

 

 

$

(153,306

)

 

 

$

(46,953

)

 

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

Basic and diluted

$

(0.54

)

 

 

$

(0.36

)

 

 

$

(0.25

)

 

 

$

(1.67

)

 

 

$

(0.56

)

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic and diluted

107,633,037

 

 

 

84,247,703

 

 

 

83,509,920

 

 

 

92,008,435

 

 

 

83,392,042

 

 

 

ROCKLEY PHOTONICS HOLDINGS LIMITED

Condensed Consolidated Balance Sheets

(in thousands, except share amounts and par value)

 

September 30,

2021

 

December 31,

2020

 

(Unaudited)

 

 

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

75,191

 

 

$

19,228

 

Short-term investments, at fair value

29,317

 

 

 

Accounts receivable

1,516

 

 

4,925

 

Other receivables

24,966

 

 

18,024

 

Prepaid expenses

9,815

 

 

1,605

 

Other current assets

4

 

 

609

 

Total current assets

140,809

 

 

44,391

 

Long-term investments, at fair value

20,485

 

 

 

Property, equipment, and finance lease right-of-use assets, net

9,358

 

 

6,182

 

Equity method investment

4,856

 

 

5,202

 

Intangible assets, net

3,048

 

 

3,048

 

Other non-current assets

3,069

 

 

1,607

 

Total assets

$

181,625

 

 

$

60,430

 

 

 

 

 

Liabilities and Shareholders’ Equity (Deficit)

 

 

 

Current liabilities

 

 

 

Trade payables

$

6,266

 

 

$

4,413

 

Accrued expenses

16,121

 

 

10,395

 

Debt, current portion

28,590

 

 

 

Other current liabilities

923

 

 

998

 

Total current liabilities

51,900

 

 

15,806

 

Long-term debt, net of current portion

 

 

74,804

 

Warrant liabilities

13,789

 

 

 

Other long-term liabilities

2,442

 

 

1,127

 

Total liabilities

$

68,131

 

 

$

91,737

 

 

 

 

 

Shareholders’ equity (deficit)

 

 

 

Ordinary shares, $0.000004 par value; 12,417,500,000 and 139,033,366 authorized as of September 30, 2021, and December 31, 2020, respectively; 126,675,098 and 83,539,382 issued and outstanding as of September 30, 2021, and December 31, 2020, respectively

 

 

 

Additional paid-in-capital

499,683

 

 

201,576

 

Accumulated deficit

(386,189

)

 

(232,883

)

Total shareholders’ equity (deficit)

113,494

 

 

(31,307

)

Total liabilities and shareholders’ equity (deficit)

$

181,625

 

 

$

60,430

 

 

ROCKLEY PHOTONICS HOLDINGS LIMITED

Condensed Consolidated Statements of Cash Flows

(Unaudited and in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2021

 

June 30,

2021

 

September 30,

2020

 

September 30,

2021

 

September 30,

2020

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(57,972

)

 

$

(30,557

)

 

 

$

(20,524

)

 

$

(153,306

)

 

$

(46,953

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization of property, equipment and finance lease right-of-use assets

 

1,229

 

 

1,069

 

 

 

700

 

 

3,228

 

 

2,095

 

Amortization of debt issuance costs

 

 

 

 

 

 

 

 

 

 

26

 

Gain on disposal of property and equipment

 

 

 

 

 

 

26

 

 

 

 

(98

)

Bad debt expense

 

 

 

 

 

 

 

 

377

 

 

 

Accretion of marketable securities to redemption value

 

(32

)

 

 

 

 

 

 

(32

)

 

 

Stock-based compensation

 

2,155

 

 

1,976

 

 

 

1,676

 

 

5,856

 

 

5,865

 

Change in equity-method investment

 

(145

)

 

604

 

 

 

689

 

 

346

 

 

941

 

Change in fair value of debt instrument

 

14,255

 

 

6,008

 

 

 

3,325

 

 

59,916

 

 

5,547

 

Change in fair value of warrant liabilities

 

(515

)

 

 

 

 

 

 

(515

)

 

 

Forgiveness of Paycheck Protection Program loan

 

 

 

(2,860

)

 

 

 

 

(2,860

)

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

895

 

 

(106

)

 

 

271

 

 

3,032

 

 

(1,111

)

Other receivables

 

(1,929

)

 

(2,644

)

 

 

(4,566

)

 

(6,942

)

 

4,036

 

Prepaid expenses and other current assets

 

(2,090

)

 

(63

)

 

 

(385

)

 

(7,859

)

 

878

 

Other non-current assets

 

403

 

 

(236

)

 

 

128

 

 

(1,330

)

 

485

 

Trade payables

 

1,277

 

 

(2,102

)

 

 

432

 

 

1,147

 

 

(3,915

)

Accrued expenses

 

5,398

 

 

(441

)

 

 

2,598

 

 

5,800

 

 

4,306

 

Other current and long-term liabilities

 

(374

)

 

(206

)

 

 

(2

)

 

1,240

 

 

(840

)

Net cash used in operating activities

 

(37,445

)

 

(29,558

)

 

 

(15,632

)

 

(91,902

)

 

(28,738

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

(2,876

)

 

(2,109

)

 

 

(440

)

 

(5,698

)

 

(1,090

)

Purchase of marketable securities

 

(54,800

)

 

 

 

 

 

 

(54,800

)

 

 

Proceeds from sale of marketable securities

 

5,000

 

 

 

 

 

 

 

5,000

 

 

 

Proceeds from maturity of marketable securities

 

30

 

 

 

 

 

 

 

30

 

 

 

Payment for asset acquisition

 

 

 

(500

)

 

 

 

 

(500

)

 

 

Investment in equity method investee

 

 

 

 

 

 

 

 

 

 

(2,500

)

Net cash used in investing activities

 

(52,646

)

 

(2,609

)

 

 

(440

)

 

(55,968

)

 

(3,590

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

Proceeds from convertible loan notes

 

 

 

 

 

 

16,464

 

 

76,723

 

 

28,714

 

Principal payments on long-term debt

 

 

 

 

 

 

(27

)

 

 

 

(1,979

)

Proceeds from issuance of ordinary shares, net of issuance costs

 

167,966

 

 

 

 

 

 

 

167,966

 

 

1,961

 

Proceeds from Paycheck Protection Program loan

 

 

 

 

 

 

 

 

 

 

2,860

 

Proceeds from exercise of options

 

86

 

 

146

 

 

 

 

 

369

 

 

20

 

Proceeds from the exercise of warrants

 

146

 

 

233

 

 

 

 

 

379

 

 

7

 

Proceeds from issuance of warrants

 

 

 

 

 

 

 

 

263

 

 

 

Debt issuance costs incurred

 

3,173

 

 

(2,416

)

 

 

 

 

(383

)

 

 

Transaction costs

 

(41,484

)

 

 

 

 

 

 

(41,484

)

 

 

Principal payments on finance lease

 

 

 

 

 

 

 

 

 

 

(1,231

)

Net cash provided by (used in) financing activities

 

129,887

 

 

(2,037

)

 

 

16,437

 

 

203,833

 

 

30,352

 

Net increase (decrease) in cash and cash equivalents

 

39,796

 

 

(34,204

)

 

 

365

 

 

55,963

 

 

(1,976

)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

35,395

 

 

69,599

 

 

 

18,563

 

 

19,228

 

 

20,904

 

End of period

 

$

75,191

 

 

$

35,395

 

 

 

$

18,928

 

 

$

75,191

 

 

$

18,928

 

 

Use of Non-GAAP Financial Measures

This press release references certain financial measures that are not prepared in accordance with generally accepted accounting principles in the United States (GAAP), including Adjusted EBITDA, non-GAAP cost of revenue, non-GAAP selling, general, and administrative expense, non-GAAP research and development expense, non-GAAP net loss and non-GAAP net loss per share. The Company defines Adjusted EBITDA as earnings before interest expense, taxes, depreciation and amortization, stock-based compensation, and certain other items the Company believes are not indicative of its core operating performance. The Company defines non-GAAP cost of revenue as cost of revenue as cost of revenue other than stock-based compensation, non-GAAP selling, general, and administrative expenses as selling, general, and administrative expenses other than stock-based compensation, non-capitalized transaction costs and forgiveness of PPP loan, and non-GAAP research and development expenses as research and development expenses other than stock-based compensation. The Company defines non-GAAP net loss as net loss other than the non-GAAP cost of revenue adjustment, non-GAAP selling, general and administrative expenses adjustment, and non-GAAP research and development expenses adjustment (in each case as described above), and defines non-GAAP net loss per share as net loss other than the non-GAAP adjustments noted above divided by weighted shares outstanding. None of these non-GAAP financial measures is a substitute for or superior to measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to any other performance measures derived in accordance with GAAP.

Contacts

For Rockley
Media
Karen Boud

Resonates

Telephone: +44 1635 898 698

Email: rockley@resonates.com

Investors
Gwyn Lauber

Rockley Photonics Holdings Limited

Telephone: +1 626-995-0001

Email: investors@rockleyphotonics.com

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