today, and thank you for standing by, and welcome to the Acutus Medical second quarter 2023 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Caroline Corner of Investor Relations. Please go ahead.
Thank you, operator. Welcome to Acutus's second quarter 2023 earnings call. Joining me on today's call is David Roman, Chief Executive Officer, and Takeo Mukai , Chief Financial Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements. Factors that may cause results to differ from these forward-looking statements are discussed under the Forward-Looking Statements section in the press release attached as an exhibit to Acutus's Form 8-K filed with the SEC today, and are also discussed in more detail under the Risk Factors section in Acutus's most recent filings with the SEC, including the risk factors described in Acutus's Form 10-K.
Any forward-looking statements provided during this call, including projections for future performance, are based on management's expectations as of today. Acutus undertakes no obligation to update these statements except as required by applicable law. Acutus's press release for second quarter of 2023 results is also available on the Acutus website, www.acutusmedical.com, under the Investors section, and includes additional details about Acutus' financial results. Acutus' website also has Acutus' SEC filings, which you are encouraged to review. A recording of today's call will be available on the Acutus website by 5:00 P.M. Pacific Time. Now, I would like to turn the call over to David.
Thank you, Caroline. G ood afternoon, everyone. I'm very pleased with the progress we have achieved this quarter, and I'm thrilled to report several major achievements, including record procedure volumes, our highest number of global AcQMap users, the highest level of console utilization, and the highest installed base, thanks to our committed physician partners and our team's disciplined focus on achieving our strategic objectives. Our prepared remarks today will include updates on our key growth imperatives, a review of our second quarter results, and an overview of our plans to continue to drive momentum in the business through the balance of 2023 and into 2024. Starting with our first and top priority to drive utilization of AcQMap.
During Q2, we recorded our highest volume of AcQMap procedures on record, totaling 584 procedures globally, representing 21% growth compared to the prior year and up 29% sequentially. The acceleration in procedure volumes continued the trend we discussed on our last earnings call, with strong incremental traction following the publication of the RECOVER-AF study. Our strategy to expand addressable procedure categories through new product launches and improve physician user experience to drive same-account utilization, as well as increase the number of users per account, are all contributing positively to our growth. Recent software launches, such as AcQMap 8.5, that included enhancements to procedural workflow, have also helped bolster user experience and increase procedure volumes. Specifically, in the U.S., we saw our strongest performance in over five quarters.
Of particular note has been our ability to add new users at existing accounts, as well as re-engage former users of AcQMap. Both of these cohorts have embraced the product and technology upgrades introduced over the past year. The strong U.S. performance is also in the context of a more targeted install base and streamlined commercial resources following our strategic reorganization last year. Outside the U.S., our business continued to benefit from a full portfolio offering and geographic expansion with our partner, BIOTRONIK, as well as successful cases utilizing AcQMap in conjunction with other manufacturers' pulsed field ablation, or PFA, systems.
AcQMap's proven ability to support multiple workflow approaches, as well as physician preference when it comes to their ablation strategy, is driving broader system adoption outside the U.S., and we think this is a good indicator of what to expect as we expand our portfolio in the U.S. and market dynamics evolve to include new ablation modalities. Essential to achieving our strategy and long-term growth objectives is our product development pipeline. Our organic investments are geared for both strengthening our position today and expanding our addressable opportunity ahead. Upcoming product launches all strengthen our position in the complex segment of the EP market, ranging from first-time persistent AF patients to the most difficult multiple redo patients. Importantly, in early July, we received 510(k) clearance for AcQMap 9, and we expect to be in full market release entering the fourth quarter of this year.
As I mentioned previously, we are very encouraged by the pickup in procedure volumes following the launch of AcQMap 8.5 and expect our two next software launches to have an equal, if not more significant, impact on our business. AcQMap 9 significantly expands the capabilities of the AcQMap platform, leveraging advanced algorithms and automation to improve clinical utility and procedural efficiency of the system. Following the AcQMap 9 launch, we are on track to gain U.S. approval for the AcQBlate force-sensing ablation catheter and system by the end of the year. We expect to submit our FDA PMA response by the end of the third quarter. Our FDA response letter required cross-functional collaboration with our partner, BIOTRONIK, to ensure compliance with new legislation regarding cybersecurity for electromechanical devices that went into effect earlier this year.
We are confident the extensive assessment, remediation work, and corresponding validation address the key gating items to approval. As we enter 2024, we expect our U.S. portfolio to expand and offer a complete mapping and ablation solution, which will be further complemented by additional software features when we launch AcQMap 10 mid-year. The upcoming AcQMap 10 launch is critical because it adds the capability to integrate contact and noncontact mapping in a single session, allowing us to bring all of the clinical benefits of AcQMap's differentiated mapping, while also conforming to physicians' traditional workflow. This software launch is therefore a foundational component to expanding our addressable opportunity. As we look to the second half of 2024, we also expect to gain approval across multiple geographies of our next generation AcQBlate catheter, which will feature bidirectional steering capabilities.
By the end of 2024, we expect our product portfolio to have substantially expanded, enabling us to participate in nearly $3 billion of addressable market, which is approximately 3 x the market we target with today's portfolio. The combination of our strengthened commercial performance and market-expanding new product launches gives us confidence to drive continued growth in 2023, with accelerated performance in 2024, is consistent with the outlook we've been discussing over the past year. Switching gears to our efforts to strengthen our financial performance. We continued to make significant progress during Q2 2023, with year-over-year declines in both non-GAAP operating expenses and cash burn, as well as significant improvement in our non-GAAP gross margin. During the quarter, we did make the decision to pull forward some inventory purchases on long lead time items to ensure adequate supply to support increasing demand.
Takeo will cover these financial topics in more detail during his prepared remarks. Overall, we continue to take the necessary steps to strengthen our financial position and optimize our capital resources. Putting this all together, we are pleased with our first half of the year performance, and the momentum in our business is palpable. We are laying the foundation to build long-term leadership in the diagnosis and treatment of complex arrhythmias, driven by a steady cadence of new product launches, clinical data releases, and commercial execution. When combined with our operational improvement initiatives, this business trajectory is positioning us exceptionally well for the future and will allow us to maximize value for all stakeholders. With that, I will now turn the call over to Takeo to walk through our financial results.
Thank you, David. Good afternoon, everyone. During my remarks today, I will review our second quarter of 2023 results, as well as provide an update to our full year outlook for 2023. For the second quarter, net revenue of $5.3 million, compared to $4.1 million in the second quarter of 2022. The 30% year-over-year increase was primarily driven by disposable sales, higher capital conversions, and increases in service, rent, and other revenue. The second quarter performance represents our largest quarter of net revenue to date and reflects the entire company's focus and execution on the strategy we set forward a year ago. We ended the second quarter with an install base of 78 systems globally, up sequentially from 77 last quarter.
Through the balance of the year, we continue to expect growth in our global install base, while remaining targeted to ensure new consoles are placed into service where we can drive strong procedure adoption. Our priority remains growth in procedure volume, utilization, and revenue per procedure, rather than just growing the install base. This strategy is driving positive returns, as evidenced by our Q1 and Q2 2023 results. Disposables revenue in the second quarter of $3.9 million, grew 17% compared to the second quarter of 2022, driven by a record period of procedure volumes and growth in left heart access through our distribution agreement with Medtronic. We also made solid progress towards improving back orders on key product lines, and we continue to expect our supplier dynamics to normalize by the end of the year.
Capital revenue in the second quarter of $0.7 million, compared to $0.3 million in the second quarter of 2022, driven by higher capital conversions in all regions. Service, rent, and other revenue of $0.7 million was up from $0.4 million in Q2 2022. Non-GAAP gross margin of -49% in Q2 improved sequentially from negative 60% in the first quarter and was favorable compared to the negative 129% registered in the second quarter of the prior year. The improvement in our non-GAAP gross margins continues to be primarily driven by improvements in manufacturing efficiencies and improved leverage on higher production volumes.
Improving our gross margin continues to be a point of emphasis for us. We are on pace to show marked year-over-year improvements in 2023, with a forecasted path to positive gross margin in Q1 2024. As we have already started to experience, production volumes will continue to ramp up faster than future labor and overhead costs, leading to improvement in gross margin. In addition to volumes driving this improved trajectory, we remain focused on driving efficiency, improving yields, and bringing select processes in-house. Non-GAAP operating expenses were approximately $14.5 million in the second quarter of 2023, down 26% from the same period last year. We continue to realize the benefits of our discipline around expense management and expect our full year 2023 non-GAAP expenses to decline meaningfully on a year-over-year basis as compared to 2022.
Excluding specified items, our non-GAAP net loss for the second quarter of 2023 was $17.6 million, or $0.60 per share, compared to a non-GAAP net loss of $26.2 million for the second quarter of 2022, or $0.93 per share. Our total cash and cash equivalents balance, including restricted cash at the end of the second quarter of 2023, was $61.5 million. Our cash burn was $15.2 million in the second quarter, down 41% from the prior year's second quarter.
For the full year 2023, we now expect revenue to be in a range of $20 million-$22 million, driven by growth in AcQMap procedure volumes, positive momentum from new software launches, distribution revenue from left heart access products, and a Q4 approval of AcQBlate in the United States. We appreciate your continued interest and support, and I will now turn the call back to the operator to facilitate our Q&A session. Operator?
Thank you. We will now conduct our question and answer session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Marie Thibault from BTIG. Go ahead.
Hi, David. Hi, Takeo. Congrats on a nice quarter here. Wanted to ask first here, to understand a little bit more about your guidance. You had a lot of nice wins this quarter that led to that record procedure volume. You mentioned reengaging former users, some use in PSA cases, and, you know, I'm assuming that you were able to recapture some revenue from the back orders earlier this year. Can you tell us a little bit about what's being assumed in that guidance? Anything you can on sort of the cadence and how much of this these wins are sustainable here?
Sure. Thanks, Marie. Let me walk through each of the factors that contributed to results in the quarter. First really was in procedure volumes. Right now, given the supply dynamics we face, we... Our revenue and procedure volumes are tracking pretty closely with one another. We are managing through the supply chain dynamics that we have talked about throughout the course of this year, and while we were able to resolve some of those in the second quarter, we will still face some headwinds from supply disruption here in Q3. Importantly, we have, we are seeing shipments pick up for key raw materials for AcQMap, and that is that's what gives us confidence that those supply chain dynamics will resolve by the end of the year.
As it relates to the assumptions and guidance for the rest of the year, we will expect to see some seasonality and procedure volumes in Europe here in the third quarter. Europe represents, outside the U.S., represents about 50% of our procedure volumes. Maybe I think it's actually a little bit higher than 50%. We will resolve some back orders here in Q3, but likely carry some into Q4 with full resolution by the end of the year. We would expect fairly similar trends to characterize our performance here in the back half of the year as we saw in the first half of the year.
If you go back to 2022, on a kind of first half, second half basis, we had about 43%-45% of revenue in the first half of last year, with the balance in the back half of the year. If you look specifically at the second half, it was about 57% of the revenue came in Q4, and then the balance coming in Q3. We would expect fairly similar quarter-to-quarter progression here in the back half of the year that you saw last year.
The only additional thing I would point out here is, is capital, as you know, has its ebbs and flows, too. We did have a decent quarter here in Q2 on capital. We recorded no capital revenue in the first quarter of the year. That, that is obviously a variable, given the size of capital revenue relative to our total, total base, that could impact the phasing of revenue here in, in the back half of the year. We're making no heroic assumptions around the CapEx environment.
Okay, that's really helpful. Nothing heroic there. Okay, maybe I can ask a little bit about AcQBlate. Tiny bit of a shift in the timing for that, sounds like a Q4 approval is expected. What should we think about as we, you know, ramp our expectations? What are you thinking about in terms of, you know, timing for the catheter to go through VAC committees, and, you know, how quickly we might start to see some improvements in, in utilization with that, plus the 9.0 launch? Thanks for taking the questions.
Sure. On, on the utilization side, we've been very encouraged, and quite frankly, this has trended a little bit better than we had expected. On the pickup we are seeing in utilization and procedure volumes, especially in the U.S., on the heels of some of the software releases that we have executed over the past six months. I, I think as we go back and reflect a little bit on the performance of the business, one of the things that we had observed and commented on was the extent to which we needed to make software improvements that would be critical to better aligning user experience with more conventional workflows, simplifying the procedure and ensuring that the benefits of AcQMap were not difficult to access for our customers.
The impact of simplifying procedure workflow, as well as bringing some very targeted software releases and technology upgrades to market, has had a more significant impact on our business than we might have expected. One of the things that I mentioned in my prepared remarks that is showing through here is many physicians who had an interest in what Acutus is doing several years ago, whether that was because they were looking for solutions for persistent AFib patients or more complex patients, who subsequently found that the technology did not meet their expectations, are coming back to utilizing the system more regularly and at a more consistent pace. That is helping drive higher for, higher than planned procedure volumes, especially in the U.S.
As we think about how AcQBlate fits into that, this becomes something that will ultimately help us accelerate our growth performance and, and, and capture anywhere from 30%-50% more revenue per procedure, and also continue to help from a cost perspective with our customers, allowing physicians to truly use Acutus on a standalone basis. As we think about the approval timeline here on Q4, we would expect to see fairly modest contribution from AcQBlate, is reflected in our guidance, and that largely coming from existing accounts. Then we'll utilize this as a, as a, as a catalyst to drive new account adoption, because if you look at our install base, we have largely come to the end of the account removal and sort of repositioning process.
There will still be some of that on a regular basis, but as we think about really growing the install base in a more meaningful way, AcQBlate will be important to that, especially in 2024. Given the adoption that we are seeing in mapping and mapping procedures, both in the U.S. and in markets outside the U.S., that is helping drive the overall business when, when AcQBlate, as we kind of wait, await the AcQBlate approval and launch here, later this year.
That's very helpful. Thank you, David.
Thank you. Our next question comes from the line of John Young from Canaccord Genuity. Go ahead, John.
Hey, David and Takao, it's John on for Bill Smith. Thanks for taking our question. Maybe just start on the cash burn in Q2, the $15 million. Can you talk about the current cash runway and just expectations for cash burn throughout the rest of 2023?
Sure, John. You'll see in our, in our 10-Q that, that'll be filed shortly. We continue to expect to have at least a year of cash here. We have made significant progress here, reducing our cash burn, as we've talked about on our past several calls. A few things to talk about with respect to the cash burn here. We had about $1 million of incremental inventory purchases, both on disposables and capital-related supply chain items, and that's really to reflect the higher demand that we're seeing, and also to ensure that we have appropriate supply of some of the longer lead time items.
If you kinda, if you go back and look at the financial statements from last year, you'll, we, we did bring down inventory very significantly and moved to a much more hand-to-mouth purchasing strategy with, with respect to our own inventory as we went through our restructuring initiatives. Now, as we're starting to see demand pick back up again and us play a lot more offense with respect to our commercial business, we are bringing forward some of those purchases of long lead time items. I think one of the key factors here that'll impact our cash burn, both in the back half of the year and into 2024, is the continued improvement in gross margin that we are seeing and, and expect to continue to see.
Because as you start to see that number move toward a positive trajectory, it has a material impact on our cash position, and that is one of the key... That is why we're so focused on not just driving more volume through higher demand, but also, we significantly reduced our manufacturing overhead footprint. We are looking at more processes that we can bring in-house to reduce costs. We are rigorously focused on driving yields higher on key products and ensuring that we are maximizing the efficiency of that investment, because that is the primary toggle to seeing the cash burn go from this, from something like in, in the mid-teens, what you're seeing right now, to down toward the low double digits.
Great. I, I appreciate all that color. Then just on, on the traction you're seeing, if I'm hearing your comments correctly, it seems like a lot of the procedure volume has been in the United States. You're seeing nice growth there. Maybe just any incremental color on accounts where you're seeing this in, in terms of both, you know, more procedures from your mapping updates and/or adding more physicians to using the same consoles already in place. Are you seeing these in academic centers or anything that you see that's identifiable of, of a continued pattern that's going forward? Thanks for taking our questions.
Yeah, thanks for the question, John. Maybe just one, one last follow-up on your last question is, as we've talked about for probably over a year now, when we had entered into the agreement with Medtronic on left heart access in April of 2022, we talked about having cash kinda through the middle of 2024. That is certainly extended today in, well into the third, you know, through the third quarter of 2024, and we continue to make very good progress pushing that out. through our own internal initiatives around underlying strength in the business. We continue to make very disciplined decisions with respect to operating expenses. I believe our headcount now sits at almost its lowest level, in, in several, several years.
We are making every effort to optimize resources, which is allowing us to continue to push out, our cash run- cash runway. While I can't comment, I will say, obviously, in November, we are undertaking every feasible effort to both drive growth in the business as well as push out, that cash runway. We've done, I, I think, a very consistent, incredible job on that, and we'll continue to do so. With, with respect to procedure volumes, and what we're seeing on, on usage, the pattern has really been more about where physicians are using AcQMap.
As it-- if you rewind kind of like 12 to 18 months ago, one of the things that I think was a real aha moment for me when I moved into this role, was how much AcQMap had really been relegated to a adjunct system being used in these super, super complex cases. second redo, third redo, so that means like your third or fourth procedure. That just isn't a. There aren't enough of those procedures, or they take place at so many different centers, you can't really build a big enough business on that.
The investments that we've been making in product development have all been about making AcQMap more relevant for everyday routine cases and still focused in this complex segment of the market, whether that's, you know, first redo or de novo persistent, of which there are a hundreds of thousands of both of those procedures combined. That has been one of the primary differences that is resulting in the uptick in procedure volumes, is physicians finding that not only can they use AcQMap for these extraordinarily complex cases, but they can use AcQMap in still, albeit complex cases, but ones that are more, that are more routine.
T hat for a kind of lack of a better way to put us, get us on the playing field. What we've really been trying to do with the majority of the product launches is continue to clear the way for physicians to use AcQMap more regularly, and that's been the primary factor that we've seen driving this uptick in utilization.
Great. Thank you.
Thank you. Our next question comes from the line of Margaret Kaczor from William Blair. Go ahead, Margaret.
Hey, good afternoon. Thanks for taking the questions. I wanted to start a little bit on PSA first. Any details to the extent you guys have it, of how that's impacting your business. I heard earlier, you know, this, this comment that AcQMap is being used in PSA. Are you seeing that maybe at new accounts, you know, any pullbacks in usage, I guess, of AcQBlate in those accounts, or really any details over whether this is an acceleration of AcQMap versus, you know, a pullback in general? Thanks.
Yeah, it, it, it's a, it's a great question, Margaret, and it's one that, you know, we, we kind of continue to ask ourselves here internally. You know, the way, the way we get asked the question a lot, both from our customers and, and, and I think the way you're asking it, too, is: Is it AcQMap versus PSA, or is it AcQMap enhancing PSA? I think if we were to kind of have, have a conversation a year or so ago, I might have said it's probably more like AcQMap versus PSA. What we're finding is that in sites that are utilizing PSA, that doesn't abandon the need for mapping.
We did our first commercial cases a couple weeks ago, with, with the center utilizing FARAPULSE, with, with AcQMap to do a persistent AFib case, both doing pulmonary vein isolation and also using AcQMap guided therapy to treat outside the pulmonary veins. We've done cases in, in the U.K. utilizing AcQMap with Galaxy. We've done, obviously, Affera was just launched, so we, and Affera has its own mapping system. We, we would expect to continue. We are running a study now, at Brussels, looking at the use of AcQMap with, with PSA. We, we would expect to see continued utilization of AcQMap and actually that potentially being a source of, of, of incremental cases, case volumes.
Now, in scenarios where you are seeing PSA displace, other therapies, you might see some- we might see some pullback in, in, in AcQBlate utilization, but that's not what we've seen so far. The, the only additional observation I'd make is it depends where you think PSA fits in this market, but we do have a reasonable cohort of our users who are actually using AcQMap with Cryo as well. The need for a diagnostic tool, particularly in any persistent patient, very much is still there with PSA, and we are seeing our customers find, find an incremental need for that diagnostic tool while using PSA, and then finding AcQMap to be a pretty good solution for them.
Okay. Now, that's, that's helpful. I know it's early, so I appreciate that, those comments. Now, I wanted to follow up a little bit on the U.S., I just heard your comment saying, hey, you're seeing, you know, maybe some earlier cases being done or, or the use of AcQMap, I guess, moving a little bit earlier in that kind of treatment paradigm.
You also mentioned kind of saying more routine usage, and you mentioned saying kind of new users wanting to come online. Is, is this something that's kind of a couple months old, or are you getting a little bit more, I guess, color and clarity, where you're nine months or 12 months, and you're saying: Hey, I'm, I'm starting to see these folks kind of, really be, be core drivers. You know, slight tweak on that question, but any sense around procedures per clinician or versus per account that you guys could give us?
Let me go through each of those. In terms of being used in more routine procedures, the way we've thought about the market, if you think there's like 1.1 million or so ablation procedures, and maybe 500,000 of those would fall into this category of more complex. The vast majority of those are de novo persistent and first time redo cases. We had previously found, and what we had previously kind of evaluated, was that AcQMap was really getting used in what I, like, second and beyond redos. There are only about 20,000 of those a year, sometimes getting used in transient non-sustained rhythms, like transient atrial tachycardias. Again, a fairly small percentage.
That was, I think, largely a reflection of the fact of some key, you know, user interface and user experience gaps that needed to be solved with software. That's where we kind of embarked first as we, as we recalibrated our product development roadmap. We've seen, as we've brought much, a significantly improved user experience, as well as some improved procedural efficiency capabilities to the system, that's getting us into these real de novo persistent cases. That's where ultimately we, we need to be. We've now seen that pretty consistently, especially in the U.S. In Europe, we continue to be used a lot for redo cases. About 80% of the procedures we do in Europe are redos.
In the U.S., which is obviously the largest single market and will be the key growth driver for the business going forward, we are seeing good adoption across a, an increasingly broad spectrum of procedures. Still a decent concentration around, around redos, but definitely moving much more into that first time redo and de novo persistent. We've seen that pretty consistently, the past four or five months. The RECOVER study definitely helped. We have seen a pickup in procedure volumes, subsequent to the publication of that study in late April, in that, in that kind of first time, redo cohort, which was the, the, the sort of target population there, the population that saw the greatest benefit in, in that study.
It's been a con- a increasingly consistent trend, and one that we expect to continue when we launch AcQMap 9 and AcQBlate, and then ultimately, AcQMap 10, which allows us to do contact and noncontact mapping and to switch between the two in a very seamless way. Once you add that with an ablation solution, we have a very, very strong case to be made that you could, that you that AcQMap should be used in, in, in certainly those de novo persistent cases on a very re- on a very regular basis to do both pulmonary vein isolation, as well as to treat areas outside the, outside the pulmonary veins, which is, which is pretty well established as the source of most complex disease.
Okay. Any kind of details you can give in terms of kind of procedures per clinician, whether it's kind of new clinician or kind of an established physician, just to kind of support that, that thesis would be great.
Yeah. Right now in the, in the U.S., well, we are, we are, we are pretty much, like, tracking at about three-ish procedures per consult per month. That's, that's close to probably double what we were doing a little over a year ago. We had, we, we had... Our U.S. install base has gone from 42 to 27. In the last time, we did about 250 procedures this quarter in the U.S., the last time we had that level of procedure volumes in the U.S. was when we had that installed base of 42.
We are seeing a pretty nice uptick in procedures, per consult per month, which is, which is what, what I think is probably the, the best metric I can give you to help corroborate that. The other thing I mentioned is that we, we did cross, over 100 AcQMap users, globally. We are seeing our U.S. user base in terms of number of physicians, I have to grab the number, it was, up also, even with the smaller, install base. Those are, hopefully, those metrics give you some, some clarity.
That's great. Really appreciate it.
Thank you. I'm showing no further questions at this time, so this will conclude today's conference call. Thank you for participating. You may now disconnect.