Q1 2020 Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to their Nanthealth Twentytwenty first quarter financial results Conference call.

At this time, all participants are in listen only mode.

After the speaker's presentation, there will be a question and answer session.

Ask a question during the session. Please press Star then the number one on a telephone keypad.

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I would now like to hand, the conference over to your speaker today, Mr., Robert Jaffe Investor Relations for Nantel, Sir the floor is yours.

Welcome everyone and thank you for joining us today to discuss the men's health 2021st quarter financial results.

On the call today, or rung moved Chief operating Officer, Bob Petro Chief Financial Officer, and Dr., Sandeep ready, our Chief Medical Officer.

This call is being broadcast live at Www Dot NAND health Dot com playback will be available for three months unmanned helps web site.

I'd like to make the cautionary statement and remind everyone that all of the information discussed on todays call is covered under the safe Harbor provisions of the litigation Reform Act.

The company's discussion today will include forward looking information, reflecting management's current forecast of certain aspects of the company's future and actual results could differ materially from those stated or implied.

In addition, during the course of this call we may refer to non-GAAP financial measures that are not prepared in accordance with US generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies.

Investors are encouraged to review Nance helps press release announcing its full 2021st quarter financial results.

The company's reasons for including those non-GAAP financial measures in its financial results announcement.

The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is also contained in the company's press release issued earlier today.

In a moment Ron will provide a brief overview of the quarter and discuss the business.

Load by Bob who will discuss the financial results in more detail. We we'll then open the call for questions with that said I will now turn the call over to run Luke's Ron.

Thanks, Robert Good afternoon, everyone and welcome and help 2021st quarter financial results Conference call.

I hope all of you and your families are safe and well.

They're highly unusual time for Copel 19 impacting all those.

I'd like to begin with some heartfelt thanks to our employees, who responded with resilience and dedication to the challenges related to cope with 90.

Our employees have put forth extraordinary effort to make sure our business continues to operate.

The way that effort, we have focused on our employees will be the call CDC guidelines and implemented processes and procedures for virtually all of our employees to work remotely.

As a result of these efforts the co advancing impacts on our employees and business data has been relatively minor.

With that let's take a closer look at our 2021st quarter.

During the quarter, we completed the sale were connected connected care business for more than $47 million.

Sure this business significantly strengthened our balance sheet further streamline our operations and along with the sale of our home health care services business last June allows us to focus our energies and resources on our primary SaaS business for reference the financial results were connected care business are now classified as discontinued operations for the current prior period.

Having said that those interest at the connected care business generated sales of approximately $1.2 million reported in Q1.

Financial results for continuing operations in the first quarter 2020, total revenue was $18.2 million, which SaaS revenue was 18.1 million, representing a 2% increase over the prior year quarter gross margins increased substantially the 60% of net revenue compared with 49% of net revenue in last year's first quarter.

We also made excellent progress, reducing operating expenses, especially as DNA.

Regarding our leadership, we strengthened our board of directors with the addition of Deanna Wise Deanna brings extensive clinical information technology experience in the hospital in healthcare industry for expertise will be fig, particularly helpful in shaping the future product strategy and strategic direction.

Turning briefly to our balance sheet at March 31 for cash position was $47.5 million, which increased substantially as result of the sale the connected care business.

Now, let's discuss what's offered service business and our clinical decision support Division. We presented every connect real world data on treatment patterns for patients with advanced colorectal cancer CRC at the 2020 gastrointestinal cancers symposium sponsored by the American Society of clinical oncology ASCO in January.

Related to identify treatment patterns for data analysis can provide unique and critical information to pharma payer and provider networks optimize treatment strategies.

Also in January we signed a three year renewal agreements with the one of the largest nonprofit rural health plans in the U.S.

Expanded and green with a leading US health insurance company throw everything that's across for Medicaid population to additional states.

We deployed significant where cowen database enhancements to the every platform. He says enhancements include warning notifications, which allow users to configure a warning and are deviation notification to alert to submit or when a drug was not comply with the preferred drug program. The stage review cycle time in terms of patients receive correct care.

Payer customized messaging, which allows users to indicate wouldnt when specific data is required in order to complete patient insurance I'd appeal producing submission delays.

Five year agreement includes Navidad open as a key component of the Healthland payer provider collaboration strategy.

We launched significant enhancements to the NAV that open platform, including all and new all payers self service subscription management workflow this new storefront and able to provider office to quickly create managed subscriptions for our all payer offerings along provider to expand their now that that access to nearly all health plans.

Curve sequencing and molecular analysis business in February we presented the GPS cancer data, revealing increased opportunities crude her two directed therapy in colorectal cancer patients at the 2020 gastrointestinal cancers symposium spots, where they're very excited clinical oncology that data showed that up to 40% more patients may be eligible for.

Her two directed therapies, which have implications for drug development clinical trials.

In January and health anthem is presented initial report on that on a novel artificial intelligence AI platform, creating pathologists and image based lung cancer subtyping at the society for increasing signs of technologies International Symposium on electronic imaging 2020, the solid machine vision software platform accurately subtype slug cancer.

Pathology and if he is high concordance with analysis performed the train medical oncologists.

In February and help Nantel makes announced the publication of a peer reviewed studies in breast cancer research on a novel anti technique in breast cancer study reports on the novelty burning system as digital pathology images and always data used together to more precisely identify mechanisms of therapy resistance.

To sum up we reported a solid first quarter, especially in light of the challenges associated with over 90 compared with last year's first quarter SaaS revenue increase in a gross margin rose significantly.

In February we completed the sale reflected cameras as for $47.25 million transaction has substantially improved cash position and financial flexibility and we continue to enhance our product offering add new customers and expand our existing customer agreements with that overview of our business I'll turn the call were to Bob discussed our financial results in more detail.

Bob Thank you Ron as Ron mentioned earlier for the first quarter 2020 revenue was 18.2 million compared to 20.2 million the same quarter over the prior year.

Included in that 20.2 million from the prior year was 1.6 million as home health revenue and 814000, a GPS revenue and led removed in such that's leaving just SaaS revenue SaaS revenue increase year over year by 2% to 18.2 million from $17.8 million. The primary drivers further improve.

Performance, where the addition of key contracts and partners as mentioned in previous quarters quarter on quarter SaaS revenue declined slightly mainly due to the ending of the amortization of services that were occurred in 2019.

Q1 sequence in molecular analysis revenue was 59000 down from 814000, the same quarter. The prior year as we have referenced in the past we expect to continue to see minimal sequencing and molecular analysis revenue impact until we receive a positive coverage determination from CMS.

Our connected care business, which we sold earlier this year in February January the partial quarter sales or approximately $1.2 million. As a reminder, this amount is not included in our total revenues as this business is reported as discontinued operations.

Q1, gross profit grew to 11 million, our 60% of revenue compared with 9.9 million or 49% of revenue in the same quarter a year ago.

The significant gross margin improvement was primarily due to changes in product mix, specifically that continued growth of our software related business.

Q1, total operating expense decreased 17% to 16.8 million from the 20.2 million in the prior year first quarter, reflecting our continued cost management efforts and removal costs tied to the divestiture. The home health business. We continue to manage our cost base budget do intend to invest through this.

Year on new product offerings that will generate future benefits. Accordingly, we expect to see overall opex increased modestly through this year.

For the first quarter net loss from continuing operations was 8.9 million our eight cents per share a significant improvement from 19.6 million or 18 cents per share in the prior year first quarter.

On the non-GAAP basis net loss from continuing operations was $6.1 million or six cents per share down from 10.6 million or 10 cents per share in the first quarter last year.

Finally, cash and cash equivalents were 47.5 million at March 30, Onest 2020, compared with 5.2 million at the end of the fourth quarter. This increase of 42.3 million was primarily the result of the DCF sale, excluding the inflow of cash from the sale net cash burn was approx.

$45 billion in Q1.

Which includes various closing costs and other front end loaded costs with that I will now return the call back over to Robert.

Thanks, Bob Operator, we welcome everyone and thank you for joining us today to discuss.

Operator, we've completed our prepared remarks, we now I'd like to open up the called the questions.

At this time I would like to remind everyone in order to ask your question. Please press Star then the number one or telephone keypad.

You have a question from Charles Threed. Your line is open.

Hey, guys.

Thanks for taking the question that hope everyone is safe and well here.

Well I wanted to ask about.

Actually I am just.

Total operating.

Cash here. So if we took importing it sounds like we have burned about a minus 5 million. If we didnt have the closing costs and somebody upfront costs related to the sale of Tcrcs.

Do you have an estimate of what cash would have been should we have.

Increased cash or can you give me a rough estimate.

Yes, its five year I don't think we're in a position yet to say that led to increased cash, but I think we will build burned a couple of million dollars being.

Early period that year.

Okay.

Is there as we think about the impact of coded here going forward.

What kind of impact are you expecting here in the back half the year, obviously, a lot of people not able to get to physicians offices those officer closed.

College, I think to some extent sounds like it's a little bit less impacted generally speaking, but still.

A lot lower level of procedures.

How are you thinking about sort of outlets here.

As we move forward.

So it's Ron Hain, Charles how you doing.

Yes, so obviously with Q1, we had no material financial impact due to the virus and so as soon as a bit early to tell on the longer term.

We feel comfortable so we're at as a company for the year.

But as you know it's difficult to see I think the longer you go and with closing of deals and can you actually do larger deals over the phone the smaller deals we've been able to do.

I think you don't as time progresses will have a better understanding of this and if we can actually be able to to deal with what happened to be the face to face with the customer.

So.

Okay.

Maybe.

Can you give a sense of what sort of the backlog.

Cushion you think you have that will help to step that we have some delays in closing deals yes.

Just remind us sort of the how long it takes to implement and how much of back when we have to kind of curious did as well.

Well that is one good thing I think as far as an implementation goes in a lot. The also depends on the customer of their readiness on implementation, but the nice thing about us is that.

We can actually implement virtually with the products, both equity and Avnet and so that's actually worked well for US obviously during this period being able to do that obviously customers I still think prefer in a normal situation would prefer.

Onsite in sort of that face to face interaction, especially around training, but in this case, we've been able to continue with installations.

With the customers I think from that hard we're in good shape.

Pipeline is still strong for equity in particular, we have several deals and progress.

We may see some time lags and our ability to closed deals given the location to certain prospects as well as the greatest as customers refocusing right now in the shorter term priorities, but the overall interest is still really strong I think which is a testament to the ROI over solutions and so and back to my previous point earlier on the call would impact for the.

A year ago, we still have good expectations that we're going to close some of these larger deals.

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Even though we're not face to face with customer.

Okay.

Sorry, just yet.

Sorry, as Bob just extend again I think the long term.

Strategies and prospects are still.

Fairly good I think short term, we will see a small impact in Q1 or sorry, Q2, two did see.

Yes, we did see a small impact at the onset as the quarter tied to the providers in the network and offset the in goes et cetera, and we're also doing some things internally along with our providers and providing.

Support to them. So we will definitely see an impact in in Q2.

I envision revenue to be flat to down.

From a Q2 first so I just wanted to give.

That highlight just to mature.

It's clear.

And then drilling Charles just to add to that with Bob one of the things that we did as part of the the co. When we felt the responsibility to the community and our customers is that we're providing the all payer for free right now to our customers.

And so we expect to have an impact on the revenue in Q2 based on that.

Is that so.

Is that charge on a kind of a transaction business done so you're able to is kind of provide for free for now yes.

Yes, yes.

Okay. My last question then is as we think about the model that so we should be thinking about modeling down.

Flat to down second quarter.

Third quarter is it because of a lag on delays should should third quarter same or or if let's say.

No. It wasn't a lot other companies consisting of a keeping the worse in terms of procedure volumes, but then three Q.

Starting to see a recovery going up for Q.

Is the timing for your business similar that we would see that commission I would imagine.

The NAV and Thats side, perhaps because of transactions.

Good things being scheduled or equity and maybe give us sense for that and how we should be thinking of that I think were similar to the other companies that you referenced in the same guidance.

Okay.

Alright, Thanks, that's out there.

Thanks.

During our questions at the moment please continue.

Thanks Charles.

Thanks, everybody for joining us today, we look forward to sharing our progress on our next scheduled conference call. Thanks again for joining us today have a good luck.

Thanks.

Thank you again for joining US today. This concludes today's slip conference you may now disconnect.

Have a great deal presenters please down the line.

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