Q4 2020 Precipio Inc Earnings Call
Welcome to the precipitous Q4, 'twenty 'twenty in year end shareholder update call all participants will be in a listen only mode should you need assistance. Please signal.
Oh, a conference specialist by pressing the star key followed by zero. Please note that this conference is being recorded statements made during this call contain forward looking statements about our business you should not place undue reliance on forward looking statements. As these statements are based upon current expectations forecasts and assumptions and are subject to significant risks and uncertainties.
These statements maybe identified by words, such as May will should could expect intend plan anticipate believe estimate predict potential forecast continue or the negative of these terms or other words or term similar of similar meaning.
Risks and uncertainties that could cause our actual results to differ materially from those set forth in any forward. Looking statements include but are not limited to the matters listed under risk factors in our annual report on form 10-K for the year ended December 31, 2020, which is on file with the securities and exchange.
And as well as other risks detailed in our subsequent filings with Securities and Exchange Commission.
These reports are available at Www Dot S E C dot Gov.
Statements and information, including forward looking statements speak only to the day. They are provided unless an earlier date has indicated and we do.
Can we take any obligation to publicly update any statements or information, including forward looking statements, whether as a result of new information future events or otherwise except as required by law now let me hand, the call over to Ilan day, Natalie Precipitous CEO. Please go ahead.
Thank you and good afternoon.
Non underlying.
I'd like to thank you all for joining our post year end 2020, 10-K filing for our shareholder call during the call I'll provide a recap of 2020.
Based on the progress our company has made since the start of 2021 and our plans for 2021 and beyond.
With me today is Carl I Berger our CFO.
Now turning his perspective on the business and our finances all.
I'll close with a few thoughts on where the company is going in 2021.
As you saw in our 10-K filing and the subsequent press release, we issued yesterday morning Debbie.
Doubled our revenues from 2019 for 2020.
This is an impressive accomplishment in a normal year in 2020.
Who will share gain but.
Our sales team faced limited to no access to customers a lot of people faced operational other limitations to what is already a complex workflow, yes with all of that.
To double the number of patients for whom we provided what we believe to be the most accurate diagnosis. This interest you can provide backed by academic.
Experts and proprietary technologies.
This is an incredible feat and I wanted to take a moment to recognize our all star team.
Not only did at any of our employees.
Not once did any of our employees for their personal concerns peers or need for patient care.
Third while the majority of the countries.
He stayed home they showed up to work every day to take care of the patient in front of US as we watch business is around the low capital markets in disarray, we saw many businesses take immediate action to cut costs through massive layoffs.
Our company culture does not permit for that thought to even be considered.
Instead management unemployed.
Lawyers took pay cuts to ensure that all our take home pay maybe temporarily reduce nobody has to face the prospect of losing their job and not being able to provide for their family. This.
This is the commitment that we as a company have to each other and it's the heart of who we are I'm.
I am proud of the team for all that we've accomplished in 2020.
On the product side 2020 was the year, we formulated a solidified our strategy as we took our proprietary technologies and converted them into profit.
We have the technology that working format. After all we were the first customers to use both IV so additive screen a lot.
In order to create a proper business unit for these technologies.
We just we've developed we needed the sales channel and the go to market strategy.
Let's start with IV.
I can tell you is the sophisticated products used in the fact that he's got a laboratory and requirement, which is not only a highly complex part of the lab.
Also one that is typically averse to change.
So we needed the strategy.
With that I would both get us in the door with decision makers as well as higher cost worthy relationship with these decision makers to convince them to try something new.
In August we signed a sales and distribution agreement with Avs biotech.
One of the most established and respectable players in the industry with products sold directly into these type of generic.
In the laboratory around the World a significant volume buys a D S. It's tough.
For our partnership with ACS, we aim to gain access to these laboratories and the decision makers and ABS is credibility we would win customers.
The first step in our strategy, we agreed on with ABS was to conduct a beta test.
Lap what identified several sites in the U S and Europe.
Who they knew would be open to new innovation we.
We will present to them jointly set up for trial program and work with the customer to show them the impact on results of using IV sales compared to the current media day use.
The plan was that the results will be sufficiently compelling.
<unk> for them to transition to using IV sell and become our customer.
With a few successful trial customers in our pockets and network feeling comfortable with the value proposition. We can then move to broader market penetration penetration.
With the exception of the timeline to complete the trial stage the strategy is on track.
Much as I hate to use COVID-19.
Skus, we've seen many labs crippled by the regulations they need to adopt in order to meet social distancing requirements as well as other safety precautions that include shifts rearrangements quarantine and stuff.
With five genetic labs, typically understaffed and already struggling to meet their volume capacity a funny like this will always take a backseat to clinical work.
As Nick has it should after all Theres, a patient's capital in front of them and the doctor weighted for diagnosis and that certainly comes force.
During the second part of the year, we had to meet the tastes of our customers and accept the fact that these trials will take longer than expected.
So far the initial results from the trials, we conducted have been positive.
We are moved.
Right direction, and I'm confident we will get their IV sales are promising technology that offers both clinical accuracy value as well as operational and economic benefits.
From a market that's been using the same product for over 50 years laboratories are ripe for change and I think our product with our distribution partner are in a strong position to.
Moving into the market.
Moving onto him screen, our proprietary family of reagents for rapid molecular diagnostic testing.
After using <unk> screen and online for several years last year, we identified the opportunity to migrate this technology into the COO The physician office laboratory and sell these reagents to run.
As a diagnostic test on oncology officers in their lab.
Similar to IV, so we needed to pair this technology with a solid sales partner and our successful go to market strategy is.
In December 2020, we entered into an agreement with <unk> solutions, a subsidiary of Amerisourcebergen and the GPO in the oncology market.
I own supplies oncology practices products to community oncologists oncology practices, which is precisely our target customer base. Furthermore, at the heart of their vision is helping community oncology practices provide better care for their patients aligning perfectly with our vision.
<unk> sales force is deeply entrenched with their customers.
And their ability to open doors and put us in front of the right decision maker has been nothing short of impressive.
Since the launch of the partnered partnership in mid January we presented to more than 50 customers from the vast majority of them have expressed interest in bringing him screen onboard.
We already have active customers generating revenue.
The solid.
And rapidly growth pipeline of customers in the various sales and Onboarding stage.
Our goal is to build a strong base of oncology practices as our customers moving him screen jewelry, we continue to sell these and other products. We continue to develop I really believe that he screen is going to be one of the strongest engines of growth for our company and I'm excited.
Excited to see the progress we've made and what lies ahead of us.
Lastly, let's discuss our Covid projects again, I first like to reemphasize that Covid is not our core business and as you can see contrary to some other companies in the industry at no time did we abandon our core business and are focused on its growth.
However, we.
<unk> opportunity to explore using limited resources the ability to take a technology developed by our partner and bring it to market.
Given the sensitive highly regulated assets for these tests that requires stringent approvals from the FDA, we have to change horses, a couple of times throughout the profit.
We're delighted to partner with Midas was actually the first.
U S based company to receive an EUA for point of care use of their COVID-19 antibody sales.
We are working closely with are not near minus to explore various distribution channels available for the market more to come.
In terms of our Covid testing may mean to the company.
The way, we look at it it might deliver a nice bonus providing additional revenue and cash.
But whether that happens and the magnitude are very difficult to control or predict for.
We prefer to look at it is just that a nice bonus which may or may not happen and which we will celebrate if it does not meet or beat not Miss a beat as we continue to make progress we will update our shareholders accordingly.
Now let me.
Hand, it over to Carl our CFO for him to share some thoughts on the business from a financial performance and then I'll end with a few thoughts on where I see 'twenty one from 'twenty one thank you Carl.
Thank you Ilan good afternoon, I'm Karl I Burger.
As Chief Financial Officer.
Yesterday <unk> issued a press.
Press release that for.
<unk> day synopsis of our 2020 topline results.
This press release following the filing of our 10-K on Monday March 29.
In his opening remarks, Elon covered a number of items.
Like to take this opportunity to add some additional comments.
Regarding our sales growth in pathology services.
The headway, we are making developing a distribution market for IV sales.
And finally, the impressive reception heme screen is receiving with office based oncologist and larger oncology commercial labs.
Yeah.
First apology diagnostic services.
Just prior to the interruption in business shutdowns from Covid.
We reconstituted and reorganized our sales force.
At the tail end of February and into early March 2020.
This action by the company proved to be extreme.
Extremely timely.
Our initiatives actually enable a precipitous to address the many disruptions of normal business operations, resulting from the economic shutdown.
First on that list of issues.
Just basic access to physician accounts by our sales reps.
Q2, 2020, with Covid shutdown ramping up.
We seamlessly executed the onboarding of accounts from a non cash.
Non equity acquisition of popular health Care's uncle metrics business.
And as we move through Q3.
Thank you for a 2000.
20.
The decisions and preparations effected in February and early March and our sales organization, our lab operations and lab logistics allowed the sales force to actually grow account volumes and add new business.
As our customers experienced minimal changes from.
Normal business routines.
So stepping back and reviewing 2020.
Case volume grew throughout the year.
With issuing our 10-K.
We reported a year over year volume growth of billable cases of 100.
And 20%.
While we are just completing Q1 'twenty one.
Our initial unaudited results for us and as impressive.
Given the impact of the variety of storms in the southeast and Midwest.
We project revenues to approximate Q for 2020.
Second IV cell <unk>.
<unk> stated IV cell is a sophisticated highly complex cytogenetics product.
Being introduced in the commercial lab setting.
Our path to building market revenues has been elongated reflecting the complexity and change.
<unk>.
This advanced technology has and will have.
On the Cytogenetic lab process.
So where are we today.
The bottomline on IV. So is that it delivers what is clinically advertise.
Simultaneous cultures in speed and price and processing.
Additionally, the financial value proposition to the customer is very real and very meaningful.
We are extremely confident in the product and.
And our ability to sell through our partnership with Acs and its international customers.
Third.
<unk> heme screen.
Having a product that offers a turnkey solution.
Including diagnostic equipment as well as reagents.
A product that offers extremely low entry cost for the customer.
A product that is able to build new revenues for oncology practices.
And a product that eliminates the.
The need for the practice to reference out tests that are not only expensive, but have a long lead time.
10 days for two weeks, reducing that to one day.
That product defines aim screen.
We project team screen to produce very meaningful revenues.
For precipitate in 2021.
And for Hain screen to be a material driver for the company.
Taking the growth of Haim screen and path services together.
We anticipate accelerating the companys timeline for cash flow breakeven.
So moving to the financial results.
Our 10-K provides extensive information and financial results of our operations.
The press release provided highlights of 2020.
Diving into the financial performance I'd like to address sales and gross profit.
Operating expenses.
And our balance sheet.
Sales and gross profit both rose in 2020 sales.
Sales for 2020 of $6 1 million increased 95% over 2019.
<unk> by pathology services.
Our increases.
<unk> and Paas services enabled our lab operations to leverage fixed expenses.
To maximize our batch processing.
To a large extent consolidate logistics fences.
All reducing our per test costs.
2020 gross profit.
$1 2 million.
Increased by Forex in comparison to 2019.
For 2020.
Gross margin increased to 19%.
From 7%.
Looking at just Q4 2020.
Our margin increased.
Profit of 24%.
And on an incremental revenue basis in 2020 on a $3 million increase in sales year over year.
Gross profit grew 900, K and incremental gross margin was 31%.
We.
Anticipate to continue case volume increases in pathology will show a significant and meaningful improvement in gross profit and gross margin percentage in 2021.
Continuing our discussion of gross profit, we're very encouraged about the impact team screen.
Range will have on our 2021 future gross profit.
As Hain screen revenues are beginning to build.
And our upfront investment costs are behind us.
We see him screen being a material factor in accelerating total reported revenues.
Gross profit.
And the timeline to cash flow breakeven.
Moving towards operating expenses in 2020 operating expenses were $9 8 million.
The increase less than $2 million for less than 2%.
When compared to 2019.
While revenues during.
<unk> same period almost doubled.
During 2020.
We focused on reducing G&A expenses.
Took those savings and reinvested in selling and R&D initiatives.
Within R&D in 2021, we are actively working on a development of a suite.
Of heme screen panels.
And as we build Haim screen accounts, we look to expand in screen offering to those oncology practices.
Moving on to the balance sheet.
Growth has provided the company definitely more financial flexibility.
With growth to a degree we've been able to shore up our balance sheet.
Reduced cash burn.
Increased cash on hand.
Reduced accounts receivable and make gains in stabilizing the total liabilities.
Rise of accounts payable and accrued expenses.
Ending 12 31 2020.
Accounts receivable.
Was <unk> 9 million.
An increase of only <unk> 3 million.
On a sales increase of 3.0 million.
DSO at the end of 2020 was.
It was 52 day.
As a decrease of 15 days from 2019.
That's the majority of our revenue is patient billing.
I am very pleased with the results turned in by the company's reimbursement team.
Accounts payable and accrued expenses remained essentially level.
Year over year on a much larger book of business.
And with the investments in R&D.
So improvement in DSO.
Improvement in revenue collected per case.
And accelerating the collections have assisted the company's cash needs and our operations.
Capital expenses moving on to Capex.
In Q4 2020.
Seeing the monthly case volume continually increase in pathology services.
The finance group and operations reassess the Companys capex needs for the future.
The assessment ended with initiatives.
<unk> by lab operations, and renegotiating existing contracts with major equipment and reagent suppliers.
And Additionally operations revisited equipment rental programs and upgraded lab diagnostic competencies.
Spanning our molecular testing capabilities.
This change allows particularly.
So to bring in house.
Lee referenced out testing that was very expensive and had lumpy reporting times that would impact our services to our customers.
We're encouraged that growth in volume will be met by our continual emphasis on diagnostic quality.
And we.
We'll provide lower case costs.
For financing for the company in 2020, we utilized our equity line to fuel the company's growth and operations.
Entering 2021.
With anticipated revenues on the rise.
We.
We project a reduction in the cash burn rate each and every quarter.
Key to this equation will be building games screen revenues.
As <unk> stated earlier regarding Covid, while we were actively moving forward R&D.
Our endeavor in Covid antibody testing and the resulting.
<unk> revenue performance is as of yet very uncertain.
As such we do not have any material impact of Covid revenue in our projections.
As we move forward the company will provide additional shareholder information.
On this product.
We have real data becomes available.
In summary, 2020 was a unique year in a very challenging period for the company.
Going forward we.
We are truly.
Truly excited about 'twenty, 'twenty, one and our growth opportunities.
As Mitch operationally, we anticipate continued improvement through volume growth and pathology services and as Hain screen revenues build.
Financially, we continue to gain strength.
But we remain focused on leveraging our assets and driving the company to breakeven.
The time I'm done with my portion of the presentation and I will return the meeting over to Ilan.
Thank you Elon.
Elon.
Yes, sorry, I was on mute. Thank you Carl I appreciate the outstanding job Yoga, Jim or Joe.
Let me end with a few closing thoughts on where I see us in 2021 and beyond.
The volume of services will always be our core.
The first.
First and foremost it's the vehicle that enable us to deliver on our vision to provide the highest level of diagnostic accuracy in the industry.
Our technology business starts with our talented sales team responsible for the growth. We described at the top of this call and is supported by our dedicated team in our lab and customer service for sure.
For that we deliver.
Business from our promise everyday for every patient the doctor we serve.
It also facilitates our ability to create test and developed new products that drive the product sides of our business and this is where I think the real growth engine exists for <unk>.
This valuable business offers unique opportunities, we've never really spaces for first of all proprietary product trade.
<unk> order to entry not easily overcome by competitors second these of <unk> products with our current revenues from ongoing usage and lastly, the markets for each of these products are huge exceeding $100 million per year.
Therefore, both parts of our company form a strategy, which we impact patient care book.
Made a berliner allowed by creating products that can be used to achieve the same by outside labs.
From 2021, Ics continue to grow the pathology business our value proposition is strong and our team is well poised to deliver that message and so we continue to gain customers.
I also see the product side of the business becoming.
A substantial part of our revenue and our bottom line.
We have a solid go to market strategy and formidable partners for both our lead both our lead product and the feedback from our customers is outstanding and shorts. The pathology business will continue to serve as our anchor for the business and the foundation for developing our propriety products.
And those products are what will enable us to achieve rapid market and find out for growth.
Coming out of 2020, I'm more excited than ever we have the team and the tools, we need to execute and results for already shown up.
I want to thank you all for your ongoing support and I look forward to speak with you soon thank you and have a nice evening.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.