Q4 2021 Precipio Inc Earnings Call
Operator: Welcome to the Precipio shareholder fourth quarter 2021 shareholder update conference call.
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Statements made during this call contain forward-looking statements about our business.
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 our current expectations, forecasts, and assumptions and are subject to significant risks and uncertainties. These statements may be 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 terms of similar meaning.
You should not place undue reliance on forward-looking statements as these statements are based upon our current expectations, forecasts, and assumptions and are subject to significant risks and uncertainties. These statements may be 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 terms of similar meaning.
You should not place undue reliance on forward-looking statements as these statements are based upon our current expectations, forecasts, and assumptions and are subject to significant risks and uncertainties. These statements may be 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 terms of similar meaning.
These statements may be identified by words, such as may, will, should, could, expect, intend, plan, anticipate, believe.
We estimate predict potential forecast continue or the negative of these terms or other words or terms 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 31st, 2021, which is on file with the Securities and Exchange Commission as well as other risks detailed in our subsequent filings with the Securities and Exchange Commission, these reports are available at www.sec.gov.
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 31st, 2021, which is on file with the Securities and Exchange Commission as well as other risks detailed in our subsequent filings with the Securities and Exchange Commission, these reports are available at www.sec.gov.
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 31st, 2021, which is on file with the Securities and Exchange Commission as well as other risks detailed in our subsequent filings with the Securities and Exchange Commission, these reports are available at www.sec.gov.
One which is on file with the Securities and Exchange Commission as well as other risks detailed in our subsequent filings with the Securities and Exchange Commission fees.
These reports are available at Www Dot SEC dot Gov.
Statements and information including forward-looking statements, speak only to the date they are provided unless an earlier date is indicated. And we do not undertake 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.
Only to the date they are provided.
An earlier date.
Indicated.
And we do not undertake 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 Danieli, Precipio's CEO .
Ilan Danieli: Thank you Anthony. Hello and good afternoon, everyone. Thanks for joining our 2021 fourth quarter and year-end shareholder call. Thanks also to those who have sent in your questions. We've done our best to incorporate them into today's call.
My goal today is to give you some insight into how we experienced in recent quarters and how we closed out 2021 overall beyond what you read in our financial statements that were filed last week.
And lastly, to give you some insight into how we view the upcoming year with respect to the contributions of each division and the expected impact on shareholder value.
We expect the contributions of each division and the expected impact on shareholder value.
Let's begin with fourth-quarter results. In Q4, we got back on track closing the quarter with revenues of $2.4 million, an increase of 8% from the prior quarter and year-over-year increase of half a million dollars or 25% in Q4 2020.
For the full year of 2021, revenues increased from $6.1 million to $8.8 million, a $2.7 million or 44% increase from 2020.
Our sales team and our internal lab operations are back [inaudible]. We've resolved the operational issues and are humming on all cylinders. From sales conversion metrics, the turnaround time results from Cogs, to DSO, I'm pleased to report that all metrics are moving in the right direction. This is important because it enhances the performance of the diagnostic services division and it also enables the company's leadership to focus on growing our new product division; more on that in a few moments.
Our sales team and our internal lab operations are back [inaudible]. We've resolved the operational issues and are humming on all cylinders. From sales conversion metrics, the turnaround time results from Cogs, to DSO, I'm pleased to report that all metrics are moving in the right direction. This is important because it enhances the performance of the diagnostic services division and it also enables the company's leadership to focus on growing our new product division; more on that in a few moments.
Mhm and it also enabled the company's leadership to focus on growing our new products division more on that in a few moments.
I'd like to take a moment to discuss Carl Iberger's resignation. Obviously, we were saddened to see Carl resign as our CFO. Carl joined is in late 2016, several months before we completed the merger and became a public company.
I'd like to take a moment to discuss Carl Iberger's resignation. Obviously, we were saddened to see Carl resign as our CFO. Carl joined is in late 2016, several months before we completed the merger and became a public company.
Carl joined is in late 2016, several months before we completed the merger and became a public company.
I don't think there were many moments in my career where I was more concerned with the events we were about to embark on than the months, leading up to us going public. I remember I was the tank commander in the Israeli army. But having Carl in our corner gave me the confidence to know we had what it would take to pull this off.
It's safe to say, we wouldn't be where we are today without Carl. The organization, control, structure, and discipline he brought to the company were critical to getting us through the tough times to a point where we now have a solid operation and a clean, strong balance sheet that enables us to execute on our growth plans.
Nation control structure and discipline he brought to the country were critical to getting us through the tough times to a point, where we now have all of the operation.
<unk> strong balance sheet that enables us to excuse on our growth plans.
But most important, in his capacity, Carl accomplished what many managers failed to see, the key goal a manager can achieve to build their teams to the point where the team can function without it.
And that's precisely because of this scale that I know that Carl called lead the finance team that it's well equipped to continue to support the company's growth.
Matt Gage, our Director of Finance, has stepped in as interim CFO. Matt has over 20 years of public company finance experience and was Carl's right-hand guy throughout the past five years. I look forward to work with Matt and I have full confidence that he and his team will continue to function as well as they did with Carl.
Matt Gage, our Director of Finance, has stepped in as interim CFO. Matt has over 20 years of public company finance experience and was Carl's right-hand guy throughout the past five years. I look forward to work with Matt and I have full confidence that he and his team will continue to function as well as they did with Carl.
Matt has over 20 years of public company finance experience and was Carl's right-hand guy throughout the past five years.
I look forward to work with Matt and I have full confidence that he and his team will continue to function as well as they did with Carl.
As well as they did with Carl.
Yeah.
Next, I'd like to review some of the actions we've taken to position the company for further growth.
As mentioned, our revenues from diagnostic services grew both Q-over-Q and year-over-year. I'd like to mention a few key drivers of this.
I'd like to mention a few key drivers of this.
First, improved sales team management and performance. Our team is now better trained, better equipped, and better positioned to deliver our message to our customers.
First, improved sales team management and performance. Our team is now better trained, better equipped, and better positioned to deliver our message to our customers.
Our team is now better trained, better equipped, and better positioned to deliver our message to our customers.
We're also seeing access to customers improve with the ability to meet with customers in-person, which significantly impacts the prospecting and sales process as well as interacting with existing customers. This resulted in an increase of 23% case volume.
We're also seeing access to customers improve with the ability to meet with customers in-person, which significantly impacts the prospecting and sales process as well as interacting with existing customers. This resulted in an increase of 23% case volume.
This resulted in an increase of 23% case volume.
Yeah.
Improved operations. We took various steps to revamp some of the lab operations, resulting in an increase in cases reported within the committee turnaround time from 80% to 96%.
Various steps to rebound from the lab operations, resulting in an increase in cases reported within the committee took one five from 80% to 96%.
Third, cross-pollination between products and our services division.
Pollination between products and our services Division.
Last quarter, one of our [inaudible] customers also became a diagnostic services customer. This is the first time that we've seen this cross-pollination effect actually materialize where the relationship and quality of our product opens up a discussion to the other side of our business for diagnostic purposes, and we end up with a customer served by both divisions.
Last quarter, one of our [inaudible] customers also became a diagnostic services customer. This is the first time that we've seen this cross-pollination effect actually materialize where the relationship and quality of our product opens up a discussion to the other side of our business for diagnostic purposes, and we end up with a customer served by both divisions.
This is the first time that we've seen this cross-pollination effect actually materialize where the relationship and quality of our product opens up a discussion to the other side of our business for diagnostic purposes, and we end up with a customer served by both divisions.
This single customer at full throttle is expected to generate over $1 million combined diagnostics and [inaudible] revenue
This is an exciting validation of our business model and we expect to see other customers follow suit.
Our products division continued to grow in two dimensions. First, we continue to add more customers. Second, we see customers growing revenue organically by ordering more of our products.
We see customers growing revenue organically by ordering more.
Most of our E&P customers begin with a conservative volume they commit to knowing they will grow into the full revenue potential.
This has been the case with the majority of our customers, which increased their commitment volume sometimes by more than double the [inaudible].
Okay.
In a recent conference we attended, we were able to finally meet in person with many of our prospects with whom we have previously presented only via video call. So anyone who's tried to build a business relationship you know that making a sale over video call is virtually impossible. That's why the in-person meeting, especially industry conferences, were such a huge boost to our ability to gain more customers.
In a recent conference we attended, we were able to finally meet in person with many of our prospects with whom we have previously presented only via video call. So anyone who's tried to build a business relationship you know that making a sale over video call is virtually impossible. That's why the in-person meeting, especially industry conferences, were such a huge boost to our ability to gain more customers.
So anyone who's tried to build a business relationship you know that making a sale over video call is virtually impossible.
That's why the in-person meeting, especially industry conferences, were such a huge boost to our ability to gain more customers.
We anticipate that over the next couple of quarters, we're going to see accelerated growth as our sales team can visit with customers in person, build the relationship and the trust, which translates into business.
Our [inaudible] portfolio currently includes three panels: the NPM, AML, and a media panel. We recently completed the update of the anemia version 2.0 panel following changes to the guidelines to be launched this quarter.
We recently completed the update of the anemia version 2.0 panel following changes to the guidelines to be launched this quarter.
We also expect to launch the long-awaited CLO panel, which has been delayed due to multiple changes in guidelines we expect to be adopted by the various regulatory bodies, such as the NCCN and the WHO also this quarter.
Is the delay due to multiple changes in guidelines is expected to be adopted by the various regulatory bodies, such as the CCN and the WD Joe also this quarter.
As for [inaudible], we're beginning to see the relaxation of the state's policy laboratories adopted during COVID and we hope this translates into active customers; more of that to come in the coming months.
We're focused on the product side for two reasons. First, this is a new development division of our company compared to the diagnostic services division, which is well established.
Second, we believe each product addresses a substantial total available market and has significant, demonstrable, and sustainable competitive advantages.
Management expects that the company will continue to evolve over the next 12 to 24 months to build its technology biotech products business with a portfolio of proprietary technologies that is expected to generate revenues and strong margins, while staying true to our mission of eradicating the problem of misdiagnosis through out diagnostic services.
Exotic services.
Diagnostic services side, and our laboratory will remain a mission-critical component. After all, none of our products would've existed were it not for the experience we developed in the laboratory using processes that needed a better solution.
After all none of our products would've existed were it not for the experience we developed a laboratory using processes that needed a better solution.
Our experience also taught us that we gained substantial credibility with our customers when we tell them that we are users of [inaudible] technology.
Being able to support our customers via our own labs experience deliberately creates credibility levels that no other manufacturer in the industry could provide.
It's that precise cross-collaboration between the two divisions, Diagnostics services and Product Division that differentiates our company from any other diagnostic market.
The vision differentiates our company from any other diagnostic market.
We developed a unique two-pronged business model. On one side, you have an R&D team that can develop proprietary technologies that solve real-world problems.
In parallel, we have a functional, actual operating diagnostic laboratory, where we identify the technological needs, we test the products we develop, and end up using them within our own laboratory.
Actual operating diagnostic laboratory, where we identified the technology technological needs, we test the products, we develop and the purely them within our own laboratory.
Let's not forget, a diagnostic laboratory is a revenue-generating, nearly cash flow breakeven division, essentially creating a low-cost R&D function.
If you look at other competitors, they are either diagnostic services companies facing continuous scale up revenue and margin challenges or they are biotech companies creating product while spending tens of millions of dollars on R&D and they seldom become a user of their own technologies. We feel that we have a unique value proposition both from a customer, operational, and financial perspective through the combination of both divisions.
If you look at other competitors, they are either diagnostic services companies facing continuous scale up revenue and margin challenges or they are biotech companies creating product while spending tens of millions of dollars on R&D and they seldom become a user of their own technologies. We feel that we have a unique value proposition both from a customer, operational, and financial perspective through the combination of both divisions.
from a customer, operational, and financial perspective through the combination of both divisions.
I'd like to close with a few thoughts on our company goals for 2022, and how we see those goals translating into shareholder value.
Keep in mind that while we feel that with the focus and dedication they are attainable, we also need to be mindful of the fact that we live in a world where a pandemic, hostile nation invasion, and other market instabilities can always impact our ability to achieve these goals. But I thought it'd be helpful to share them with you, so you know how we're looking at the future and where we want to go.
Keep in mind that while we feel that with the focus and dedication they are attainable, we also need to be mindful of the fact that we live in a world where a pandemic, hostile nation invasion, and other market instabilities can always impact our ability to achieve these goals. But I thought it'd be helpful to share them with you, so you know how we're looking at the future and where we want to go.
But with the focus and dedication they are attainable, we also need to be mindful of the fact that we live in a world where pandemic hostile nation invasion and other market is stability can always impact our ability to achieve these goals.
But I thought it'd be helpful to share them with you. So you know how we're looking at the future and where we want to go.
As my Marketing Professor from Business School recited the famous Alice in Wonderland quote, "If you don't know where you're going, any road will take you."
Well, we're laser-focused on our goals and where we want to go. So let me map out for you where I'd like to see our company in each of our divisions at the end of 2022. Then, I'll discuss the potential impact on shareholder value.
Well, we're laser-focused on our goals and where we want to go. So let me map out for you where I'd like to see our company in each of our divisions at the end of 2022. Then, I'll discuss the potential impact on shareholder value.
So let me wrap up for you where I'd like to see our company in each of our divisions at the end of 2022 .
Then I'll discuss the potential impact shareholder value.
We have three goals in mind.
Number one, let's start with the goal of our Diagnostic Services Division.
We ended the year at a run rate of approximately $8 million but given the business operation and cost structure of operating a lab, this division breakeven at around $12 million.
Given the business operation and cost structure of operating allowed this division breakeven at around $12 million.
Our goal for 2022 is to reach that revenue mark. At that point, we'll not only have a division that could potentially grow to profitability from there, we will also have a cash-neutral R&D operation that enables our products division to create new products virtually at no cost. This is unparallel in the biotech healthcare industry. As mentioned, we recently added a new customer with a 1 million dollar revenue potential, so with that account, we will be at 25% on the way to achieving that goal.
At that point, we'll not only have a division that potentially grow to profitability from it.
We will also have a cash neutral R&D operation.
Tables are products division to create new products virtually no cost.
This is unparallel in the biotech healthcare.
Mentioned, we recently added a new customer with a 1 million dollar revenue potential so without accounts, we will be at 25%.
On the way to achieving that goal.
Goal number two is for the Product Division.
We are at a current annualized revenue run rate of approximately $2 million for out product division; all generated solely from a [inaudible] NPS panel.
All generated solely pardon me, Jim screen NPS path.
Our goal by the end of 2022 is to reach an annual run rate of $10 million led by our two current product [inaudible] with its floor panels [inaudible] and IV cell, each with a total available market north of $100 million and with customers generating recurring revenue both domestically and internationally.
Yeah.
Our sales pipeline is more than adequate to help us reach that goal even without the organic growth I described previously. Our team will be working hard to add customers every month. The goal is aggressive but I also believe it's attainable.
Our team will be working hard to add customers every month.
It was aggressive but I also believe it's Pedro.
I also want to see a slide with two to three new products from our development pipeline with similar market potential ready to be launched in 2023.
At that point, given the attractive margins that the Product Division generates, our company is expected to be either close to or profitability with a strong growth trajectory for this division.
The combination of these goals will make us one of the few biotech companies that are able to reach profitability cash independents at a $20 million revenue run rate.
Look around the industry, I challenge you to find another company with that kind of attractive financial structure.
Goal number three is our balance sheet and cash position.
We ended Q1 2022 with $9.2 million in cash. That gives us approximately five quarters of runway if we were to remain at our current operating cash burn rate, which we are decreasing each new customer we onboard.
If we achieve our goals as mentioned earlier, we expect that we will have no need to raise capital defensively in other words to cover operating cash losses. We will be able to move into the profitability through building up our cash reserves to further reinvest in our growth.
Yeah.
Now, I'd like to consider what would be the value of a company, but it's also just a follow-up.
I'd like to consider what would be the value of our company, but it's also just a follow up.
Hey.
(A) Has a revenue-generating diagnostic service division, that doubles as the cash-neutral R&D facility develops future products.
(B) Has a products division with existing products that are demonstrating the value within major markets that are timed to capture major market share and a division with a pipeline of additional disruptive technologies in the pipeline.
The products division with existing products.
Demonstrating the value within major markets time to capture major market share in the division with a pipeline of additional disruptive technologies in the pipeline.
And (C) a company with a strong balance sheet, either at or close to cash flow positive with plenty of runway to achieve profitability.
Now, ask yourself, what might a company like that would be worth.
At our current market cap, we're trading at approximately four times revenue and this is where the splits between diagnostic services and product revenues of approximately 90 to 10.
Now, imagine if it's 50/50. With strong margins and demonstrated market penetration, both domestically and internationally, a company that is cash-flow positive with a strong balance sheet, what might the multiple be then? I leave you with those thoughts. That's where I would like to see the company at the end of the year of 2022.
With strong margins and demonstrated market penetration, both domestically and internationally.
The company is cash flow positive with a strong balance sheet. But by the multiple would be that. I leave you with those thoughts.
But by the multiple would be that. I leave you with those thoughts.
I leave you with those thoughts.
That's where I would like to see the company at the end of the year of 2022.
I hope these closing thoughts have provided you with an insight beyond our recently filed financial statements. These are the goals that our management team is focused on and this is the best way, we believe, the company can create tremendous shareholder value. Thank you all for your ongoing support and have a great evening.
These are the goals that our management team is focused on.
This is the best way, we believe the company can create tremendous shareholder value.
Thank you all for your ongoing support and have a great evening.
Yeah.
Operator: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Ilan Danieli: Alright, okay.