Q1 2023 Semler Scientific Inc Earnings Call

Speaker 1: Good afternoon and welcome to the December Scientific 2023 first quarter financial results conference call. All participants will be in a listen-only mode.

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Speaker 1: Please note this event is being recorded. Before we begin, some of the scientific needs to remind you that certain comments made during this call may constitute forward-looking statements and are pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended.

Speaker 1: These include statements regarding the expectations for expansion of the business and the development and marketing of additional products, as well as the effects of the CMS rate announcement. Such forward-looking statements are subject to both known and unknown risks.

Speaker 1: and uncertainties that could cause actual results to different materially from such statements. Those risks that uncertainties are described in the press release and our SEC filing. The forward-looking statements made today are as of the date of this call and the company does not undertake any obligation to update the forward-looking statement.

Speaker 1: If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of the website.

Speaker 1: like. .

Speaker 1: Now I would like to introduce Doug Mark Ricciatorian in term CEO of Summler Scientific.

Speaker 2: Good afternoon, everybody. I'd like to thank you for joining us on our first quarter, 2023 results call.

Speaker 2: Q1223 performance represents the highest quarterly revenue and pre-tieks net income that Semmler has ever achieved. Now I would like to introduce to you Renee Kormé.

three performance represents the highest quarterly revenue and pre-tack net income that similar has ever achieved. Now I would like to introduce to you Renee for me that you should take it away.

Thank you, Doug. Good afternoon and thank you for joining us today. In addition to Doug, with me are Andy Weinstein, SPP, Finance and Accounting and Dennis Rosenberg, Chief Marketing Officer.

Doug and Dennis and I will be available for Q&A following today's prepared in life.

Last month, we appointed two new independent directors to our board, Eric, Timler, and William Chang. Both are long-standing, large stockholders who bring deep expertise in capital allocation, corporate governance, strategic planning, and investment management to our board.

We are very pleased to have them taking a more active role at Semmer. They plan on working together with the Boarding Management while in technically focusing on taking to unlock stakeholder values.

To the end, the board has appointed Doug as our interim CEO . We are delighted that he has changed his near-term plans in order to return to our company and to search for his successor can be started and completed. Now, I will turn it over to Andy to describe our financial performance for the first quarter of 2020 students. Andy?

Thanks for now. Please refer to the financial results described in the press release that was distributed at market close today.

We reported record-hop quarterly revenues and pre-tax net income in the first quarter of 2023.

We are pleased to see revenue growth at both our 60 and variable fee customers in the first quarter of 2023 compared to the first quarter of 2022.

For the first quarter ended March 31, 2023, Revenue was $18.2 million. That's an increase of 30% compared to the corresponding quarter in 2022.

In Q1 2023, fixed fee revenues were 9.3 million in increase of 18% period over period.

We continue to grow revenues at our largest fixed fee customer as well as at other existing and new customers.

We saw increased interest in our products from hospitals, major pharmaceutical and other retail chains, and delegated medical groups.

In Q1 2023, variable fee revenues were $8.6 million, which represents a 46% increase period over period.

In Q1 2023, equipment and other revenue was $340,000, an increase of 19% period over period.

Because the majority of equipment sales are to variable fee customers.

We believe it is a sign of strength in the fee-protest market.

In the first quarter of 2023, our two largest customers, including their related affiliates, comprised of 40.9 and 33.5 percent of quarterly revenues.

These same customers represented 31.7 and 39.2 respectively of quarterly revenue in Q1 2022.

In Q1 2023, operating expenses, which includes close to revenue, were $12 million, an increase of 18% period over period.

Operating expenses increased primarily due to increased head count, wage inflation, and increased professional fees.

In Q1 2023, our pre-tax net income was $6.6 million, an increase of $2.7 million, or 68% period over period.

In Q1 2023, net income was $5 million or 74 cents per basic share and 63 cents per fully deluded share, which was an increase of 48 percent period over period. Weighted average basic share count was $6.7 million per Q1 2023.

and weighted average deluded share account with $7.9 million.

There were no shares, re-burches this quarter.

We have $15 million remaining under the Board Authorized Stock Repurchase Program.

We had cash, cash equivalents, and short-term investments at March 31, 2023 of $43 million, approximately $37.7 million of which is held in short-term US Treasury bills.

At March 31, 2023, headcount was 134 employees compared to 127 at the end of the fourth quarter 2022.

We expect to file our annual report on 410Q on or around May 12, 2023.

Now I will ask Dennis to provide more color about factors at play in our market and our business activities. Dennis? Thanks, Andy. I first want to reiterate our continuing strong belief in the clinical benefit and importance of the early diagnosis of chronic diseases as a standard of care.

As you know, last year, two large independently conducted, peer-reviewed studies by Quantaflow customers.

were published that strongly underscore the clinical benefit of identifying asymptomatic peripheral arterial disease or PAD patients in order to put preventive measures in place.

Separately, there is an additional future revenue opportunity for Semler using Quantiflow as an aid to assess heart dysfunction, or HD. A clinical study was published in late February 2023 in the Journal of Preventive Medicine using Quantiflow as an aid to assess heart dysfunction.

performs the test in a primary care setting, similar to how one uses quanta flow for PAD.

Results were that our tests showed a statistically significant correlation with a p-value of less than 0.01 using transphoracic echocardiography as a gold standard to diagnose heart failure. The spectrum of heart dysfunction includes heart failure.

Heart failure affects about 6.5 million adults in the U.S. And the lifetime risk of heart failure is estimated to be one in five at 40 years of age.

Published studies have shown there are over 1 million hospitalizations per year in the United States from heart failure and the annual cost of care

Mortality rates after hospitalization for heart failure are 31% within one year after diagnosis.

The number of patients with asymptomatic heart disease exceeds the number of patients with symptomatic heart disease.

Like PAD, a symptomatic HD patients are not routinely tested in the current standard of care, because echocardiography is not a screening test.

This test is performed by referral and a specialized lab requires a trained ultra-cinographer to perform the test.

takes about an hour and must be interpreted by a cardiologist.

As a specialized procedure, echocardiography is not practical to be performed in primary care offices or in the home setting. The sensitivity, specificity, and accuracy of Quantaflow HD all were greater than 88%

compared to using echocardiography as a gold standard as the methodology for identifying heart failure.

The goal is for healthcare providers to have a better chance of encouraging patients to adopt healthier lifestyles and optimize proven guideline directed medical therapies earlier with the potential of improving long-term health outcomes.

Patients that have been identified as positive with quanta-flow HD will need to have additional diagnostic tests to determine the underlying type of heart dysfunction.

Currently, there are CPT reimbursements for echocardiography and HCC diagnostic codes for heart dysfunction.

For those of you who have been with Semler for a long time, you may recall the prolonged lead times for many of our current customers with the initial adoption of Kwanaflo for many of our current customers with the initial adoption of Kwanaflo for many of our current customers with the initial adoption of Kwanaflo.

We continue to remain in discussion with customers of all sizes and expect the market uptake process for HD will take time.

Our sales and marketing goals are to focus on growing our business. These goals include further establish our quanta flow for PAD product as a standard of care in the industry given the proven clinical benefits of early diagnosis and preventive treatment.

To make new additions to our customer base, including diversifying our customer base further to hospitals, including the VA, value-based care providers, and major pharmaceutical and other retailers. To expand orders from existing customers.

to introduce Quantaflow as an aid to assess heart dysfunction or HDN to our customers. And finally, we aim to begin to more broadly market and install insulin insights.

to produce quanta flow as an aid to assess heart dysfunction or HDE to our customers. And finally, we aim to begin to more broadly market and install insulin insights. Now I will turn it back over to Renee.

Thank you, Dennis. As many of you are aware, CDMS issued the 2024 final rate announcement in late March 2023. Essentially, HCC payments for vascular disease without complications is being phased out over a period of three years.

This decision might have an effect on our PED testing business because many of our customers rely on HPC payments to support PED testing programs for Medicare Advantage patients, which includes ACE and somatic patients.

We believe that Quantic Low provides important clinical value to our customers in terms of better patient care and potential for future cost savings in identifying positive PAD patient.

We believe that earlier diagnosis will lead to earlier initiation of preventative interventions and treatments that may save lives and consequently lower healthcare expenditures.

To date, our customers continue using our products for PAD testing unabated, but it's too early to make any predictions about future customer behavior.

Moving on, our R&D goal continues to be to upgrade the existing products and data services.

to commercialize other internally developed services and products, and find other potential investments to diversify our product pipeline, such as the recent investments we have made in the diabetes case in the autism monosmetical.

As you know, diabetes is a large market with over 35 million people diagnosed in the United States, growing at 4 to 5% per year. In addition, 96 million people have prediabetes. Melisir's platform, Influent Insight, offers an algorithm that helps primary care physicians to most efficiently interact winner,

Tytrate insulin for type 2 diabetic patients. We have exclusive marketing rights in the United States and Puerto Rico.

Type 2 diabetes on insulin represents a difficult patient's population.

to manage as these patients had found oral therapy alone has not been enough to adequately control their blood glucose.

find value with employment insights because by appropriately, easily adjusting employment levels in type 2-guy-backed solutions.

Patients who have less risk of adverse complications with imprimary have improved control of their blood glucose levels which leads to fewer complications from diabetes and overall better clinical outcomes.

In addition, plans have the potential to save on total cost of care medication costs, as well as achieve higher T to star quality measures as patients have improved ABA1C levels, demonstrating that their diabetes is under good control. Initial installations and new sales continue to make progress.

the Avascular Conditions and simplified diabetes management.

As healthcare continues to evolve, our technology remains a valuable asset for patients, physicians, physicians, facilities, and patients.

Because we developed a technology that is portable and accessible, we are also part of the solution to reduce health inequities and currently that currently exist in cardiovascular disease.

Our management team has the experience and resilience to make appropriate adjustments to our ongoing growth strategy as market conditions change.

We are confident that our mission to improve clinical outcomes and reduce total cost of care and patients with cardiovascular disease and diabetes will remain relevant to our school.

We are enthusiastic about the future and the growth of the potential of our Quantaflow? insulin inside Construct smart

Thank you.

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Yes, okay. Well, thank you. Sorry, we don't have questions for you today. Please reach out to us if you do have questions and thank you for your time. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.