Q3 2023 Precipio Inc Earnings Call

Welcome to the precipitous third quarter 'twenty twenty-three shareholder update conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Speaker 1: Welcome to the Precipio third quarter 2023 shareholder update conference call. All participants will be in listen-only mode.

Speaker 1: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note that the

Please note that the 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 our current expectations forecasts and assumptions and are subject to significant risks and uncertainties. These.

Speaker 1: The statements made during this call contain forward-looking statements about our business.

Speaker 1: We 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.

Speaker 1: 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 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 terms of similar meaning.

Speaker 1: 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, 2022, 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.

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, 2022, which is on file with the Securities Exchange Commission as well as other risks detailed in.

Our subsequent filings with the Securities and Exchange Commission. These reports are available at Www Dot S E C Dot Gov.

Speaker 1: These reports are available at www.sec.gov.

Speaker 1: 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.

Statements and information, including forward looking statements speak only to the date. They are provided unless an earlier date has 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.

Speaker 1: Now let me hand the call over to Elon Danielli, Precipio's CEO . Please go ahead.

Now, let me hand, the call over to Ilan Daniela Precipitous CEO. Please go ahead.

Okay.

Speaker 2: Thank you, and good evening, and thank you for joining our Q3 2023 shareholder update.

Thank you and good evening and thank you for joining our Q3 2023 shareholder update call.

Speaker 2: As this will be the last shareholder call for the year, I'd like to take a few moments to recap the recent quarter's results, and even though we still have six weeks left to the end of the year, to frame this within the context of 2022.

As this will be the last shareholder call for the year I'd like to take a few moments to recap recent quarters' results and even though we still have six weeks left to the end of the year. The frame this within the context of 2023.

Speaker 2: Following that, since our next shareholder call will be in April of next year, I'd like to share some thoughts about what we have lined up for 2024 and what you can expect to see.

Following back since our next shareholder call would be in April of next year I'd like to start share some thoughts about what we have lined up for 2024.

You'd expect to see.

Speaker 2: Let's begin with our Q3 results. As you saw in our filings, we grew revenues by almost 30% from the previous quarter and doubled year-over-year from Q3 of last year.

Let's begin with our Q3 results.

As you saw in our filing we grew revenues by almost 30% from the previous quarter and doubled year over year from Q3 of last year.

Speaker 2: This is a very meaningful jump for us in business volume and was driven both by our pathology business as well as our product.

The very meaningful jump breath in business volume was driven both by our pathology business as well as our product.

Speaker 2: At 4.5 million per quarter, this puts us on the annualized run rate of 18 million, which begins to approach our break-even point.

At $4 5 million per quarter. This puts us on an annualized run rate of $18 million, which begins to approach our breakeven point.

Speaker 2: Additionally, our cash burn dropped to around $1 million in the quarter, down to approximately 40% of the $2.5 million, which was our cash burn the same quarter of last year.

Additionally, our cash burn dropped to around one 1 billion in the quarter down approximately 40% of the $2 5 million, which was our cash burn in the same quarter of last year.

Speaker 2: This is an outstanding accomplishment for our company. And it's important to emphasize that this was not a fat-cutting.

This isn't like astounding outstanding accomplishment for our company. It's important to emphasize that this was not a cat having zelle.

Speaker 2: Those who know me and our company, you know that we've always been a very lean and frugal.

You know me and our company you know that we've always been a very lean consumable company. This cash burn reduction was accomplished by a combination of restructuring operational initiatives. It saves a lot of money and of course. In addition to our revenue growth we generated positive cash margin.

Speaker 2: This cash flow reduction was accomplished by a combination of restructuring operational initiatives that saved a lot of money. And of course, in addition to our revenue growth, it generated positive cash margins, getting positive margins and cash.

Deposit margins and cash.

So overall, we had a good quarter and we are continue to head in the right direction now.

Speaker 2: So, overall, we had a good quarter, and we are continuing to head in the right direction. Now, let me put this within the context of the

Now let me put this within the context of 2023.

At the start of 2023, we've got a very clear goal for the company to reach cash flow breakeven and achieve financial independence.

Speaker 2: At the start of 2023, we set a very clear goal for the company to reach cash flow break-even and achieve financial independence. Breaking this down, this would be a...

Breaking this down this will be achieved by really three targets.

Speaker 2: First is the pathology vision reaches breakeven at a run rate of 14 million.

First is the pathology division reaches breakeven run rate of 14 million.

Speaker 2: The second is that the product division reaches a run rate of 8 million. And the third is significant reductions in R&D.

Is it the products Division, which is the run rate of 8 million in the third.

There is significant reductions in our expenses.

Speaker 2: The combination of these three targets gets us to, gets our business to cashflow.

The combination of these three targets is to get our business to cash flow breakeven.

Speaker 2: As of Q3, we have achieved two of those three targets. Our pathology division has reached that target and is now a cash-neutral division.

As of Q3, we have achieved two of those three targets.

Our pathology Division has reached that target and is now a cash neutral division.

Speaker 2: This has significant implications for our future business, and I'll come back to that in a few minutes. But the important part is the most expensive part of our business, our pathology services operation, is no longer a cash drain on the company.

This has significant implications for our future business and I'll come back to that two minutes, but.

One part is the most expensive part of our business our pathology services operation is no longer a cash drain on the company.

The second target, we achieved significant reduction in our expenses through the execution of various operational efficiencies as we've discussed.

Speaker 2: The second target we achieved is a significant reduction in our expenses through the execution of various operational efficiencies as we've discussed.

Speaker 2: One example we've mentioned in the past is bringing our billing function in-house versus using an outside billing service.

One example, we mentioned in the past as being our billing function in house versus using an outside.

Speaker 2: Depending on the revenue level and case mix, this billing and collections initiative and subsequent reduction in billing expenses yield savings of about between $50,000 to $75,000 in cash every month.

Depending on the revenue level in case mix this billing and collections initiatives and subsequent reduction in billing expenses.

Your savings of about between 50 to $75000 in cash.

Speaker 2: This is just one initiative of many, which in combination have enabled us to significantly slash our cash burden. Since many of these are tied to revenues, the impact will continue to improve as we grow our business.

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This is just one initiative as many which in combination have enabled us to significantly slashed our casper.

Many of these are tied to revenues the impact will continue to improve as we grow our business.

Speaker 2: While our product division has not yet reached its target as of Q3, the combination of achieving the two other targets has effectively reduced the company break-even threshold for product division from 8 million to 6 million, or 1.5 million per quarter.

While our products Division has not yet reached its target as of Q3.

The combination of achieving the two the two other targets as effectively reduce the company breakeven threshold for product division from 8 million to $6 million or $1 5 billion per quarter.

Speaker 2: With our current pipeline, we are well on our way to reaching that target.

With our current pipeline, we are well on our way to reaching that target.

Speaker 2: Perhaps the most important part of the equation is that we believe we have enough cash to get us to the target, and whether it takes one or two more quarters to get there, we have the gas in the tank to reach our goal of financial independence.

Perhaps the most important part of the equation is that we believe we have enough cash to get us to the target whether and whether it takes one or two more quarters to get there we have the gassner. Thanks to reach our goal of financial independence.

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It's beginning to generate cash will be an exciting milestone from my vantage point, we are well within reach of achieving that target.

So what does that mean for the company, Let's review a few things.

First of all by reaching the milestone of breakeven it doesn't mean, we change our mindset from the food the way in which we operate our business.

One of the things I'm proud of quite about them is that management and indeed, the entire team treat every dollar as if it's coming out of their own pocket.

That mindset has enabled us to look at our operations, mostly and find ways to operate in a more cost efficient manner January Hussein, even better results, while spending less cash.

Yeah.

Speaker 2: Now, let's talk about a few other impacts. First of all, having a pathology vision that is breakeven essentially means we have achieved a significant component of our business model, which is to create a cost-free R&D.

Now, let's talk about a few other impact first of all having a pathology division that is breakeven essentially means we have achieved a significant component of our business model, which is to create a cost free R&D center.

Speaker 2: As you know, the company's strategy is to develop and sell diagnostic products that make labs better.

As you know the company strategy is developing self diagnostic products that make lives better.

Speaker 2: In our industry, developing a product for laboratories typically means an expensive process of coming up with a product, finding a fully operational lab which has all the equipment and staffing to test it, which in itself is quite expensive.

In our industry developing the product to laboratories typically means an extensive process of coming up with a product finally gets fully operational lab, which has all the equipment and staffing to test it which is itself is quite expensive.

Speaker 2: Perhaps the most challenging and most expensive element is to find patient samples upon which the company can test their product.

Perhaps the most challenging and most expensive element is defined patient sample upon which the company can test their part.

Speaker 2: If you look at our competitors, you will find R&D costs in the tens of millions of dollars to develop their products.

If you look at our competitors you will find the R&D cost in the tens of millions of dollars to develop their product.

Speaker 2: Our incremental cost is minimal because we have a revenue-generating, now cash-neutral laboratory with all the equipment, staffing, and patient samples coming in every day, which once we're done with the clinical work, we can utilize for our product development.

Our incremental cost is minimal because we have a revenue generating now cash neutral laboratory with all the equipment staffing and patient samples coming in every day, which once we're done with the clinical work, we can utilize for our product.

Essentially it's about the business model, where our cost to develop a product is almost negligible.

Speaker 2: Essentially, we developed a business model where our cost to develop a product is almost.

Speaker 2: In August , we announced the release of our new breakthrough BCR-AVL assay. The development cost for this assay was less than $100,000.

In August we announced the release of our new breakthrough bizarre ABL asset.

Kebab, Wisconsin, this assay was less than $100000.

Speaker 2: To the best of our knowledge, there is no other company that has developed this kind of model.

Best of our knowledge there is no other company that has developed this kind of model.

Speaker 2: And what it means is that in a relatively low budget and with tremendous flexibility, we can develop future products without a significant need of capital.

What it means is that in a relatively low budget and with tremendous flexibility weakened about future product without a significant need of capital.

Speaker 2: Think of what this does for the potential ROI of a business where we can launch such a product like BCRDL with revenue potential as high as $40 million a year and with an incremental product development cost of less than $100,000. We like that business.

I think what this does for the potential ROI of the business, where we can launch such a product like D C or D O with revenue potential as high as 40 million a year with an incremental product development cost of less than $100000, we like that business model.

Second this allows us to make small investments in sales and marketing our products right now we rely on a combination of a direct sales effort. In addition to the distributors, we work with Thermo Fisher Mckesson.

Speaker 2: Second, this allows us to make small investments in sales and marketing of our products. Right now, we've relied on a combination of a direct sales effort in addition to the distributors we work with, Thermo Fisher and McKesson.

Speaker 2: We believe that with minor marketing efforts, costing less than $100,000 for the entire year, we can significantly boost product awareness and generate additional product sales for our customers.

We believe that with minor marketing effort costing less than 100000 for entire year, we could significantly boost product awareness and generate additional product sales.

Speaker 2: Up until now, we've been very limited in spending to enable us to reach this milestone of cash flow breaking.

Up until now we've been very limited and spending to enable us to reach this milestone.

Okay.

Speaker 2: Yet another impact is the ability to invest in our product's production.

You had another impact is the ability to invest in our product production line.

Speaker 2: We currently control the entire supply chain and manufacturing process to ensure product availability and its quality. By purchasing various pieces of equipment over time, we can reduce our manufacturing costs and increasing margins, generating a positive ROI from those equipment purchases within less than 12 months.

We currently control the entire supply chain and manufacturing processes to ensure product availability and its quality.

My purchasing various pieces of equipment over time, we can reduce our manufacturing cost and increasing margin generating a positive ROI.

Roy from those equipment purchases within less than 12 months.

Speaker 2: Having the volume to do that and the financial stability of the cash-generating business changes the decision-making process for such purchases and subsequently improves our business.

Having that volume to do that and the financial stability of the cash generating business.

Is the decision, making process or such purchases and subsequently through the.

Our business economics.

Speaker 2: These are just a few of the impacts we will see once the company reaches cash flow breakeven. This is, of course, very exciting for our company, in particular, to reach this point at such low revenue.

These are just a few of the impact we will see once the company, reaching cash flow breakeven. This is of course very exciting for our company in particular you reach this point, it's such a low touch low revenue numbers.

With a total available market potential for some of our products. For example seems to be at approximately 400 millions a year. There is tremendous growth potential just imagine what this business looks like what do we captured 10% aftermarket.

Speaker 2: With a total available market potential for some of our products, for example, HumeScreen at approximately $400 million a year, there is tremendous growth potential. Just imagine what this business looks like when we capture 10%

Okay.

Now, let's turn to a few things we have planned for 2024.

Speaker 2: Now let's turn to a few things we have planned for 2024.

Speaker 2: Number one, financial stability. First and foremost, we are setting in place the infrastructure so that when we reach cash flow positive, we stay there. We've always maintained clear visibility and transparency within the entire organization as it relates to cash management, and we intend to keep it that way to ensure that the numbers continue to trend in the right direction.

Number one financial stability.

First and foremost we are setting in place the infrastructure so that when we reach cash flow positive we stay there.

We've always maintained clear visibility and transparency within the entire organization as it relates to cash management and we paid we intend to keep it that way to endure the numbers continue to trend in the right direction.

Number two product.

Speaker 2: We're working on several strategies and partnerships that will significantly accelerate the growth of our product revenues. Those will include various business development and collaboration issues that will get us directly in front of the right and large customers. More on that to come.

We're working on several strategies and partnerships.

If we can accelerate the growth of our products revenues. Those will include various business development and collaboration ensures that we will that will get us directly in front of the rights at large customers more than that to come in the future.

Speaker 2: Number three, R&D development. In 2023, our R&D team's marching orders were to remain fully focused on heme screen and leave the other products on the back.

Number three R&D development in.

In 2023, our R&D teams marching orders, which remains fully focused on his screen lead the other products on the backward.

Speaker 2: This was done in order to focus on the full development of the Heapspeed product line, as well as to provide the proper support to our customers.

This was done in order to focus on the full development of the heap screen product line as well as to provide the proper support to our customers.

Speaker 2: Going into 2024, we're going to unleash our R&D team to begin developing some of the new products that have been parked while we got HumeScreen up and running.

Going into 2024, we're going to unleash our R&D team to begin developing some of the new products that have been parked, while we got him screen up and running.

Speaker 2: Keep in mind, our vision was never to be a one product company, but rather to build out a suite of products we can sell to the same customers. Next year, we will see the start of executing of that component of our vision.

Keep in mind, our vision was never to be a one product company, but rather to build out a suite of products. We can sell through the state customers next year, we will see the start of executing of that component of our vision.

Speaker 2: And lastly, I think next year we get to tell the story to the public.

And lastly, I think next year, we get the kind of the story the public market.

Speaker 2: The questions about our company's ability to execute, reach cash flow positive, and grow the product business will have largely been addressed.

The questions about our company's ability to execute reached cash flow positive and grow the product business will have largely been addressed.

Speaker 2: But the public markets don't really know us, and it's time they did. So, I myself am going to be spending significantly more time attending conferences and meeting with investors to share our story. We also plan to develop social media and digital marketing campaigns to get the story out.

If the public markets don't let me know us and it's time to do it.

So.

I myself I'm gonna be spending significantly more time attending conferences and meeting with investors to share our story.

We also plan to develop social media and digital marketing campaigns to get the story out.

Speaker 2: These are things that require relatively minimal resources and with the right messaging, getting to the right audience, I think we can get many more ears to hear the story and many more eyes on the stock.

These are things that require a relatively minimal resources and with the right messaging getting to the right audience. I think we can get many more years to hear the story and many more eyes on the stock.

Speaker 2: I believe that the combination of our story of continued financial success and growth and the extension of the audience that hears the story will create a multiplying impact for our show.

I believe that the combination of our story of continued financial success and growth and the expansion of the audience. Here's the story will create a multiplying impact for our shareholders.

I'm really excited to see and share with you the results of the year and especially for next year as we turn the corner on delivering under Scipio station.

I want to thank you for attending the call today and I wish you and your families a happy Thanksgiving and happy holiday season.

And look forward to connecting with you again in 2020, Thank you and how about I see.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Uh huh.

Yeah.

Yeah.

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Yeah.

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