Q4 2023 Semler Scientific Inc Earnings Call
Operator: Good afternoon, and welcome to the Semler Scientific 2023 fourth quarter financial results conference call. All participants will be in a listen only mode.
Good afternoon, and welcome to the similar scientific 2023 fourth quarter financial results Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. Before we begin, Semler Scientific needs to remind you that certain comments made during this call may constitute forward-looking statements and are made pursuant to and within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 as amended. These include statements regarding the following exception
After todays presentation, there will be an opportunity to ask questions.
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Please note. This event is being recorded before we begin similar scientific needs to remind you that certain comments made during this call may constitute forward looking statements and are made pursuant to and within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of one.
1995 as amended.
These include statements regarding the acceptance.
Operator: Expectations for Expansion of the Business and the Development of Marketing and Additional Products, including receipt and timing of an additional 510k clearance for Quanta Flow, and Investment in Emerging Growth Opportunities. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and the 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 statements. If you do not have a copy of today's release, you may obtain one by visiting the Investor Relations page of the website www.SemlerScientific.com. I would now like to turn the conference over to Doug Murphy-Katorian, CEO of Semler Scientific. Please go ahead.
Expectations are for expansion of the business and the development of marketing and additional products, including receipt.
And timing of an additional five 10-K clearance for <unk>.
Qantas Qantas flow and investment in emerging growth opportunities such forward looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in.
In the press release, and our S. T SEC filings. 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 statements. If you do have a copy of today's release you may obtain one by.
By visiting the Investor Relations page of the website similar scientific dotcom.
I would now like to turn the conference over to Doug Murphy could Torreon C. E O of similar scientific please go ahead.
Douglas Murphy: Good afternoon, everybody. Thank you for joining us for the fourth quarter and full year 2023 results. Year over year, we continue to achieve annual revenue and earnings. Now I'm pleased to introduce our CFO, Renae Cormier, who will provide you with further details.
Good afternoon, everyone.
And for joining us for our fourth quarter and full year 2023 adults.
We continue to achieve annual revenue and earnings growth.
It creates to introduce our C F O Rene called Merritt, who.
We will provide you with further detail Renee.
Renae Cormier: Thank you, Doug. Good afternoon, everyone. And thank you for being part of today's conference call. Today, I'll be presenting an overview of our fourth quarter 2023 financial results and discussing recent corporate developments. Jennifer Oliva-Harrington, who leads our marketing, sales, and related operations, will be providing information about our market developments and opportunities. Following our remarks, Doug, Jennifer, and I will be available to address any questions you may have.
Thank you Doug good afternoon, everyone and thank you for being part of today's conference call.
I'll be presenting an overview of our fourth quarter 2023, you finance the rebel and discussing corporate about.
Jennifer I'll leave that Harrington, who leads our marketing sales and related operation will be providing information about our market developments and opportunities.
Following our remarks, Doug Jennifer and I will be available to address any questions you may have.
Renae Cormier: I'm excited to announce continued growth in revenues and earnings in the fourth quarter of 2023. This achievement is a testament to the hard work of our team, as well as the ongoing support of our customers who continue to recognize the clinical benefits and value of our technology. Now for the details of our fourth quarter results. Total revenues in Q4 2023 were $15.1 million, an increase of 9% compared to the fourth quarter of 2022.
Excited to announce continued growth in revenues and earnings in the fourth quarter 2023.
This achievement is a testament to the hard work by the team as well as the ongoing support of our customers who continue to recognize the clinical benefit.
And value of our technology.
Now for the details of our fourth quarter results.
Total revenues in Q4 2023.
Were $15 $1 million, an increase of 9% compared to the fourth quarter of 2022.
Renae Cormier: Our revenues continue to be driven by continued sales of Quantaflow to existing and new customers to test for peripheral arterial disease or PAD. We believe the promising results that were published in two large independently conducted peer-reviewed studies by Quantaflow customers in 2022 are having an impact. These studies underscore the importance of identifying asymptomatic PAD patients, thereby enabling the implementation of preventative measures. Six fee revenues were $8.8 million, a decrease of 2% year over year.
Our revenue continues to be driven by continued scale of Qantas low to existing and new customers to test for peripheral arterial disease or P. M D.
We believe the promising results that were published in two large independently conducted peer reviewed study by quantum flow customers in 2022 are having an impact.
These studies underscored the importance of identifying asymptomatic PAGP.
The implementation of preventative measures.
The revenues were $8 $8 million, a decrease of 2% year over year.
Renae Cormier: We saw an end of 2023 cleanup of underutilized units by some customers resulting in the decline. However, we see continued interest in our products from existing customers, as well as new customers, such as hospitals, value-based care providers, and major pharmaceutical and retailer markets. Variable fee revenues were $5.8 million, an increase of 28% year over year. We continue to see strong demand from our home risk assessment customers using QuantiFlow for PAD during in-home examinations. Equipment and other revenues were $0.5 million, an increase of 71% year over year.
We saw and up 2023 cleanup of under utilized by some customers, resulting in the decline.
We see continued interest in our product from the existing customers as well as new customers such as hospital value based care provider and major pharmaceutical and retailer market.
Variable fee revenues were $5 $8 million, an increase of 28% year over year.
We continue to see strong demand from our home risk assessment customers using quantico for ph D. During home.
In home examination.
Equipment and other revenue with zero point $5 million, an increase of 71% year over year.
Renae Cormier: Equipment revenues remain strong versus historical levels because the majority of equipment sales are to variable fee customers. We believe this is a sign of future potential growth in the fee-for-test market. In the fourth quarter 2023, our three largest customers, including their related affiliates, comprised 37%, 32%, and 11% of quarterly revenue. Operating expenses in Q4 2023, which included cost of revenue, were $12.5 million, an increase of 23% year over year.
Net revenue remained strong versus historical level, because the majority of the equipment sale are two variables being customers. We believe it is a sign of future potential growth in the fee per test market.
In the fourth quarter 2023, our three largest customers, including the related affiliates comprised 37%, 32% and 11% of quarterly revenue.
Operating expenses in Q4, 2023, which includes cost of revenue were $12 $5 million, an increase of 23% year over year.
Renae Cormier: Our Q4 2023 results included a $2.5 million write-off in the cost of revenues for the Influence Insights prepaid licenses and also a $0.6 million impairment of malicious investments in other income. While we've continued to market Insulin Insights because we believe in its clinical benefits for diabetic patients, our marketing efforts over the past three years have not yielded significant results to date. As a percentage of revenues, operating expenses increased to 83% compared to 74% in 2022, due primarily to the write-off. Free tax income was $2.8 million compared to $4 million in the prior year.
Our Q4 2023 result included $2.5 million write up in cost of revenues in the influent inside prepaid licenses and also is there a point 6 million impairment analysis investments and other income.
While we continue to market insulin insight because we believe in its clinical benefits for diabetic patients our marketing efforts over the past three years have not yielded significant results to date.
As a percentage of revenue operating expenses increased to 83% compared to 74% in 2022 due primarily to the write off.
Pretax income was $2 $8 million compared to 4 million in the prior year.
Renae Cormier: Net income was $4.2 million or $0.62 per basic share and $0.55 per fully diluted share compared to $3.2 million or $0.48 per basic share and $0.41 per fully diluted share in 2022. We add cash, cash equivalents, and short-term investments at December 31 2023 of $57.3 million. Now I'd like to turn the call over to Jennifer to provide a more in-depth discussion of our market development and opportunities. Janet, are you still there? Sorry
Net income was $4 $2 million or 62 cents per basic share and 55 cents per fully diluted share compared with $3 2 million or 48 cents per basic share and 41 cents per fully diluted share in 2022.
We had cash cash equivalents and short term investments at December 31st 2023 $57.3 million.
Now I'd like to turn the call over to Jennifer to provide a more in depth discussion of our market development and opportunity.
And then Janet are you still there.
Oh.
Sorry.
Jennifer Oliva-Harrington: Thank you, Renae. As I look into the future, I'm excited about Semler's potential to support the identification of chronic diseases by our customers, which is a large burden on our healthcare system. Cardiovascular disease is the number one cost to the healthcare system, as well as the number one cause of death worldwide, which makes early detection of chronic cardiac conditions so critical. In January, we announced we are seeking a new 510K clearance from the FDA to broaden the labeling for Quantaflow, extending its application to include aiding in the diagnosis of other cardiovascular diseases. We aim to receive clearance for this expanded label in the second half of 2024. Upon achieving this milestone, our focus will shift towards effectively upselling our existing customer base with this enhanced offering.
Thank you Renee.
They look into the future I'm excited about sandler's potential to support the identification of chronic diseases by our customers, which is a large burden on our health care system.
Cardiovascular disease is the number one cost to the health care system as well as the number one cause of death worldwide, which makes the early detection of chronic cardiac conditions. So critical.
In January we announced we are seeking a new five 10-K clearance from the F. D. A to broaden the label age for quantifiable extending its application to include aiding in the diagnosis of other cardiovascular diseases. We aim to receive clearance with its expanded label in the second half of 'twenty 'twenty four.
Upon achieving this milestone our focus will shift towards effectively upselling, our existing customer base with this enhanced offering.
Jennifer Oliva-Harrington: In the interim, we remain dedicated to the promotion and sales of Quantaflow as a valuable aid in the diagnosis of PAD. This proactive approach ensures that we continue providing our customers with a trusted solution while positioning ourselves for future success in the broader cardiovascular diagnostic market. By supporting early diagnosis of peripheral arterial disease, we are hopeful that health care providers will initiate preventative management, or, to put it mildly, management of chronic cardiovascular disease.
In the interim we remain dedicated to the promotion and sales of quantum flow as a valuable aid in the diagnosis of P. E D.
This proactive approach ensures that we continue providing our customers with a trusted solution, while positioning ourselves for future success in the broader cardiovascular diagnostic market.
By supporting early diagnosis of peripheral arterial disease, we are hopeful that health care providers will initiate preventative medicine excuse me management of chronic cardiovascular disease. We believe that this proactive approach may save lives and also lower health care expenditures.
Renae Cormier: We believe that this proactive approach may save lives and also lower health care expenditure. As we set our sights on the future, we envision a healthcare landscape where our technology plays a pivotal role in shaping healthier outcomes for patients while delivering substantial economic benefits to our customers. Our sales and marketing goals are to further establish QuantiFlow for PAD as a standard of care given the proven clinical benefits of early diagnosis and preventative treatment, and to diversify our customer base by adding medical centers, additional value-based care providers, penetrating deeper into the VA system, and growing the self-insured employer pharmaceutical and retail market. Now, Renae will give our concluding remarks. Renae?
As we set our sights on the future we envision the health care landscape, where our technology plays a pivotal role in shaping healthier outcomes for patients, while delivering substantial economic benefits to our customers.
Our sales and marketing goals are to further establish quantify for P. E D. As a standard of care given the proven clinical benefits of early diagnosis and preventative treatment.
And to diversify our customer base by adding medical centers additional value based care providers penetrating deeper into the VA system and growing the self insured employer pharmaceutical and retail market.
And now Renee will give our concluding remarks Rene.
Renae Cormier: To achieve this plan, we are reinvesting in emerging growth opportunities with a focus on expanding our customer base for PAD. We believe that these opportunities hold promise and represent an exciting aspect of our company's future. Additionally, our commitment to research and development remains unwavering as we prioritize the enhancement of existing products and data services to stay at the forefront of innovation and consistently deliver cutting-edge solutions to our customers. Our long-term vision includes extending our reach to encompass additional cardiovascular applications, reflecting our dedication to continuous expansion. A key strength of our technology lies in its portability and accessibility, allowing us to actively contribute to addressing health inequities prevalent in cardiovascular disease. By providing tools that can be utilized in diverse settings, we play a role in breaking down barriers, ensuring that more individuals have access to early detection and intervention.
To achieve this plan, we are reinvesting in emerging growth opportunities with a focus on expanding our customer base for P. D. We believe that these opportunities hold promise and represent an exciting aspect of our company's future.
Additionally, our commitment to research and development remains unwavering as we prioritize the inherent another existing products and data services to stay in the forefront of innovation and consistently deliver cutting edge solutions to our customers. Our long term vision includes extending our reach to encompass additional cardiovascular.
Their application, reflecting our dedication to continuous expansion.
A key strength of our technology life, and its portability and accessibility, allowing us to actively contribute to addressing hoffman equity prevalent and cardiovascular disease.
By providing tools that can be utilized in diverse setting we play a role in breaking down barriers, ensuring that more individuals have access to early detection and intervention.
Operator: As part of our growth strategy, we are exploring inorganic growth initiatives to further diversify our product portfolio. Through strategic partnerships and exploring new opportunities, we aim to broaden our impact on the market and expand our offering. We extend our gratitude for your interest in our company and appreciate your continued support as we embark on this journey of innovation. Now, operator, if you could please open the line, Doug, Jen, and I will be happy to address your question. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the key.
As part of our growth strategy, we are exploring inorganic growth initiatives to further diversify our product portfolio.
Through strategic partnerships and exploring new opportunities, we aim to broaden our impact on the market and expand our offering.
We extend our gratitude for your interest in our company and appreciate your continued support as we embark on this journey of innovation.
Now operator, if you could please open the line, Doug Jen and I will be happy to address your question.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speaker phone. Please.
Pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Our first question comes from Brooks O'Neill with Lake Street Capital Markets. Please go ahead. Thank you very much. Good afternoon, everyone.
Our first question comes from Brooks O'neil with Lake Street Capital markets. Please go ahead.
Thank you very much good afternoon, everyone and appreciate all the prepared remarks.
Unknown Executive: I appreciate all the prepared remarks. I guess I'll start off by just asking, it looks to me like the $2.5 million right off of the Insulin Insights investment may have obscured to some extent the benefit of the 30%. Unknown Executive, Dennis Rosenberg, Wayne Pan, Aaron Wukmir, Semler, out of your expense space this year. Sure, so you're right, it does obscure the numbers there.
Yes, I'll start off by just asking you it looks to me like the 2.5 million write off.
Insight investment.
May have obscured to some extent the benefit of that 30%.
Expense reductions you're targeting for that.
The company can you just give us a quick update on whether you were successful in taking the 30% expenses.
Aldo.
Your expense base this year.
Sure So you're right. It does obscure the numbers they are and the $2 5 million write off is on cost of revenues and there are some and.
Unknown Executive: And the $2.5 million write-off is in cost of revenues. And there is some noise between Q3 and Q4 between when we had & Associates and the Q4 expenses. So we were able to take out these expenses, and you should see that more clearly going forward as we won't have these one-time items. Okay, good. And then... Just thinking about the business and the report, the fixed license fee was pretty flat this quarter.
Some noise between Q3 and Q4 between when we had.
Expenses or reversals.
The reversals and the Q4 expenses. So we were able to take out these expenses and you should see that.
You know more clearly going going forward as we won't have these one time items.
Okay. Good.
And then.
Yes.
About the business in the report.
The license fee.
Pretty flat this quarter would you say.
Unknown Executive: Would you say, as I think you mentioned in your prepared remarks, some cleanup from customers, but how would you evaluate the demand environment for the fixed fee side of the business? You know, obviously in light of the changes to the CMS. Risk Methodology.
I think you've mentioned in your prepared remarks, some cleanup from customers, but how would you evaluate the demand environment for <unk>.
Fixed fee side of the business.
Obviously in light of the changes to the CMS.
Risks.
LNG.
Unknown Executive: Sure. So we are in constant contact with our customers, and we've had reactions from customers that have been mixed. So, as you saw, we aren't giving guidance for 2024, but we do believe that the motivation to do testing is still there, although it's less for some customers as the phase-in with that CMS decision that you referred to. So we do continue to expand our market with customers that are not dependent on Medicare Advantage. And going into 2024, we will remain nimble and adjust according to market conditions. Joe, I mean, just trying to follow up on this a little bit, Renae, you would say right this minute you're not seeing much in the way of new interest from MA plan sponsors, and there could be some softening of demand from existing customers in that arena. Is that a fair way to characterize it? I don't know that I was going to that much detail.
Sure. So we are in constant contact with our customers and we've had reaction from customers that has been mix. So as you saw we arent, giving guidance for 2024, but we do believe that the motivation to do testing is still there although it last for.
Some customers that's the phasing in with that CMS decision that you referred to so we do continue to expand our market with customers that are not dependent on Medicare advantage and going into 2024, we will remain nimble and adjust according to market condition.
No.
Let me just try to follow up on this a little bit Renee you would say right. This minute you're not treating.
<unk> in the way of do interest from plan.
Plan sponsors.
And there could be some softening of demand from existing customers in that arena is that a fair way to characterize it.
I don't know that I was going to.
That specific a detail, but when we're looking at expanding our market and we are looking to expand outside the Medicare advantage suite, so and in the other spaces.
Unknown Executive: But when we're looking at expanding our market, we are looking to expand outside the Medicare Advantage space, so in the other spaces that we've talked about before, like the hospital system, retail, pharmaceutical markets, and then also delegated medical. Okay, and, would you say I'm just trying to think this through quickly on the fly? I've always had a sense one of the appeals of the MA market is that you didn't need to get, you know, any kind of specific reimbursement decision from from the payers to reimburse doctors for providing the test. Do you see in the future a need or opportunity to pursue what I might call a more traditional route to revenue generation reimbursement for your service, your test? Right, so not at this time.
We've talked about before like the hospital systems.
Retail pharmacy to the coal markets and then also a delegated medical groups.
Okay.
Would you say I'm, just trying to think district quickly on the fly.
I've always had a sense one of the appeals of the MH market, you said you didn't need to get.
Any kind of specific reimbursement decision from.
Uh huh.
From the payers.
To rehab.
Reimburse doctors provided the test.
Do you see in the future.
Need or opportunity to.
Pursue what I might call more traditional route too.
Revenue generation reimbursement for your service your debt.
Okay.
No not at this time and some of these markets that we're going after are you know more in the value based care side and so looking at.
Unknown Executive: And some of these markets that we're going after are, you know, more in the value-based care side. And so looking at the perspective of identifying these patients early to put preventative measures in place ahead of time for major events that can be very costly. Sure, that makes all the sense in the world.
The perspective of identifying these patients early to put preventative measures in place ahead of time of major events that can be very costly.
Sure that makes all the sense in the world. Okay. Let me switch gears for a second and just.
Unknown Executive: Okay, let me switch gears for a second and just, obviously, you commented on the 510K submission for heart dysfunction. One of the things that I think I recall from your press release is talking about the decision to submit a new 510K is sort of the opportunity to be more clear about the conditions that Quantaflow can test for. Have you been able to achieve any clarity either in your own minds or in conversation with the FDA about the kinds of tests, cardiovascular tests that Quantaflow might work for? We have, and so what we talked about at this time is we're just broadly classifying it as cardiovascular diseases, and as we progress into the second half, we hope to have this 5-10 clearance at that time, and then we will be able to talk in more detail about what it's specifically Okay, that makes sense to me. Maybe I'll just ask you one broad question. I'm just curious.
Obviously, you commented about the five 10-K submission for heart dysfunction.
One of the things that I think I recall Brian.
Your press release is talking about.
The decision to.
Submit a new five 10-K is the route.
The opportunity to be more clear about the conditions.
Quanta flow test for have you been able to achieve any clarity either in your own minds or in conversation with the FDA about the kinds of tests cardiovascular tests that quantifiable might work for.
We have it and so what we talked about at this time, we're just broadly classifying it as cardiovascular diseases and as we progress into the second half you know we hope to have this 510 clearance at that time, and then we will be able to talk in more.
How about what it's specifically cleared for.
Okay that makes sense to me.
And maybe I'll just ask you one broad one I'm just curious I know you're in a unique position.
Unknown Executive: I know you're in a unique position as you interact with the M.A. plan sponsors out there, and frankly, as you mentioned, the value-based care providers. How would you say people are evaluating the changes the government has put in place for the risk model for M.A. reimbursement? Is it changing people's behavior in a substantial way? Are the changes more tweaks to the basic methodology? How do you read it right, Sure.
Who interact with the MAA.
Sponsors out there and frankly as you mentioned the value based care providers.
How would you say people are evaluating.
Changes the government has put in place for the risk model for MA reimbursement.
Is it changing peoples behavior.
Substantial way.
It changes more tweaks to the basic methodology, how do you read it right now.
Sure. So it's hard to classify it as one particular thing because we are getting different reactions from different customers and as you saw in 2023, we did have record revenues for the year. So as the year progressed, we still continue to see testing from our customers booked.
Unknown Executive: So it's hard to classify it as one particular thing because we are getting different reactions from different customers. And, as you saw in 2023, we did have record revenues for the year. And so as the year progressed, we still continued to see testing from our customers, both existing customers and new customers. So as we work through 2024, again, we're going to, you know, just according to market conditions. But there aren't really clear reactions from customers as to whether they have been met.
The existing customers and.
New customers. So as we work through 2024 again, we're going to you know.
Just according to market conditions.
But there aren't.
Really clear reaction from customers as they have been met.
Unknown Executive: Okay, okay. I'll leave it at that. Thanks for taking my question. Great, thanks so much.
Okay.
I'll leave it at that thanks for taking my question.
Great. Thanks, so much.
Renae Cormier: This concludes our question and answer session. I would like to turn the conference back over to Renae Cormier for any closing remarks. Thank you, Dave. As we wrap up this conference call, we want to emphasize our ongoing commitment to delivering clinical benefits through earlier diagnosis of chronic cardiovascular conditions. The continued recognition of the value of this approach by our customers underscores the crucial role our technology plays for patients, physicians, facilities, and payers in an evolving healthcare landscape. Moving forward, our primary objective remains to preserve and strengthen our current revenue opportunities and profitability within the chronic disease space, with a focus on cardiovascular disease.
This concludes our question and answer session I would like to turn the conference back over to Rene Corvair for any closing remarks.
Thank you Dave as we wrap up this conference call. We wanted to emphasize our ongoing commitment to delivering clinical benefit through earlier diagnosis of chronic cardiovascular conditions.
The continued recognition of the value of this approach by our customers underscores the crucial role our technology plays for patients physicians facilities, and Payors and evolving health care landscape.
Going forward, our primary objective of bringing that back to preserve and strengthen our client revenue opportunities and profitability within the chronic disease state with a focus on cardiovascular diseases.
Renae Cormier: We appreciate your participation in today's discussion and thank you for your ongoing support. Goodbye. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
We appreciate your participation in today's discussion and thank you for your ongoing support goodbye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.