Q4 2023 MDxHealth SA Earnings Call
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Operator: Good afternoon, ladies and gentlemen, and welcome to the MDxHealth fourth quarter and full year 2023 earnings conference call. At this time, all lines are in a listen-only mode.
Good afternoon, ladies and gentlemen, and welcome to the M. D X health fourth quarter and full year 2020 earnings conference call.
At this time all lines are in a listen only mode.
Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, March 6, 2024. Before we begin, I would like to remind everyone that the company will make forward-looking statements during today's call. Whether in prepared remarks or during the Q&A session, these forward-looking statements are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the risk factors section of the company's filings with the Securities and Exchange Commission, specifically in the company's annual report on Form 20-F. I would now like to turn the conference over to Michael McGarrity, Chief Executive Officer. Please go ahead.
During the presentation, we will conduct a question and answer session. If at any time during the call you require immediate assistance.
That's a star zero for operator.
This call is being recorded on Wednesday March six 2024.
Before we begin I would like to remind everyone that the company will make forward looking statements during today's call.
Whether in prepared remarks or during the Q&A session deferred looking statements are subject to inherent risks and uncertainties.
These risks and uncertainties are detailed in the risk factors section of the company's filings with the Securities and Exchange Commission, specifically the company's animals report on form 20-F.
I would now like to turn the conference over to Michael Mcgarrity, Chief Executive Officer. Please go ahead.
Michael McGarrity: Thanks, Flutie. And thank you all for joining us for our fourth quarter and year-end 2023 earnings conference call for MDxHealth. With me today is Ron Kalfus, Chief Financial Officer. Commercial Execution and Operating Discipline are the two foundational drivers of our business and performance. And our fourth quarter and full year results for 2023 demonstrate the continued success of this strategy. It is also becoming clear that our strategy is creating multiple sources of growth for our company, including test manual argumentation, cross-selling of complementary diagnostic solutions, and expanding payer coverage with these growth drivers in place. We believe MDxHealth remains well-positioned, and will continue to deliver sustainable growth that will lead to adjusted EBITDA profitability in the first half of 2025. I would now like to review a few of the financial and operating highlights from our fourth quarter and full year 2023 results that clearly demonstrate this execution. Fourth quarter revenue was $19.4 million, an increase of 50% over the prior year period. For the full year, revenue increased to $70.2 million, an increase of 89% year-over-year, excluding the impact from GPS.
Thanks <unk>.
And thank you all for joining us for our fourth quarter and year end 2023 earnings conference call for Mdx.
With me today is Ron <unk>, Chief Financial Officer.
Commercial execution and operating discipline are the two foundational drivers of our business and performance.
And our fourth quarter and full year results for 2023 demonstrate.
Demonstrate the continued success of the strategy.
It is also becoming clear that our strategy is creating multiple sources of growth for our company.
<unk> test menu argumentation.
Cross selling of complementary diagnostic solutions.
And expanding payer coverage.
With these growth drivers in place, we believe Mdx health remains well positioned to continue to deliver sustainable growth that will lead to adjusted EBITDA profitability in the first half of 2025.
I would now like to review a few of the financial and operating highlights from our fourth quarter and full year 2023 results clearly demonstrate this execution.
Fourth quarter revenue was $19 4 million.
An increase of 50% over the prior year period.
For the full year revenue increased to $70 2 million, an increase of 89% year over year.
Excluding the impact from GPS.
Michael McGarrity: Total revenues in 2023 grew 42% year over year, and the fourth quarter gross margin improved to 65.3%, versus 56% in the prior year period, representing a year-over-year improvement of 9.3 percent for the full year. Gross margins were 62.6% compared to 51.9% for the prior year, an improvement of 10.7%, which reflects continued focus on operating discipline, cost management, and expanded pair coverage for our full menu of precision diagnostics. So, when we step back and look at the progress from only a few years ago, what these financial metrics speak to is that we are delivering on our mission to become a premier growth company in precision diagnostics focused on urology Our growth trajectory has been, I believe, quite compelling. In 2019, MDxHealth reported annual revenue of $11 million.
Total revenues in 2023 grew 42% year over year.
In the fourth quarter gross margin improved to 65, 3%.
Versus 656% in the prior year period.
Which represents a year over year improvement of nine three percentage points.
And for the full year.
Gross margins were 62, 6% compared to 51, 9% for the prior year.
An improvement of 10 seven percentage points.
Which reflects continued focus on operating discipline cost management.
And expanded payer coverage for a full menu of precision diagnostics.
So what these financial metrics speak to is that we are delivering on our mission to become a premier growth company and precision diagnostics focused in urology.
In fact.
When we step back and look at the progress from only a few years ago.
Our growth trajectory has been I believe quite compelling.
In 2019, Mdx health reported annual revenue of $11 million.
Michael McGarrity: Today, we are now projecting 2024 revenues of $79 to $81 million, which represents a five-year CAGR, or Compound Annual Growth Rate, of over 50%. Importantly, we have also maintained our operating discipline over this period of extraordinary top-line growth. Gross margins have dramatically improved, from essentially no gross profit generated by the business in 2019, to over 62% for the full year 2023, and our focus on Salesforce productivity is allowing us to manage and maintain our operating expenses as we go forward. Dynamic is providing clear leverage in our P&L and reinforces our confidence in reaching adjusted EBITDA profitability. Of course, our world-class technology, outstanding clinical lab operations, and improved reimbursement for our tests are all major factors in our success. But, without question, one of the ultimate drivers for sustained execution is the strong, and, we believe, enduring relationships we have built with our Urology customer base. Key Opinionator Community
Today, we are now projecting 2020 for revenues.
Of $79 million to $81 million.
Which represents a five year CAGR for a compound annual growth rate of over 50%.
Importantly.
We have also maintained our operating discipline over this period of extraordinary topline growth.
Gross margins have dramatically improved from essentially no gross profit generated by the business in 2019.
To over 62% for the full year 2023.
And our focus on sales force productivity.
This is allowing us to manage and maintain our operating expenses as we go forward.
This dynamic is providing clear leverage in our P&L and.
And reinforces our confidence in reaching adjusted EBITDA profitability.
Of course, our World Class Technology outstanding clinical lab operations and improved reimbursement for our tests are all major factors in our success.
But without question.
One of the ultimate drivers for sustained execution is the strong and we believe enduring relationships, we have built in our urology customer base.
And key opinion leader community.
Michael McGarrity: In my experience, these initiatives and their resulting effect on our business underpin the strength of our business model. To that end, we remain relentlessly focused on the customer experience in order to maintain and advance our best-in-class reputation. For my closing comments, I will turn the call over to Ron for a review of our financial and operating results. Thank you, Mike.
And my experience these initiatives.
Resulting effect on our business underpinned the strength of our business model.
To that end, we remain relentlessly focused on the customer experience in order to maintain and advance our best in class reputation.
Before my closing comments I will turn the call over to Ron for a review of our financial and operating results Brian.
Thank you Mike as Mike mentioned, we are pleased to report our positive results.
Ron Kalfus: As Mike mentioned, we are pleased to report our positive results for the fourth quarter and year-end 2023, with strong reported growth in revenues and solid improvements in gross margins. Revenues for the fourth quarter ended December 31, 2023, increased by 50% to $19.4 million versus $12.9 million for the fourth quarter of 2022. Fourth quarter revenues of $19.4 million were comprised of $8.8 million from GPF and $5.9 million from confirmed.
For the fourth quarter and year end 2023.
With strong reported growth in revenues and solid improvements in gross margins.
Revenues for the fourth quarter ended December 31, 2023 increased by 50% the $19 4 million.
Versus $12 $9 million for the fourth quarter of 2022.
Fourth quarter revenues of $19 4 million.
Were comprised of $8 8 million from GPS.
$5 9 million from confirm.
Ron Kalfus: $3.2 million from Resolve and $1.3 million from Solana for the year 2023. Our revenues were $70.2 million, representing an increase of 89% over the same period last year. Including GPS, school year 2023 revenue increased 42% over the same period last year. Moving below the revenue line, our gross profit for the fourth quarter was $12.7 million, an increase of 75% as compared to $7.2 million for the third quarter of 2022. Growth margins were 65.3% for Q4'23, as compared to 56% for Q4'22, an improvement of 9.3 percentage points. For the full year 2023, gross profit was $43.9 million, an increase of 129% as compared to $19.2 million for the full year 2022. Growth margins were 62.6% for the full year 2023, as compared to 51.9% in the prior year, an improvement of 10.7%. Operating loss for the fourth quarter was $6.3 million compared to $8.9 million for the fourth quarter of 2022, representing a reduction of 30 percent driven by top line growth and improved gross margin. For the full year 2023, the operating loss was $27.3 million compared to $37.9 million for the same period last year, a reduction of 28%.
$3 $2 million from resolve.
One 3 million from select.
For the year 2023 are.
Our revenues were $70 2 million, representing an increase of 89% over the same period last year.
Excluding G P S.
Full year 2023 revenue decreased 42% over the same period last year.
Moving below the revenue line, our gross profit for the fourth quarter with $12 7 million.
An increase of 75% as compared to $7 2 million for the third quarter of 2022.
Gross margins were 65, 3% for Q4 23.
As compared to 56% for Q4, 'twenty two an improvement of nine three percentage points.
For the full year 2023, gross profit was $43 9 million.
An increase of 129% as compared to $19 2 million for the full year 2022.
Gross margins were 62, 6% for the full year 2003.
As compared to 51, 9% in the prior year, an improvement of 10 seven percentage points.
Operating loss for the fourth quarter was $6 3 million compared.
Compared to $8 9 million for the fourth quarter of 2022.
Representing a reduction of 30% driven by topline growth and improved gross margin.
Full year 2023.
Operating loss was $27 3 million compared.
Compared to $37 9 million for the same period last year, a reduction of 28%.
Michael McGarrity: Cash-in-cash equivalents as of December 31st, 2023 were $22.4 million. Our total use of cash for the fourth quarter was $10.3 million. The increase in cash use in the fourth quarter was driven by non-operating, non-recurring cash payments of $2.3 million, primarily attributed to the transition to a sole listing on NET. This concludes my brief overview of the results, and I will now turn the call back to Ron. As I've consistently communicated, MDxHealth is a growth company. Everything we do is based on and committed to growth, the growth of our revenue, margins, and profitability. Growth in our shareholder base, attracting high-quality institutional investors who understand our business and who have set high expectations for consistent execution and results. Simply put, we strive to say what we're going to do and then do it. We believe this consistency and associated long-term sustainable growth potential of our business. Growth in our offering is reflected in our progression over the last 18 months, from one to four revenue-generating tests, with all of our prostate cancer tests covered by Medicare and included in the NCCN guidelines.
Cash and cash equivalents as of December 31, 2023, or $22 4 million.
Our total use of cash for the fourth quarter was $10 3 million.
The increase in cash used in the fourth quarter was driven by nonoperating nonrecurring cash payments of $2 $3 million.
Primarily attributed to the transition to a sole listing on Nasdaq.
This concludes my brief overview of the results and I will now turn the call back to Mike.
Thanks, Brian.
As I have consistently communicated mdx health as a growth company.
Everything we do is based on.
And our commitment to growth.
Growth of our revenue margins and profitability.
Growth in our shareholder base, attracting a high quality institutional investors, who understand our business.
And who have set high expectations for consistent execution and results.
Simply put we strive to say, we're going to do and then execute and deliver which we believe will lead to recognition depreciation and differentiation of this consistency and associated long term sustainable growth potential of our business.
Growth of our offering as reflected in our progression over the last 18 months from one to four revenue generating tests.
With all of our prostate cancer test covered by Medicare.
And included in the NCC and guidelines.
Michael McGarrity: And finally, growth stemming from our proven best-in-class channel, which has catalyzed multiple inbound opportunities, such as partnership, M&A, and distribution, and our evaluation of any of these opportunities. We will apply the same diligence and rigor as we have with the GPS acquisition and the Resolve Channel Opportunity. And we have found ourselves with the luxury of being very selective with our opportunities and partners. As a final note, I often convey to people at any venue that we pass the friends and family test. This concept implies, in my belief, that if you have a friend or family member navigating the complex, confounding, and anxiety-inducing diagnostic pathway of prostate cancer, you would want the clinician and patient to have access to MDxHealth.
And finally growth stemming from our proven best in class channel.
Catalyzed multiple inbound opportunities for partnership M&A in distribution.
And our evaluation of any of these opportunities.
We will apply the same diligence and rigor as we have with the GPS acquisition and.
And resolve channel opportunity.
And we have found ourselves with the luxury of being very selective with our opportunities and partners.
As a final note I often compete convey to people in any venue that we pass the friends and family test.
This concept implies in my belief.
But if you have a friend or family member navigating the complex confounding.
Xiety inducing diagnostic pathway of prostate cancer.
You would want the clinician and patient.
Do you have access to the Mdx Hoffman Hugh.
Michael McGarrity: No other company offers a precision test at the multiple points along this pathway. We have a clinically actionable diagnostic from elevated PSA to initial biopsy, whether the result is negative or positive, for ruling out unnecessary intervention and for risk stratification of patients that may need intervention, and we continue our efforts to advance into optimal monitoring of the approximately 1.5 million patients in active surveillance annually with our monitor project. So it was particularly powerful at our recent national sales meeting to focus on the patients and the clinicians that we serve and believe we are doing just that and doing it the right way with the right people. To me personally, and all of us collectively, MDx Health. That was quite compelling,
No other company.
Offers a precision test at the multiple points along this pathway.
We have a clinically actionable diagnostic from elevated PSA to initial biopsy.
Whether the result is negative or positive.
We are ruling out unnecessary intervention.
For risk stratification of patients that may need intervention.
And we continue our efforts to advance into optimal monitoring.
The approximately $1 5 million patients.
In active surveillance annually with her monitor project.
So it was particularly powerful at our recent national sales meeting to focus on the patients and the clinicians that we serve.
And believe we are doing just that.
And doing it the right way with the right people.
To me personally and all of us collectively the Mdx health.
That was quite compelling.
Operator: I'm closing. We at MDxHealth will remain committed to driving sustainable growth, which will serve as the foundation for value creation for all of our stakeholders, including patients, customers, and shareholders. So thank you for your interest in and support of MDxHealth, and I'll turn the call back over to Ludi for questions. Thank you. And ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your telephone keypad. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline the polling process, please press the star followed by the number key.
So in closing we.
<unk> remained committed to driving sustainable growth, which will service the foundation for value creation for all of our stakeholders.
Including patients customers and shareholders.
So thank you for your interest in and support of Mdx Health and I'll turn the call back over to <unk> for questions.
Thank you and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your telephone keypad.
Year to date on Trump with Nudging your request and your questions you will be pulled into <unk> should.
Should you wish to decline from the polling process. Please press the star followed by the number Q1 moment. Please for your first question.
Operator: One moment, please for your first question. Your first question comes from the line of Andrew Brackmann from William Blair. Your line is open. Hi, guys. Good afternoon.
Your first question comes from the line of Andrew Backman from William Blair. Your line is open.
Hey, guys. Good afternoon, thanks for taking the question.
Andrew Frederick Brackmann: Thanks for taking the question. Maybe to start here on guidance, can you maybe peel back the onion for us a little bit in terms of how you're thinking about this from a buildup of a test level? I guess any color that you can share about which sort of areas of the portfolio might grow faster than others and how you're thinking about price here as well.
Maybe just starting on guidance can you maybe peel back the onion for us a little bit in terms of how youre thinking about this from a buildup of a test level I guess any color that you can share, which in which sort of which areas of the portfolio might grow faster than others, and how youre thinking about price here as well thanks.
Michael McGarrity: Andrew, you know, we feel good about the balance of our menu. I think, as we've discussed and as I've communicated, we're very confident that our sales force is selling not a test or going in with one of our tests but selling our pathway, and that each of them has. Over the past number of quarters, including GPS, we have demonstrated consistent growth, and as we go forward, we expect that to continue. And a resolve, obviously, at some point, the growth rate on that will..., will normalize.
Yeah Andrew.
We feel good about the balance of our menu I think.
As we've discussed in there or is that as I've communicated we're very confident that our sales force is selling not a test or going in with one of our tests, but selling our pathway.
And that each of them has.
Over the past number of quarters, including GPS demonstrated.
Consistent growth as we go forward, we expect that to continue.
And our resolve obviously at some point the growth rate on that well.
Will normalize.
Michael McGarrity: But again, that was really important to validate our thesis that we can take advantage of channel opportunities that fit with our menu offering and our customer base. So we think the adoption is sustainable, and then, you know, we have two drivers on the revenue side. It's important to note that both, I think, are working.
But again that that was really important to validate our thesis that we can take advantage of channel opportunities that fit with our.
Menu offering and into our customer base. So we think.
The adoption of sustainable and then we have two drivers on the revenue side. It's important to note that both I think are working and.
Michael McGarrity: In parallel, definitely over the last few quarters, our sales team drives unit adoption into our customer base, and then our market access managed care team drives coverage, which shows up on our ASP. And we're confident that we can continue to drive the menu, but growth within each task, from both the unit and revenue. So we feel like it's pretty balanced, and we believe that it's sustainable. That's great. Thanks for that.
In parallel definitely over the last few quarters. So our sales team drives unit adoption into our customer base and then our market access managed care team drew.
Drives coverage, which shows up in our ASP and we were confident that.
We can continue to drive.
The menu, but growth with them.
Each test.
From both a unit and revenue perspective.
So we feel like it's pretty balanced.
And we believe that's sustainable.
That's great. Thanks for that and then as you.
Andrew Frederick Brackmann: And then, you know, as you move throughout 2023, you showed some nice leverage on the P&L. From here, can you maybe just sort of talk about the leverage that you have there? Is it mainly revenue growth at this point? Or is there any more room, I guess, on the cost side to also drive some further reductions in net adjusted EBITDA losses and burn here? Thanks.
Move throughout 2023, you showed some nice leverage on the P&L from here can you maybe just sort of talk about the levers that you have there is it mainly revenue growth at this point or is there any more room I guess on the cost side to also drive some further reductions in net adjusted EBITDA loss in burn here. Thanks.
Michael McGarrity: Thanks, Andrew. Yeah, I think revenue growth is obviously key. Our gross margin has gotten to a point where it can drive the P&L below that deadline. And then I really think the strength of our business as we go forward is that we feel very confident that we can hold our op-ex. You know, pretty straight away through our inside model period, but definitely through 2024 and beyond. We think we're very confident that our sales channel is right sized, so we have 70 total people in the field, 50 direct reps, and the way we're driving adoption in a sustainable way through our pathway allows for what I commented on, which is we'll drive rep productivity. It's the Stryker model that I'm familiar with.
Thanks, Andrew Yeah, I think revenue growth, obviously is key our gross margin has gotten to a point where it can drive the P&L below that that line and then I really think the strength of our business as we go forward is that we.
We feel very confident that we can hold our opex.
Pretty straight away through our inside model period, but definitely through.
Through 2024 and beyond.
We're very confident that our sales channel is right sized so we have 70 total people in that field 50 direct reps.
And the way, we're driving adoption in a sustainable way.
Through our pathway.
Allows for what I commented how much is will drive rep productivity, it's the Stryker model that I'm familiar with and so we think the leverage is really in holding our opex, we've driven it to the point through.
Andrew Frederick Brackmann: And so we think the leverage is really in holding our OPEX. We've driven it to the point through significant discipline on cost and headcount and operating discipline across our organization. So really, when we look at our P&L revenue growth, the gross margin where it is, and leverage in our OPEX, where really the expansion there is, largely based on scale and volume into our lab and our RCM group. I'll leave it be.
Significant discipline on cost and head count and operating discipline across our organization. So really when we look at our P&L revenue growth.
The gross margin, where it is and.
Leverage in our in our Opex, where really the expansion there is largely based on scale volume into our lab and our RCM group.
Thomas Vranken: Thanks, guys. Thanks, Sandra. And your next question comes from the line of Thomas Vranken from KBC Securities. Your line is open. Hi, this is Thomas.
I'll leave it there thanks guys.
Thanks, Andrew.
Yes.
And your next question comes from the line of Thomas Jenkins from KBC Securities. Your line is open.
Hi, This is Tom Thanks for taking my question and.
Thomas Vranken: Thanks for taking my question. And congratulations on the nice margin improvement. Two questions from my side.
Congratulations on the nice margin improvements.
Two questions from my side. The first one is with regards to <unk>.
Michael McGarrity: The first one is with regard to the multiple high growth opportunities that you mentioned that are under evaluation. Can you give a little bit more granularity there? Should we understand these more like in-house R&D projects? Or are you really considering business development here? Thomas, as always, thank you for staying up late and...
Multiple high growth opportunities that you mentioned that are under evaluation can you give a little bit more granularity there should we understand this more like in house type of R&D projects or are you really considering business development here.
Thomas as always thank you for staying up late and.
Michael McGarrity: I likely cannot give you a whole lot of granularity there, but only to point to what we've done so far, right? We run a growth strategy process here. We have for the last two years.
Likely I cannot give you a whole lot of good granularity, there, but but only to a point to what we've done so far right. So.
We run a growth strategy process here, we have for the last two years.
Michael McGarrity: To give you details, we meet every other Thursday, and we've always been focused, as a group, on what's out there, right? What's important in the space that we need to focus on, pay attention to, make sure we don't miss anything, and we were always looking outward. I would tell you over the last two years in that process, it's really flipped to inbound as we've... I think it's become more obvious.
To give you detail we meet every other Thursday, and we've always been focused a group of us on what's out there right what what's important in the space that we need to focus on pay attention to make sure. We don't Miss anything and we were always looking outbound.
I would tell you over the last two years in that process, it's really flipped to inbound as we've.
I think become more obvious.
Michael McGarrity: You know, I've commented, my view is we had to do two things with MDxHealth. We had to de-risk the business, which I think we are largely achieving. And we had to become more obvious, and that's showing up in inbound opportunities based on how challenging it is in the market dynamics today to A, build a channel and B, have access to driving adoption of diagnostics, but we're going to be, you know, resolved as it could, a model for that. That was really important.
Commented My my view is we had to do two things with Mdx health, we had to Derisk the business, which I think we are largely achieving and.
And we had to become more obvious and thats showing up in inbound opportunities based on how challenging it is and the market dynamics today.
<unk> build a channel and be have access to driving adoption of AR.
Or a diagnostic but we're gonna be resolve is a good.
Model for that that was really important all of our diligence which was.
Michael McGarrity: All of our diligence, which was very rigorous, as I noted, has played out in our ability to drive adoption, sustainable, sticky adoption into our customer base without diluting our focus. Those are all part of the criteria that we look at with opportunities that are coming our way. And I think we have good examples, as I noted, with both an M&A with a successful integration and driving growth into a product, and secondly, with channel opportunities.
Very rigorous as I noted.
<unk> has played out and our ability to drive adoption sustainable sticky adoption into our customer base without diluting our focus.
Those are all part of the criteria that we look at with opportunities that are coming our way.
And I think we are good examples as I noted with bolt on M&A and with the successful integration and driving growth into a product.
And secondly, with the channel opportunity so.
Well, we'll take a balanced look at opportunities that make sense for us there's a lot of room in our space into urology and we're confident that.
Thomas Vranken: We'll take a balanced look at opportunities that make sense for us. There's a lot of room in our space, in urology, and we're confident that. The way I would characterize it, I think, Thomas, is that if you looked at our menu 18 months ago, it looks very different today. And if you make the assumption that it might look different 18 months from now, I think that's a reasonable assumption. Okay, thanks.
The way I would characterize it I think Thomas is that if you looked at our menu 18 months ago. It looks very different today and if he made the assumption that it might look different in 18 months from now.
I think that's a reasonable assumption.
Okay, Thanks, and maybe as a second question I wanted to zoom in a little bit more on the revenue guidance for 2024, and I noticed that the window is rather narrow at only.
Michael McGarrity: And maybe as a second question, I wanted to zoom in a little bit more on the revenue guidance for 2024. And I noticed that the window is rather narrow, only two million variations. Can you comment on what drives this increased precision versus previous guidances from previous years? Yeah, I got that question a number of times as we went through our process to put out guidance, and I think. You know, as we've done, it's been difficult over the last few years.
2 million variation can you comment on what's driving this increased precision versus previous guidance is from from previous years.
Yeah, I got that question a number of times as we went through our process to put out guidance.
I think.
As we've.
It's been difficult over the last few years I mean, the combination of the pandemic as well as launching.
Thomas Vranken: I mean, the combination of the pandemic as well as, you know, launching additional tests into our menu, as per my previous comment. I feel like we now have history, which forms how you predict and project your business more accurately. So we believe that that. But we're confident that we can meet or exceed the expectations that we've put out for 2024, for sure. Okay, thank you.
Watching additional tests into our menu per my previous comment.
I feel like we now have history right.
Informs how you predict and protect your business more accurately.
So we believe that that's indeed a tight.
Band.
But we're confident that we can meet or exceed the expectations that we've put out to the street for 2024 for sure.
Okay. Thank you.
Daniel Gregory Brennan: Thanks, Thomas. Your next question comes from the line of Dan Brennan from TD Cowen. Your line is open. Hey, good afternoon, guys. This is Kylon Perdant.
Thanks Thomas.
Okay.
Your next question comes from the line of Dan Brennan from TD Cowen Your line is open.
Hey, good afternoon, guys. This is a pile on for Dan. Thanks for taking the questions I just wanted to ask on the quarter.
Daniel Gregory Brennan: Thanks for taking the questions. I just want to ask, you know, on the quarter, if there's any granularity you can provide on, you know, maybe the volume from Confirm and Select slash, you know, Resolve too. Is there anything you can share there?
If there's any granularity you can provide on maybe the maybe the volume from.
Confirmed in select slash resolved two is there anything you can share there.
Okay.
Michael McGarrity: I'm not sure I understand the question. So, you know, as reflected in the revenue and the growth per test, we've seen consistent growth with each of those from a unit perspective. We have seen ASP. That was the point I made as far as our revenue drivers are two-fold right unit adoption and then our coverage, which shows up in our ASP. And so we're confident that we have seen that with each of our tests individually in the menu collectively. We don't put out a... Press release on every coverage, positive coverage decision we get, but we have noted a couple of key ones in the past quarters with United on GPS, and select with Cigna so, we're confident we can see consistent growth that's driving our guidance of mid-teens. We believe that it's very sustainable. Got it.
And kind of I'm not sure I understand the question. So we've seen you know us.
As reflected in the revenue and the growth per test, we've seen consistent growth with each of those from a unit perspective, we have seen asps.
Accretion that was the point I made as far as our revenue drivers are twofold right unit adoption.
And then.
Our coverage, which shows up in our ASP and so we've seen we're confident that we have seen that with each of our tests individually in the menu collectively.
We don't put out.
Press release on every coverage.
Positive coverage decision, we got but we have noted a couple of key ones in the past few quarters with United on GPS and.
Select with Cigna so.
We're confident we can see consistent growth.
That's right that's driving our guidance of a mid teens.
We believe that's very sustainable.
Got it and so on the on the volume side, though in the fourth quarter was there anything you've disclosed there across the different tests.
Daniel Gregory Brennan: So on the volume side, though, in the fourth quarter, was there anything you disclosed there, you know, across the different tests? Just what we disclosed, Kyle.
Just what we disclosed.
Got it okay.
Michael McGarrity: Okay. And just said one more, you know, on the, you know, just leave profitability in the first half of 2025. Can you just remind us of your confidence there? You know, you reiterated that you'll get there in the first half of 25, but if you found a target that was the right asset for the portfolio that, you know, might push this target out a bit, what are your thoughts on that? Well, if I understand your question correctly, you're asking, would an additional opportunity that we're not currently offering be the catalyst for that? My answer is no.
I just had one more.
On the adjusted EBITDA profitability in the first half of 2025 can you just remind us of your competence. There you know you reiterated that you will get there in the first half of 'twenty five but if you found a target that was the right asset into the portfolio that might push this target out a bit.
What are your thoughts on that.
Well if I understand your question, you're asking with an additional opportunity that we're not currently offering.
The catalyst for that and my answers now right.
Daniel Gregory Brennan: Right, right. Okay. Yeah, no. We're confident that we're not basing that on additional opportunities that will come in. So we're confident we can get there with our current menu, very clearly. God, thank you.
Okay.
Yeah, No. We're we're confident that we're not basing that on additional opportunities that will come in so we're confident we can get there with our current menu.
Clearly.
Got it thank you.
Jason M. Bednar: Thanks, Kyle. Your next question comes from the line of Jason Bednar from Piper Sandler. Your line is open.
Thanks Scott.
Your next question comes from the line of Jason Bednar from Piper Sandler Your line is open.
Jason M. Bednar: Hey. Good afternoon, guys. You know, I'll pack a few in here just to start.
Hey, good afternoon guys.
I'll pack a few in here just to start.
Jason M. Bednar: Look at the performance in the quarter. You know, Resolve was really the big upside driver in the quarter, at least for all the DAR models. So, really, just a few questions here that come to mind. I mean, first of all, you know, how much, how much more room for growth is there from this specific test? You know, when do those trends start to normalize? And I think, Mike, you kind of alluded to that maybe happening at some point in 24.
Look at the performance in the quarter resolved was the really the big upside driver in the quarter or at least called the Dar model. So it really just a few questions here that come to mind first how much how much more room for growth is there from the specific test.
When do those trends start to normalize I think Mike you kind of alluded to that maybe happening at some point in 'twenty four but.
Michael McGarrity: But, you know, any other clarity there would be helpful. And then, you know, second, given its size, it's probably becoming increasingly relevant from a margin standpoint. So, can you remind us where the margins on Resolve fit versus your other tests? And then, maybe, to come back to one of the questions earlier, but as you think about commercializing other tests, you know, you've obviously validated your ability to commercialize something with Resolve. You know, are you exclusively looking for urology, male urology?
Any other clarity there would be helpful and then.
Given its size, it's probably becoming increasingly relevant from a margin standpoint, so can you remind us where margins unresolved sit versus your other tests.
And then just.
Maybe to come back to one of the questions earlier, but.
As you think about commercializing other tests, obviously validated your ability to commercialize something with resolve.
Are you are you exclusively working in neurology male urology.
Michael McGarrity: Is that where you are, as you evaluate partnerships or M&A? Jason, thank you. So with Resolve, you know, candidly, that succeeded. We set our expectations internally, but it's exceeded our expectations. And I think it's based on the diligence that we did. And, you know, one aspect of our diligence, I should note, is that we, which may not be customary, but we really involve our sales team and our smart reps, who have access to and understand how our customers adopt. And so all of that, our thesis is held with that. Now, the growth rate that we've had, you know, clearly that that will normalize. But what I would say is that the market for the second part of your question related to resolve is, Of the 10 million cases that present annually with UTI in the U.S., 20% of them present to urology.
As you evaluate partnerships or M&A.
Jason. Thank you yeah, so with resolve candidly that succeeded we said our expectation internally.
But it has exceeded our expectations and I think it's based on the diligence that we did in one.
One aspect of our diligence I should note.
Is that we which may not be customary, but you know we really involve our sales team and our smart reps, who have access and understand how our customers adopt.
And so all of that our thesis is held with that now the growth rates that we've.
Had you know clearly that that will normalize, but what I would say is that that market to the second part of your question related to resolve is.
Of the 10 million cases of the present annually with UTI in the U S 20% of them present to urology.
Michael McGarrity: So we have room to grow, but yeah, I would expect that to normalize as we go forward. The second part of your question was related to margin. You know, all our margins are criteria, which I've noted on any sort of channel opportunity, be it M&A or partnership license distribution. That's one of our key criteria, right, that it's a creative gross margin, day one, dollar one. And that's proven to be true
So we have room to grow yeah, I would expect that to normalize as we go forward.
The second part of your question was related to margin you know all our margins our criteria, which I've noted on any sort of channel opportunity be it.
M&A or partnership license distribution.
That's one of our key criteria right that it is accretive to our gross margin day, one dollar one and that's proven to be true. So while we don't break out margin by product.
Michael McGarrity: So while we don't break out margin by product, I think the accretion in our gross margin has been material but expected. We saw that coming.
Think the accretion in our gross margin.
<unk> been material, but expected, we we saw that coming we knew how it would build based on the way we were building our menu.
Michael McGarrity: We knew how it would build based on the way we were building our menu and our expectations for cost control and pricing. So that's how do we expect that to continue to hold? And then as far as our growth opportunities, yes, urology is our focus. So we are a growth company focused on urology. And I would just say, without speaking specifically, there are a number of opportunities for growth that we see. And, as per my previous comment on the process we run, which is quite disciplined.
And our our expectations on cost control and pricing.
So that's how can we expect that to continue to hold.
And then as far as our growth opportunities, yes, urology is our focus.
So we are a growth company focused in the urology.
And I would just say without speaking specifically there is a number of opportunities for growth that we see in per my previous comment on the process, we run which is quite disciplined.
Michael McGarrity: We have a dashboard of opportunities that we see as viable. And that coupled with, to your question, from an R&D perspective or the previous question, our monitor project, we're very excited about the potential there. Now, we're not guiding to that. We're not building that into any of our assumptions. But we think that that can really change the landscape for patients in Active Survival.
We have a dashboard of opportunities that we.
She is is viable and that coupled with you know to your question from an R&D perspective or the previous question.
Our monitor project, where we're very excited about the potential there now we're not guiding to that we're not building that into any of our assumptions.
But we think that that can really change the landscape for.
The patients on active surveillance.
Jason M. Bednar: Okay, all right, very helpful. Maybe if I could drill in on gross margins a bit, maybe it's related to my last question there, but you know, pretty strong exit rate, you know, putting up the 65% plus, exiting 23. Was that strength due to the testing mix with Resolve being stronger?
Okay, Alright very helpful.
Maybe if I can drill in on gross margins a bit maybe it's related to my last question there but.
Yes, pretty strong exit rate, you're putting up to 65% plus exiting 'twenty three.
Was that strength.
Due to testing mix with resolve being stronger.
Michael McGarrity: And then maybe talk about the sustainability of that gross margin performance as we think through, you know, modeling future years. Should we be anchored to 65 or plus or minus that level here in 24 and 25? Yeah, I think plus or minus is probably right, and you're right in each of your assumptions in your question, right? So mix, on any given chord or mix, can move our margin by a couple points, but our goal... You know, if we go back to a year ago, our goal was to target 65%, plus or minus. So, as we look at the quarters coming up, I think anywhere in that range of, you know, two or three points below or two or three points above is reasonable based on mix. Ultimately, could our margins start with a seven? It could, but we're not guiding or projecting to that right now.
And then maybe talk about the sustainability of that gross margin performance as we think through.
Modeling future years should we be anchored to the 65, plus or minus that level here in 'twenty four 'twenty five.
Yeah, I think plus or minus is probably right and youre right in each of your assumptions of your question right. So mix in any given quarter mix can can move our margin you know.
A couple of points, but our goal.
You know if we go back to a year ago, our goal was to target 65%.
Plus or minus so as we look at the quarters coming up.
I think anywhere.
In that range of you know two or three points below or two or three points above is reasonable based on mix ultimately could our margins start with the southern it could but we're not we're not guiding or projecting to that right. Now. So we think we're building and it's.
Michael McGarrity: So we think we're building and it's really important. The two things we control are coverage, which drives our ASP, and cost, which we are very focused on. And so, you know, as we scale our business, we're continually looking at ways to, Drive, you know, drive cost benefits that would affect margin. But also, as we look at opportunities, that last criteria I noted was, it's critical. We won't, you know, we really won't look at anything that isn't creative, even if initially, I don't like it resolve where it builds and we have visibility to how it That's the way we think about those things.
It's really important.
The two things, we control our coverage, which drives our ASP and.
And cost, which we are very focused on and so there's you know as we as we scale our business. We are continually looking at ways to.
Drive.
Five cost benefit that would affect margin.
But also as we look at opportunities that last criteria. I noted was it's critical we want we really wont look at anything that isn't.
Accretive even if initially not unlike resolve where it builds and we have visibility to how it lands on our targeted gross margin. That's the way we think about those things we're confident that yes.
Jason M. Bednar: And we're confident that that margin is sustainable. Okay, great. And one last clarification question here. The $6.3 million operating loss in the period, I just want to confirm that included one-time costs from the sole listing transition, correct? That really figure would have been a $4.6 million operating loss if not for those one-time costs.
That margin is sustainable.
Okay great.
One last clarification question question here.
The $6 3 million operating loss in the period I just wanted to confirm that included onetime costs from the sole sole listing transition to correct. The feet that really figure would have been $4 6 million operating loss if not for those onetime costs do I have that right.
Jason M. Bednar: Do I have that right? That's correct, Jason. Okay, thanks Ron. Thanks guys. Thank you. Thank you for watching. See you next time. And your next question comes from the line of Mark Massaro from PTIG. Your line is open.
That's correct Jason.
Okay. Thanks, Ron Thanks, Scott.
Thank you Jason Thank you.
And your next question comes from the line of Mark Massaro from <unk>. Your line is open.
Mark Anthony Massaro: Hey, guys, congrats on a great 2023. Yeah, obviously, a lot of the questions have been asked, but um, okay, so if you're looking to either partner or acquire, just be curious if you have a preference for either. And then, you know, Mike, you indicated that whatever you do would need to be acquisitive on day one. So I have to assume that if you do look to bring in, you know, another clinical test, is it safe for me for us to assume that reimbursement would need to be in place already? That's a good assumption, Mark.
Okay.
Hey, guys congrats on a great 2023.
Yes, so obviously a lot of the questions have been asked but.
Okay. So if you are looking to eat.
Either partner or acquire I'd just be curious if you have a preference to either and then.
You indicated that whatever you do would need to be accretive on day one.
So I have to assume that if you if you do look to bring in.
Another clinical tests.
Is it safe for me for us to assume that reimbursement with dean would need to be in place already.
That's a good assumption Mark we had a quite an odyssey as you know with the.
Michael McGarrity: We had quite an odyssey, as you know, with... The reimbursement landscape is challenging for everybody in the ClearLab diagnostics sector. So yes, that is indeed a key criteria, for sure. And as to the front part of your question, when we think about, it's clear the GPS acquisition was, somewhat transformative for us, particularly at our stage when we made the acquisition, from an M&A perspective, a good example of, and that's why I comment on it was really important that we got that right. So now we have a model for that, for what I would refer to, I obviously refer to more as channel growth opportunities that don' The Capital Investment that an M&A or GPS brings, but, you know, any M&A would have to look like the GPS, right, where it brings immediate revenue and gross margin accretion to the business.
The reason the pursuant landscape is challenging for everybody in the CLIA lab diagnostic sector.
So yes that is indeed, a key criteria.
For sure.
Sure.
The front part of your question.
We think about it is clearly the GPS acquisition was.
Somewhat transformative for us, particularly at our stage when we made the acquisition.
From an M&A perspective resolve is a good example of that is why I comment on it was really important that we got that right.
So now we have a model for that for for what I would refer to it obviously refer to more as channel growth opportunities that don't require.
The capital investment that in M&A or GPS, but.
Any M&A would have to.
Look like the GPS right were bought immediate revenue and gross margin accretion in the business but.
Mark Anthony Massaro: But I think your assumption is correct that it would probably be more of the latter on our, you know, more near-term growth opportunities that we're looking at. Okay, great. And then, you know, as we're thinking about tuning up our models, you know, the 2024 revenue guidance is looking for 12 to 15 percent top line growth. Is it fair for us to assume mostly volume growth for the year? You know, are there certain tests that you might see some ASP expansion? I know SELECT is pretty, but it hasn't quite achieved maturity yet.
But I think your assumption is correct that it would probably be.
More of the ladder on are more near term growth opportunities that we're looking at.
Okay, Great and then as we're thinking about tuning up our models.
The 2020 for revenue guidance I was looking for 12% to 15% topline.
Is it fair for us to assume <unk>.
Mostly volume growth for the year.
Are there certain tests that you might see some ASP expansion I know select is pretty.
Not quite achieved maturity yet so how should we just think about that volume versus price dynamic.
Michael McGarrity: So how should we just think about that volume versus price dynamic? Yeah, I think you're right in your assumption volume drives the majority of our growth projections; we tend to lean on ASP as a, I don't want to say upside, but support for that growth, but we expect our sales team to drive the growth that you're referring to through straight adoption from our customer base and their expectations individually and as a group. Read on for that.
Yeah, I think youre right in your assumption volume drives.
The majority of our growth projection, we tend to lean on ASP is.
As I don't want to say upside, but support for that growth, but we expect.
Our sales team to drive the growth that you are referring to through straight adoption from our customer base.
And there their expectations individually and as a group.
Read on that.
Mark Anthony Massaro: Okay, great. And then, if I'm looking at the numbers correctly, it looks like the OPEX came in at around $71 million for the year. I believe that's a 25% growth year over year.
Okay, Great and then.
If I'm looking at the numbers correctly it looks like the Opex came in at around $71 million for the year.
Believe that the 25% growth year over year.
Mark Anthony Massaro: How should we be thinking about OPEX in 2024? And then maybe just sort of reconciling, you know? I think you were at a $10 million use of cash, you've got $22 million on the balance sheet. Just help me think about cash utilization in 2024. Yeah, so Ron can comment on your OPEX number.
How should we be thinking about opex in 2024, and then maybe just sort of reconciling.
I think you were at a $10 million use of cash <unk> got $22 million on the balance sheet.
Help me think about cash utilization in 'twenty four.
So Ron can comment on your Opex number I think thats, a little high with what we reported but to your question.
Mark Anthony Massaro: I think that's a little high with what we reported, but to your question, um, you know, we're confident that we can hold the OPEX here, as I noted, going forward. Sorry, Mike, the second part of your question was... Yeah, the cash utilization for the year. I know that you've talked about getting to adjusted EBITDA profitability in the first half of 2025, but help us walk through that.
We're confident that we can.
Hold the Opex here as I noted.
Going forward.
Sorry, Mike the second part of your question was forgive me.
The cash utilization for the year I know that you've talked about getting to adjusted EBITDA profitability in the first half of 'twenty five but hell.
How much did that.
Mark Anthony Massaro: Yeah, so. I think my comment there, Mark, would be, we want to be smart and prudent with our balance sheet, and I would just say that we have. We believe we have the optionality there to continue to fund the business and fund our growth. As we go forward, and this is probably, you know, as specific as I'll get, I mean, we have access to additional debt, and we're confident that we'll keep the company in a strong position here as we go forward to drive continued growth.
Yeah. So.
And I think my comment there Mark would be look we want to be.
Smart and prudent with our balance sheet and I would just say that we have.
We believe we have optionality there to continue to fund the business and fund our growth as we go forward and that's probably.
Pacific is I'll get I mean, we have access to.
Additional debt and we were confident that.
We will keep the company in a strong position here as we go forward to drive continued growth.
Mark Anthony Massaro: All right, that's it for me. Thanks, guys. Mark, thank you. Thank you, and we have reached the end of our Q&A session. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Thanks, everybody, and Francois Toit. Thank you. Thank you. Thomas Vranken, Ron Kalfus, Michael McGarrity, Vidyun Bais, Daniel Sammarco, Ron Kalfus, Ron Kalfus, Michael McGarrity, Vidyun Bais, Daniel Sammarco, Ron Kalfus,
Alright, that's it for me thanks, guys.
Mark Thank you.
Thank you and we have reached the end of our Q&A session, Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Thanks Peter.
Okay.
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