Q1 2024 Exagen Inc Earnings Call

Operator: Greetings. Welcome to Exagen Inc.'s first quarter 2024 earnings call. At this time, all participants are in listen-only mode. The question-and-answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero from your telephone keypad. Please note, this conference is being recorded. I'll now turn the call over to Ryan Douglas with Investor Relations.

Greetings welcome to Exigent, Inc. First quarter 2024 earnings call at this time, all participants are in listen only mode.

Question and answer session will follow the formal presentation.

If anyone today should require operator assistance. Please press star zero from your telephone keypad.

Please note that this conference is being recorded.

I'll now turn the call over to Ryan Douglas with Investor Relations.

Ryan Douglas: Ryan you may now begin.

Ryan Douglas: Good morning, and thank you for joining us. Earlier today, Exagen Inc. released financial results for the quarter ended March 31st, 2024. The release is currently available on the company's website at www.exagen.com. John Aballi, President and Chief Executive Officer, and Kamal Adawi, Chief Financial Officer, will host this morning's call. Before we get started, I would like to remind everyone that management will be making statements during this call that are forward-looking statements within the meaning of federal securities laws, which were made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Ryan Douglas: Good morning, and thank you for joining US earlier today <unk> released financial results for the quarter ended March 31 2024.

Ryan Douglas: The release is currently available on the company's website at Www Dot <unk> Dot com.

Ryan Douglas: China, Barley, President and Chief Executive Officer, and <unk>, Chief Financial Officer will host this morning's call.

Ryan Douglas: Any statements containing this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including without limitation, statements regarding our business strategy, future financial and operating performance, including guidance, potential profitability, our current and future product offerings, reimbursement, and coverage, are based upon current estimates and various assumptions. These statements involve material risk and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

Speaker Change: Before we get started I would like to remind everyone that management will be making statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act 1995.

Speaker Change: Any statements contained in this call that are not statements of historical facts should be deemed to be forward looking statements. All forward looking statements, including without limitation statements regarding our business strategy future financial and operating performance, including guidance potential profitability, our current and future product offerings and reimbursement and coverage are based upon current S.

Speaker Change: And various assumptions these statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements for a list and description of the risks and uncertainties associated with our business. Please see our filings with the securities and exchange.

Ryan Douglas: For a list and description of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2023, our Form 10-Q for the quarter ended March 31, 2024, and any subsequent filings. In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted EBITDA that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP.

Speaker Change: Commission, including our Form 10-K for the year ended December 31, 2023, our Form 10-Q for the quarter ended March 31, 2024, and any subsequent filings.

Speaker Change: In addition, some of the information discussed today include non-GAAP financial matrix, such as adjusted EBITDA that have not been calculated in accordance with generally accepted accounting principles of the United States for GAAP. These non-GAAP items should be used in addition to and not substituted for any GAAP results. We believe these metrics provide useful supplemental information.

Ryan Douglas: These non-GAAP items should be used in addition to and not substituted for any GAAP results. We believe these metrics provide useful supplemental information in assessing our revenue and operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted to the investor relations page of the company's website. Information provided in this conference call relates only to the live broadcast today.

Speaker Change: And accessing our revenue and operating performance reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted to the Investor Relations page at the company's website.

Speaker Change: The information provided in this conference call speaks only to the library cast today.

Ryan Douglas: Exagen disclaims any intention or obligation, except as required by law, to update or revise any information, financial projections, or other forward-looking statements, whether because of new information, future events, or otherwise. I will now turn the call over to John Aballi, President and CEO of Exagen.

Speaker Change: <unk> disclaims any intention or obligation, except as required by law to update or revise any information financial projections or other forward looking statements, whether because of new information future events or otherwise.

Speaker Change: Now I'll turn the call over to John and barley, President and CEO of <unk>.

John Aballi: Thanks, Ryan, and everyone, for joining the call. Here at Exagen, we've executed another fantastic quarter, and today, I plan to discuss our results, provide updates on our path to profitability, and give further details on the enhancements we're making to advise CTD. I'll then hand it over to Kamal, our Chief Financial Officer, for details on our financial performance. We had a great start to 2024, and for Q1, I'm happy to report that total revenue was $14.4 million, driven by a strong increase in advised CTD ASP.

Thanks, Ryan and to everyone for joining the call.

John Aballi: Our trailing 12-month ASP is now $377 per test, which is up 35% or almost $100 from a year ago. ASP continues to be a key strategic focus, and I feel good about the momentum and trajectory we have built as we work towards profitability. Our adjusted EBITDA for the first quarter was a negative $2 million.

John: Iridex again, we've executed another fantastic quarter and today I plan to discuss our results provide updates on our path to profitability and give further details on the enhancements, we're making to advise CTD.

I'll, then hand, it over to come off our Chief financial Officer for details on our financial performance.

Speaker Change: We had a great start to 2024 and for Q1 I'm happy to report that total revenue was $14 4 million driven by a strong increase in advise CTD asps.

Speaker Change: Our trailing 12 month ASP is now $377 per test, which is up 35% or almost $100 from a year ago.

Speaker Change: A S. P continues to be a key strategic focus and I feel good about the momentum and trajectory we have built as we work towards profitability.

Speaker Change: Our adjusted EBITDA for the first quarter was a negative $2 million.

John Aballi: This is also a significant improvement over the same period last year and a testament to the impact ASP improvements are having on our bottom line. The progress we've made on our ASP is substantial, and execution on our strategy has continued to dramatically reshape the operating profile of the company over the past year. Volume for advised CTD in the first quarter was just over 30,000 tests, which was essentially flat from the fourth quarter of 2023. However, we did see volume increase in each month of the first quarter, and that momentum continued into Q2.

This is also a significant improvement over the same period last year and a testament to the impact ASP improvements are having on our bottom line.

Speaker Change: The progress we've made on our E. S. P. A substantial and execution on our strategy has continued to dramatically reshape the operating profile of the company over the past year.

Speaker Change: Volume for advise CTD in the first quarter was just over 30000 tests, which was essentially flat from the fourth quarter of 2023.

Speaker Change: However, we did see volume increase in each month of the first quarter and that momentum continued into Q2.

John Aballi: At this point, we have fully recognized the impact to volume we expected to see as a result of the changes we made in the middle of last year and are confidently seeing testing growth again. Over the coming quarters, we anticipate our volume continuing to build as our team works to improve ordering efficiencies and educate physicians on the clinical value proposition of advised CTD. During the last earnings call, we briefly touched on improvements we're planning to make to our advised CTD offering.

Speaker Change: At this point, we are fully recognize the impact of volume we expected to see as a result of the changes we made in the middle of last year and are confidently seeing testing growth again.

Over the coming quarters, we anticipate our volume continuing to build as our team works to improve ordering efficiencies and educate physicians on the clinical value proposition of advise CTD.

Speaker Change: Yeah.

Speaker Change: During the last earnings call, we briefly touched on improvements, we're planning to make to our advise CTD offering.

John Aballi: And I'd like to provide additional details, as we believe these enhancements will be very positive for customers in our organization. We currently plan to add three T cell markers for SOE and additional new markers for rheumatoid arthritis to the Advise CTD offering in the fourth quarter of this year. These new markers have been clinically validated, and we're working through the operational logistics of adding them to our core product. The benefits of these new markers will be multifaceted.

Speaker Change: And I'd like to provide additional details as we believe these enhancements will be very positive for customers and our organization.

Speaker Change: We currently plan to add three T cell markers for SLE and additional new markers for rheumatoid arthritis to the advise CTD offering in the fourth quarter of this year.

Speaker Change: These new markers have been clinically validated and were working through the operational logistics of adding them to our core product.

Speaker Change: The benefits of these new markers will be multifaceted first we gain enhanced IP protection and offering some of the most sensitive markers to aid in the diagnosis of systemic lupus erythematosus.

John Aballi: First, we gain enhanced IP protection by offering some of the most sensitive markers to aid in the diagnosis of systemic lupus erythematosus. Second, our overall product improves in terms of clinical utility, which we expect to lead to increased adoption over time. And third, we anticipate these additional markers will be accretive to our financial performance, both in terms of the top and bottom lines.

Speaker Change: Second our overall product improves in terms of clinical utility, which.

Speaker Change: Which we expect to lead to increased adoption over time.

Speaker Change: And third we anticipate these additional markers will be accretive to our financial performance both in terms of top and bottom lines.

John Aballi: In regard to the improved clinical utility that we expect for advised CTD, it helps to remind you that we've demonstrated in multiple published validation studies that the current sensitivity of advised CTD is 80%, with standard of care markers ranging from 14 to 44%. We're in the process of publishing data that will show how the introduction of T cells will significantly enhance the sensitivity of advised CTD. The improved sensitivity of these markers will help clinicians diagnose lupus patients sooner.

Speaker Change: In regard to the improved clinical utility that we expect for advise CTD. It helps to refresh that we've demonstrated in multiple published validation studies that the current sensitivity of advise CTD is 80% with standard of care markers ranging from 14% to 44%.

Speaker Change: We're in the process of publishing data that will show how the introduction of T cells will significantly enhance the sensitivity of advise CTD.

Speaker Change: The improved sensitivity of these markers will help clinicians diagnose lupus patients sooner.

John Aballi: The patent protection on the T cell markers continues through 2035, making their proprietary nature durable for the next decade plus. Additionally, Advice CTD currently includes traditional markers to aid in the diagnosis of rheumatoid arthritis, and our markers identify approximately 70% of RA patients. This leaves roughly 30% of RA patients who would be seronegative with no current diagnostic biomarker commercially available.

Speaker Change: The patent protection on the T cell markers continues through 2035, making their proprietary nature durable for the next decade plus.

Speaker Change: Additionally, advise CTD currently includes traditional markers to aid in the diagnosis of rheumatoid arthritis, and our markers identify approximately 70% of <unk> patients.

Speaker Change: This leaves roughly 30% of <unk> patients, who would be zero negative with no current diagnostic biomarker commercially available.

John Aballi: We plan to add new RA markers in the fourth quarter of this year, which we believe will allow us to improve the sensitivity of our rheumatoid arthritis assays and correctly identify 80 to 83 percent of total RA patients, or up to a third of the traditional seronegative population. We believe this level of diagnostic performance is unmatched by alternative commercially available options and will continue to demonstrate to our clinicians our commitment to providing them with the best quality testing with first-in-class performance.

Speaker Change: We plan to add new RNA markers in the fourth quarter of this year, which we believe will allow us to improve the sensitivity of our rheumatoid arthritis assays and correctly identify 80% to 83% of total RA patients or up to a third of the traditional Cerro negative population.

Speaker Change: We believe this level of diagnostic performance is unmatched and alternative commercially available options and we will continue to demonstrate to our clinicians our commitment to providing them the best quality testing with first in class performance.

John Aballi: Altogether, these new markers substantially increase the utility of Advise CTD, which we believe will lead to increased product adoption. Our commercial team is preparing for the launch of these products. Our sales organization is eager to educate clinicians on the gain in clinical value, and our laboratory is working through the operational requirements to offer these novel markers at scale from launch. We expect the impact of CTD demand will likely be slow at first, mirroring the pace of educational progress amongst our base of clinicians, but increasing over time.

Speaker Change: Altogether these new marker substantially increase the utility of advise CTD, which we believe will lead to increased product adoption.

Speaker Change: Our commercial team is preparing for the launch of these products. Our sales organization is ear to educate clinicians on the gain in clinical value and our laboratory is working through the operational requirements to offer these novel markers at scale from launch.

Speaker Change: We expect the impact of CTD demand will likely be slow at first marrying the pace of educational progress amongst our base of clinicians, but increasing over time.

John Aballi: We're very excited to bring these innovations to patients, signifying the next phase of growth at Exagen. I'd also like to briefly touch on the FDA's proposed rule that became final a few weeks ago. We believe we are well situated to handle the additional regulatory requirements as our laboratory is CLIA, CAP, and New York State certified, and we perform several assays which are currently FDA approved. Broadly, we believe this regulation will create a barrier to entry for competitors in our market because it increases the resources required for commercialization of lab-developed tests.

Speaker Change: We're very excited to bring these innovations to patients signifying the next phase of growth at <unk>.

Speaker Change: I'd also like to briefly touch on the Fda's proposed rule that became final a few weeks ago.

Speaker Change: We believe we are well situated to handle the additional regulatory requirements as our laboratory is CLIA cap and New York State certified and we performed several assays, which are currently FDA approved.

Speaker Change: Broadly we believe this regulation will create a barrier to entry for competitors in our market because it increases the resources required for commercialization of lab developed tests.

John Aballi: Lastly, I'd like to thank Brian Burke, Dr. Beto Paredes, and Wendy Johnson for their years of service, numerous contributions, and guidance to Exagen as they transition off our Board of Directors. Since I joined the company in late 2022, they have been integral in making the necessary changes to focus on achieving profitability and have been extremely supportive throughout my time here.

Speaker Change: We'll continue to monitor the development of these rules and do not currently anticipate any major impediments to executing our plan.

Speaker Change: Lastly, I'd like to thank Brian Burke, Dr. Beth <unk> and Wendy Johnson for their years of service numerous contributions and guidance to X Gen as they transition off our board of directors.

Speaker Change: Since I joined the company in late 2022, they have been integral in making the necessary changes to focus on achieving profitability and have been extremely supportive throughout my time here.

John Aballi: Additionally, I'd like to welcome Dr. Scott Kahn to our board and look forward to leveraging his unique skill set and experience as we move to our next phase of growth. I'll now turn the call over to Kamal for details on our financial results.

Additionally, I'd like to welcome Dr. Scott Con to our board and look forward to leveraging his unique skill set and experience as we move to our next phase of growth.

Speaker Change: I'll now turn the call over to come all for details on our financial results.

Kamal Adawi: Thank you, John, and good morning, everyone. As John mentioned, it was a strong start to the year with total revenues in the first quarter of 2024 of $14.4 million compared with $11.2 million in the first quarter of 2023, a 28.4% increase. Total revenues were driven by record ASPs for buying CPD tests. Other testing revenue was $1.5 million in the first quarter of 2024, compared with $1.4 million in the first quarter of 2023.

Speaker Change: Thank you John and good morning, everyone as John mentioned it was a strong start to the year with Charles revenues in the first quarter of 2024 up $14 4 million compared with $11 2 million in the first quarter of 2023 or 28, 4% increase total revenues were driven by record.

Speaker Change: Asps for <unk> CTD apps other testing revenue was $1 5 million in the first quarter of 2024, compared with $1 4 million in the first quarter of 2023.

Speaker Change: Improvements to our revenue cycle continued to yield results as we collected approximately 700000 from prior period collections from task performed over a year ago.

Kamal Adawi: Improvements to our revenue cycle continue to yield results as we collected approximately $700,000 from prior period collections from tests performed over a year ago. Cost of revenue was $5.8 million in Q1 2024, resulting in a total gross margin of 59.6% compared to 47.2% in Q1 2023. The increase in gross margin was driven by increases in ASP. Operating expenses excluding COGS for the first quarter of 2024 were $11.6 million, compared with $13 million in Q1 2023. Your year-end decreases were primarily due to a reduction in employee-related expenses as a result of decreases in head count.

Cost of revenue were $5 8 million in Q1 2024, resulting in total gross margin of 59, 6% compared to 47, 2% in Q1 2023. The increase in gross margin was driven by increases in Asps.

Speaker Change: <unk> expenses, excluding Cogs for the first quarter of 2024 were $11 6 million compared with $13 million in Q1 2023.

Speaker Change: Year over year decreases were primarily due to a reduction in employee related expenses as a result of decreases in head count.

Kamal Adawi: The net loss in Q1 2024 was $3.4 million compared with $7.7 million in Q1 2023. Adjusted EBITDA was negative $2 million for the first quarter of 2024 compared to negative $6.2 million for the first quarter of 2023. As a reminder, our adjusted EBITDA excludes stock compensation expense since it is a non-cash expense for the organization.

Speaker Change: The net loss in Q1, 2024 was $3 4 million compared with $7 7 million in Q1 2023.

Speaker Change: Adjusted EBITDA was negative $2 million for the first quarter of 2024 compared to negative $6 2 million for the first quarter of 2023.

Speaker Change: As a reminder, our adjusted EBITDA excludes stock comp expense since it is a noncash expense for the organization. Please refer to our earnings release issued earlier today for a reconciliation of adjusted EBITDA to net loss.

Kamal Adawi: Please refer to our earnings release issued earlier today for a reconciliation of adjusted EBITDA to net loss. Looking to our balance sheet, cash and cash equivalents as of March 31st, 2024 were approximately $27.3 million, and our accounts receivable balance increased to $10.9 million. As we communicated in March, we fully anticipated the increase in AR and decrease in cash as we hold claims in the first half of the year as part of our Revenue Cycle Management Initiative.

Speaker Change: Looking to our balance sheet cash and cash equivalents as of March 31, 2024 were approximately $27 3 million and our accounts receivable balance increased to $10 9 million.

Speaker Change: As we communicated in March we fully anticipated the increase in AR and decrease in cash as we hold claims in the first half of the year as part of our revenue cycle management initiatives.

Kamal Adawi: This remains consistent with the strategy we employed last year, and we anticipate this trend to continue in Q2 and begin to reverse in the second half of the year, similar to what we saw in 2023. I'm very happy with the start of the year as all key metrics continue to trend in the right direction. For full year 2024 revenue, we're raising guidance from approximately $54 million to at least $55 million. We're also updating our adjusted EBITDA guidance and now believe it will be better than negative $18 million, an improvement from our prior guidance of better than negative $20 million. We reiterate our belief that our existing cash and cash equivalents are sufficient to meet our anticipated cash requirements into 2026. We will now open the call to questions.

Speaker Change: This remains consistent with the strategy, we employed last year and we anticipate this trend to continue in Q2 and begin to reverse in the second half of the year similar to what we saw in 2023.

Speaker Change: I'm very happy with the start of the year as all key metrics continue to trend in the right direction for full year 2020 for revenue, we're raising guidance from approximately $54 million to at least $55 million. We're also updating our adjusted EBIT Guide and now believe it will be better than negative $18 million an improvement from our prior.

Speaker Change: Guidance of better than negative $20 million.

Speaker Change: We reiterate our belief that our existing cash and cash equivalents are sufficient to meet our anticipated cash requirements into 2026.

Speaker Change: We will now open the call for questions.

Operator: Thank you. We'll now be conducting a question and answer session. If you would like to ask a question at this time, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Thank you we will now be conducting a question and answer session.

To ask a question at this time, please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press Star two if you like to withdraw your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we poll for questions. Thank you. Thank you. And our first question today is from the line of Mark Massaro with BTIG. Please take their question.

Speaker Change: One moment. Please we poll for questions. Thank you.

Thank you and our first question today is from the line of Mark Massaro with BTG. Please proceed with your questions.

Mark Anthony Massaro: Hey guys, thank you for the questions and congrats on the quarter. The first one, I think, is the new product launch with the T cell markers. I know you talked about it on the prior quarter call, but I'm sure you've had some time, perhaps, to think about how this might expand your market opportunity. I know, certainly, if you're able to diagnose earlier, perhaps it could have increased clinical utility for some of the existing sets of customers that you're selling to, but can you maybe expand a little more on the RA? Is this incremental to the size of the market and the patient type that you're going after? And can you, perhaps, help us think about how this can fit in and potentially expand your market opportunities?

Mark Anthony Massaro: Hey, guys. Thank you for the questions and congrats on the quarter.

Mark Anthony Massaro: The first one I think is on the new product launch with the T cell markers I know you talked about it on the prior quarter call but.

Mark Anthony Massaro: I'm sure you've had some time, perhaps to think about how this might expand your market opportunity I know certainly if you are able to diagnose earlier.

Mark Anthony Massaro: Perhaps could have increased clinical utility on some of the existing.

Mark Anthony Massaro: Sets of customers that you're selling to but can you just maybe expand a little more on the <unk>.

This incremental too.

Mark Anthony Massaro: The size of the market and the patient type.

Mark Anthony Massaro: That you're going after.

Mark Anthony Massaro: And can you perhaps help us think about how this can fit in and potentially expand your market opportunity.

John Aballi: Hey Mark, good morning. Thanks so much for the question and opportunity to expand. Appreciate you joining the call as well.

Speaker Change: Hey, Mark good morning, Thanks, so much for the question and opportunity to expand.

Speaker Change: Appreciate you joining the call as well.

John Aballi: So when I joined the organization, we took a methodical approach to reviewing every aspect of our business and specifically evaluating the opportunity in the market against the technology and projects we had ongoing internally. We start with the customer need. And I truly believe that's important. You know, it's a simple concept.

Speaker Change: So when I joined the organization, we took a methodical approach to reviewing every aspect of our business and to specifically evaluate the opportunity in the market against the technology and projects, we had ongoing internally.

Speaker Change: We start with the customer need and I truly believe that's important it's a simple concept it's out there in plain sight, but it can be hard to maintain to take her point as you get into the thick of development.

John Aballi: It's out there in plain sight, but it can be hard to maintain this anchor point as you get into the thick of development. Certainly, I've had that experience.

Speaker Change: Certainly I've had that experience.

John Aballi: The science doesn't always work out as you draw it up, et cetera. But with both of these new marker efforts, we understand the customer need. And we're building on the back of a proven, well-adopted product in advised CTD. We've said consistently that our market there is for ANA positive referrals into rheumatology. From a prevalence standpoint, that's roughly 41 million Americans in the U.S. Additionally, up to a third of RA patients present with a positive ANA test. So this very much is in the wheelhouse of

Speaker Change: The science doesn't always work out as you draw it up et cetera.

Speaker Change: With both of these new marker efforts, we understand the customer need and we're building on the back of a proven well adopted product and advise CTD.

Speaker Change: We've said consistently our market there is for <unk> and a positive referrals into rheumatology.

Speaker Change: From a prevalent standpoint, that's roughly 41 million Americans in the U S.

Speaker Change: Up to a third of our Ah patients present with a positive DNA test. So this very much is in the wheelhouse of <unk>.

John Aballi: Diagnostic Utility within Connective Tissue Disease. And our strategy across the organization has really been, how do we make it by CTD better? You know, whether that's with new markers such as these, whether we're improving our service with our sales and customer facing groups, or even with our ASPF. We've gone all in on improving this part of our business and studying how Advice CTD is used clinically. And that's led us to want to strengthen that aspect, both in terms of what we can provide for the diagnostic sensitivity of SLE and in rheumatoid arthritis. For RA, you have established markers used in the diagnosis of RA, such as anti-CCP antibodies, and various rheumatoid factors. These are all part of Advise CTD today.

Speaker Change: Diagnostic utility within connective tissue disease and.

Speaker Change: And our strategy across the organization has really been how do we make advise CTD better.

Speaker Change: Whether thats with new markers such as these.

Speaker Change: But it we're improving our service with our sales and customer facing groups or even with our ESP efforts, we've gone all in and improving this part of our business and studying how advise CTD is used clinically and thats led us to want to strengthen.

Speaker Change: That aspect both in terms of what we can provide for diagnostic sensitivity of SLE and in rheumatoid arthritis.

Speaker Change: For our a you have established markers used in the diagnosis of RA such as anti CCP antibodies. Various rheumatoid factors. These are part of advise CTD today, we also offer.

John Aballi: We also offer a fairly unique anti-carbamylated protein, or anti-CARP, as it's more commonly referred to, which helps improve the sensitivity in identifying suspected RA patients. But there are still approximately 30 percent of RA patients who are diagnosed without any serologic positivity. And this group of patients can be challenging clinically. This is exactly what these new markers aim to do. And as we said on the call, we anticipate capturing around a third of that, what is today, the seronegative RA patient population. And that should be industry-setting performance, very additive to advise.

Speaker Change: Fairly unique anti <unk> protein or antique car P. As it's more commonly referred to which helps improve the sensitivity and identifying suspected RNA patients, but there is still approximately 30% of <unk> patients, which are diagnosed without any <unk> positivity.

And this group of patients can be challenging clinically.

Speaker Change: This is exactly what these new markers aim.

Speaker Change: To do and as we said on the call we anticipate capture.

Speaker Change: Capturing around a third of that what is today Cerro negative patient population and that should be industry setting performance.

Speaker Change: So very additive to advise CTD.

Mark Anthony Massaro: Got it. All right. Awesome. That's helpful. And then, obviously, you guys had a nice quarter. You exceeded my in-street expectations.

Speaker Change: Got it alright awesome. That's helpful. And then obviously you guys had a nice quarter.

Mark Anthony Massaro: Looks like a lot of this was driven by the ASP expansion. So, for Kamal, I think I heard you say that you collected $700,000 from prior period collections. When I think about your raised guidance, are you expecting any other prior period collections for the rest of this year? And then, even if you are not including it in guidance, how do you think about the potential opportunity to collect from prior periods? I know elsewhere in diagnostics land, this quarter, I saw quite a few labs in my coverage that collected material amounts from prior periods. So, how should we think about that opportunity?

Speaker Change: You exceeded my and street expectations, let's take a lot of this was driven by the ASP expansion. So.

Speaker Change: For tomorrow.

Speaker Change: I think I heard you say that you've collected $700000 from prior period collections.

Speaker Change: When I think about your raised guidance are you expecting any other.

Speaker Change: Prior period collections for the rest of this year and then even if you are not including it in guidance.

Speaker Change: How do you think about the potential opportunity to collect from prior periods I know elsewhere in diagnostics lab this quarter.

I saw quite a few labs in my coverage that collected material amounts from prior periods. So how should we think about that opportunity set.

Kamal Adawi: Hi Mark. Thanks for the question. Yes, we collected $700,000 in Q1 of 24. But keep in mind, we had collected about $5 million between Q2 2023 and Q4 2023. So, we've seen that number come down in Q1. When we gave guidance last quarter, we made it clear that we don't factor in prior period collections into our guidance estimate. And we didn't do that again this time. Just because of the visibility into collecting on prior period collections, it's very challenging to forecast that. And we did say that over time, we expect that number to get closer to zero. So we weren't going to factor that into the guidance.

Hi, Mark Thanks for the question, Yes, we collected 701000 in Q1 of 'twenty four keep in mind, we had collected about $5 million between Q2 2023 in Q4 2023, So we've seen that number come down in Q1.

Speaker Change: We gave guidance last quarter, we made it clear that we don't factor in prior period collections into our guidance estimate and we didn't do that again. This time, just because of the visibility into collecting on prior period collections, it's very challenging to forecast that and we did say over time.

Speaker Change: <unk>, we expect that number to get closer to zero. So we werent kind of factor that into the guidance.

Mark Anthony Massaro: Yep, that makes sense. And then, maybe, one more for you, Kamal.

Speaker Change: Yes that makes sense.

Speaker Change: And then maybe one more for you come I'll do you still think that you can achieve cash flow breakeven at annual revenue of 75 million and 60% gross margins.

Mark Anthony Massaro: Do you still think that you can achieve cash flow breakeven at annual revenue of $75 million and 60% gross margin?

Speaker Change: Okay.

Speaker Change: We had a great Q1 on gross margins 59, 6%.

Kamal Adawi: You know, we had a great Q1 on gross margins of 59.6%. And over the last several years, you've probably heard me say over and over again that usually you see the lowest gross margin in the first quarter because of seasonality, because deductibles are reset in Q1. However, our strategy with revenue cycle management of holding claims has offset that seasonality impact on gross margins, and we didn't see that negative impact in Q1.

Speaker Change: And over the last several years, you've probably heard me say over and over again.

Speaker Change: Usually you see the lowest gross margin in the first quarter because of seasonality as deductibles reset in Q1, However, our strategy with revenue cycle management of holding claims has offset that seasonality impact on the gross margins and we didn't see that negative impact in Q1. So I was very pleased.

Kamal Adawi: So I was very pleased with that number of almost 60% on the gross margin. Now, I used to say we build off that Q1 number; we're gonna have a little bit of lumpiness with gross margins, just because of that prior period collection number, but I'm very excited with how well we did at 59.6%. And when we do get to profitability, we always put that 75 million revenue number and 60% gross margin figure as a goal. And we've exceeded our internal expectations on the gross margin number. So as we get towards profitability, we're likely gonna have a higher gross margin number, which means our revenue number is gonna come down slightly.

Speaker Change: With a number of almost 60% on the gross margin now I used to say, we build off that Q1 number we're going to have a little bit of lumpiness with gross margins just because of our prior period collection number, but I'm very excited with how well we did at 59, 6% and when we do get to a profitability.

Speaker Change: <unk>.

Speaker Change: <unk> always put out $75 million revenue number and 60% gross margin figure as a goal we've exceeded our internal expectations on the gross margin number so as we get towards profitability, we're likely going to have a higher gross margin number which means that revenue number is going to come down slightly.

Mark Anthony Massaro: Yep, that makes sense. All right. Thanks so much, guys.

Speaker Change: Yes that makes sense alright, thanks, so much guys.

Operator: The next questions are from the line of Kyle Mikson with Canic Orginuity. Please proceed with your question.

Speaker Change: The next questions are from the line of Kyle <unk> with Canaccord Genuity. Please proceed with your questions.

Kyle Alexander Mikson: Hey guys, thanks for the questions.

Kyle: Hey, guys. Thanks for the questions Congrats really great quarter.

Kyle Alexander Mikson: Congratulations. It was a really great quarter. Yeah, just on that note, Kamal, with the gross margin, if you take out the $700K prior period collections, it looks like the core gross margin was in the high 50s, maybe 58%. I mean, in the past, the core margin was like 50%. I think last quarter, if you take out the prior period collections, maybe 50% was the margin. So maybe just talk about what an organic gross margin looks like when you take out some of these prior period revenues and just how to think about that going forward. For me, a lot going forward.

Kyle: Yeah, just on that note come out with the gross margin. If you take out the 700 K prior period collections looks like core gross margin was like high <unk>, maybe 58% in the past that the core margin was like 50% I think last quarter. If you take out the prior period collections, maybe 50% list.

Kyle: With our margin so maybe just talk about what an organic gross margin looks like when you take out some of these prior period revenues and.

Kyle: Just how to think about that going forward, what that means for the profitability kind of.

Kyle: The formula.

Kyle: Going forward.

Kamal Adawi: Sure, thanks for the question, Kyle. Yeah, so we still are exceeding what we have rejected internally in terms of gross margins, even with the 700,000 taken out. So our ASPs have trended up conservably, even without prior period collection, you know; it's up almost $100 year over year. So we've been making great strides. Obviously, our gross margin isn't all being driven by prior period collections. The ASP is the biggest contributor to the gross margin though, but not all from prior periods.

Speaker Change: Sure. Thanks for the question Kyle Yeah. So we still are exceeding what we <unk>.

Speaker Change: <unk> currently in terms of gross margins, even with the 700000 taken out so our asps have trended up considerably even without prior period collections, it's up almost $100 year over year. So we've been making great strides. It's obviously, our gross margin has been all being <unk>.

Speaker Change: And by that prior period collections.

Speaker Change: The asps.

Speaker Change: Is the biggest contributor to the gross margin, though but not all from prior period.

Kyle Alexander Mikson: Yeah, okay, thanks, Claude. And then John, on the, you know, I guess, monthly volume levels, you said they increased month over month each month during one queue, you know, maybe like on an annualized basis, maybe March was ahead of 30k or so. I mean, can you just talk about when the You know, with some quantitative commentary, like, you know, how we should think about the exit rates in March for volume and maybe we saw recently in April or May.

Speaker Change: Yes, Okay. Thanks, Paul and then John on the.

Speaker Change: I guess month.

Speaker Change: Monthly volume levels.

John: Increased month over month, each each month during <unk>, if you look on that.

John: Annualized basis, maybe marches ahead of 30 carriers. So I mean can you just talk about with me.

John: With some quantitative commentary like.

John: How we should think about the exit rates in March for volume and maybe what you saw recently in April and May.

John Aballi: Kyle, good morning. Thanks for joining the call. I appreciate the question.

Speaker Change: Hey, good morning, Thanks for joining the call.

Speaker Change: I appreciate the question. So we made changes just to give context why we're seeing some of these volume trends, we made changes to our process in 2023, and an effort to improve asps for advise CTD.

John Aballi: So we made changes just to give context why we're seeing some of these volume trends. We made changes to our process in 2023 in an effort to improve ASP for AdviseCTD, and this was with a long-run mentality or viewpoint.

Speaker Change: And this is with a long run mentality or viewpoint.

John Aballi: We're trying to operate a more profitable business, and it's clearly working. There's more to come, and so this was absolutely the right approach to take, and I'm very encouraged about our progress over the past 15 months. We expect some temporary impact of volume, as you said, as we work with various accounts to adjust and as we focus our sales team on making these changes smooth. In the past, and we're returning to this more traditionally now, our normal sales focus has been the pursuit of new business.

Speaker Change: We're trying to operate a more profitable business and it's clearly working there is more to come and so this was absolutely the right approach to take and I'm very encouraged about our progress over the past 15 months we.

Speaker Change: We did with these changes expect some temporary impact of volume as you said as we work with various accounts to adjust and as we focus our sales team on making these changes smooth.

Speaker Change: In the past and were returning to this more traditionally now our normal sales focus is in the pursuit of new business and so thats occurring we've moved more in that direction I expected Q4 of 23 to be the low point in terms of this temporary volume correction and that's essentially exactly what we saw at <unk>.

John Aballi: And so that's happening. We've moved more in that direction. I expected Q4 of 23 to be the low point in terms of this temporary volume correction, and that's essentially exactly what we saw. It carried over a little bit to the first couple of weeks in January, but we had a strong end to January. February grew further, and March was the height of the quarter. Our momentum has continued into Q2, and I'm very confident that we've returned to growth driven by a combination of ASP and volume improvements. We don't guide on volume, per se, but

Speaker Change: Carried over.

Speaker Change: Little bit to the first couple of weeks in January but we had a strong end of January February grew further March was the height of the quarter. Our momentum has continued into Q2 and I'm very confident that we've returned to growth driven by a combination of ASP and volume improvements, we don't guide on volume.

Speaker Change: Per se, but this.

John Aballi: This is exactly what we expected. To be honest, it's fun to be operating a more profitable business with a clear path to profitability and strong growth. And so we're very excited with the trajectory we're on. Okay, great.

Speaker Change: This is exactly what we expected to be honest, it's fun to be operating a more profitable business with a clear path to profitability and strong growth and so we're very excited with the trajectory we're on.

Kyle Alexander Mikson: Okay, great. A quick side note was, did ASP remain pretty healthy in each month, or did that decline, you know, as, like, sequentially?

Speaker Change: Okay, Great. A quick side note was good ASP remained pretty healthy and each one third of that decline.

Speaker Change: I'd like sequentially.

John Aballi: So with our ASP being on an accrual methodology, we look at that monthly, but we don't make the final adjustments until the end of the quarter. So we'll be ready to comment on that at the next earnings call. There's nothing that we saw that would make me concerned with the ASP number going in a different direction than what you've seen over the past four quarters.

Speaker Change: So with our AFP being on accrual methodology.

Speaker Change: We look at that monthly, but we don't make the final adjustments until the end of the quarter. So we'll be ready to comment on that at the next earnings call. There is nothing that we saw that wed.

Make me.

Speaker Change: Concerned with the ASP number going in a different direction than what you've seen over the past four quarters.

Kyle Alexander Mikson: Okay, that's good. Last one, John.

Speaker Change: Okay. That's great final one John just given this FDA final rule I think talked about that a little bit in your remarks.

Kyle Alexander Mikson: Just, you know, given this FDA final rule, I think you talked about it a little bit in your remarks. Just wondering, you know, the impact on your pipeline. I know that it has kind of de-emphasized in recent years a bit, but I feel like that remains an important part of the growth strategy long term. So maybe just talk a bit about how you're thinking about investing in the pipeline and kind of future tests and stuff, you know, including some of these new markers.

Speaker Change: Just wondering getting back to your pipeline I know that it was kind of deemphasize in recent years, a bit but I feel like it remains an important part of the growth strategy long term. So maybe just talk a bit about how youre thinking about investing in the pipeline and kind of a future testing started including some of these new markers.

John Aballi: Thanks Kyle, a very relevant question, a really good question, something that we're evaluating and working to get smarter on on a daily basis around here. To be clear, we're still studying the exact implications of the rule to best understand the potential strategic impacts it'll have on our approach. I think there's a very real opportunity that this provides advantages for us, and I want to better understand those, but then also, I think maybe a little more to your question was around which gaps and what it would take to comply over the phase-out period specifically relevant to our development efforts. So as it pertains to our development efforts, or I guess not currently marketed would be the language used there, part of our pipeline. Like I said, we're still working through some clarifying points.

Speaker Change: Thanks, Carl very relevant question really good question, something that we're evaluating and working to get smarter on on a daily basis around here.

Speaker Change: To be clear, we're still studying the exact implications of the rule to best understand the potential strategic impacts it will have on our approach.

Speaker Change: I think there's a very real opportunity that this provides advantages for us and I want to better understand those but then also I think maybe a little more to your question was around which gaps in what would it take to comply over the phase out period, specifically relevant to our our development efforts.

So as it pertains to our development efforts are I guess not currently marketed would be the language used there.

Speaker Change: Part of our pipeline.

Speaker Change: Like I said, we're still working through some clarifying points. The FDA itself is hosting a webinar tomorrow to clarify some of the details around the final rule. So even information out of the FDA is still.

John Aballi: The FDA itself is hosting a webinar tomorrow to clarify some of the details around the final rule, so even information out of the FDA is still percolating. We continue to be confident that our approach to developing LDTs, and specifically our track record of meeting the requirements of New York State certification, will allow us to remain on track with our communicated timeline. So there will be some upgrades required, we anticipate, to our quality management systems.

Speaker Change: Percolating, but.

Speaker Change: We continue to be confident that our approach to developing <unk> and specifically our track record of meeting the requirements of New York State certification will allow us to remain on track with our communicated timelines.

Speaker Change: So there will be some upgrades required we anticipate to our quality management systems. It appears.

John Aballi: Again, that's likely over the next year or two, but again, we're still working through all of these details over the coming months. We have the right resources to support our information gathering, and as we evaluate the impacts of our strategic approach, we'll keep everyone apprised. We do believe that in the long run, the way we're currently understanding the final rule, this is likely to be a competitive advantage for us, as it raises the bar in some respects for new entrants and LDT development.

Speaker Change: Again, thats likely over the next year or two but again, we're still working through all of these details over the coming months, we have the right resources to support our information gathering and as we evaluate impacts to our strategic approach will keep everyone apprised, we do believe that in the long run the way. We're currently understanding the final rule. This is likely to be a competitive advantage.

Speaker Change: For us as it raises the bar in some respect to new entrants in LDC development.

Kyle Alexander Mikson: That's helpful. Thanks, John. Thanks, guys.

Speaker Change: Perfect. That's helpful. Thanks, John Thanks, guys.

Speaker Change: Thanks Scott.

Operator: The next question is from the line of Dan Brennan with TD Cowen. Please proceed with your questions.

Speaker Change: The next question is from the line of Dan Brennan with TD Cowen. Please proceed with your questions.

Daniel Gregory Brennan: Great, thanks for the questions, congrats on the quarter. Maybe the first one on price, I think I heard you guys just mention that; there's no reason to... The recent four-quarter trend can continue, so if we strip out the prior periods, it looks like price in Q3 went up $29 sequentially, Q4 up $40, and then this quarter up $40. So is the expectation that price will continue to climb from here? I know you're still withholding some claims, but did I hear you guys correctly on that?

Daniel Gregory Brennan: Great. Thanks for the questions congrats on the quarter.

Daniel Gregory Brennan: Maybe just last one on price I think I heard you guys. Just mentioned that there is no reason.

Daniel Gregory Brennan: The recent four quarter trend can continue so.

Speaker Change: If we strip out.

Daniel Gregory Brennan: The prior periods it looks like price in Q3 went up $29 sequentially Q4 up 40, and then this quarter up 40.

Speaker Change: So is the expectation that price will continue to climb from here I know you're still withholding some claims but did I hear you guys correctly on it.

Kamal Adawi: Good morning. So we are still holding claims. We do this for various internal reasons which we think optimize our ability to collect cash relative to those claims. We've had tremendous growth on the ASP side. I appreciate you throwing out those numbers.

Good morning.

Speaker Change: So we are still holding claims we do this for various various internal reasons, which we think optimize our ability to collect cash.

Speaker Change: Relative to those claims we.

Speaker Change: We've had tremendous growth on the ASP side.

Speaker Change: You just I appreciate you've thrown out there those numbers from our perspective, we're working hard on the processes that we now will pay off long term, we know how to do this strategically we know how to operate very sound revenue cycle practices and Thats, a big part of what I brought to the organization and coming here. It takes some time to get these things in place.

Kamal Adawi: From our perspective, we're working hard on the processes that we know will pay off long term. We know how to do this strategically. We know how to operate very sound revenue cycle practices. And that's a big part of what I brought to the organization in coming here. It takes some time to get these things in place.

Kamal Adawi: We're very content and happy with how that progress has materialized, but we expect it to continue. Whether it'll continue exactly in those proportions is an inherently difficult metric to forecast. That's part of the reason why we point folks to the trailing 12-month metric. That's part of the reason why we don't provide guidance specifically related to ASP. We can have material wins at any given time in the future. The lower-hanging fruit tends to be consumed here in the early phases, and then it gets a little bit harder as time goes on.

Speaker Change: Very.

And happy with how that progress has materialized, but we expect it to continue.

Speaker Change: Either it will continue exactly in those proportions, asps and inherently difficult metric to forecast. That's that's part of the reason why we do the point folks to the trailing 12 month metric as part of the reason why we don't.

Speaker Change: Provide guidance specifically related to Asps.

We can have material wins at any given time in the future the lower hanging fruit tends to be.

Speaker Change: Consumed right.

Speaker Change: Here in the early phases, and then it gets a little bit harder as time goes on but we still are very optimistic internally that we have the right strategy in place to to drive asps higher over the long term and again looking at that trailing 12 month number is likely to give you a very good insight into the trend over time.

Kamal Adawi: But we still are very optimistic internally that we have the right strategy in place to drive ASP higher over the long term. And again, looking at that trailing 12-month number is likely to give you a very good insight into the trend over time.

Daniel Gregory Brennan: And then maybe one just on volume. So just to be clear, it sounds like you're basically indicating that the volume growth that you've seen, you expect volume to continue to climb sequentially from here. I mean, it might not be linearly, but is that the expectation? That's kind of what you're thinking about for 24?

Speaker Change: Great. Thanks for that and then maybe one just on volume so just to be clear it sounds like youre basically indicating that the volume growth that you've seen you expect volumes to continue to climb sequentially from here I mean, it might not be linearly, but is that is that the expectation thats kind of what youre thinking about for 2004.

John Aballi: Yeah, that's a very fair assumption.

Speaker Change: Yeah, that's a very fair assumption.

Daniel Gregory Brennan: Got it. Okay.

Speaker Change: Got it Okay, and then on the new markers like.

Speaker Change: Could there be any impact on price over time would you look to re file and given you have greater utility that you might look to get a better price.

Daniel Gregory Brennan: And then on the new markers, could there be any impact on price over time? Would you look to refile and, given you have greater utility, might you look to get a better price? And I know you sounded pretty excited, you'll start to market these this year and then into next, but could you also just help us think through, I know you gave some color around the new market opportunity that you have, but just in terms of magnitude, like what kind of impact could these have as we look out in 25 and 26?

Speaker Change: I know you sounded pretty excited you'll start to market. These kind of this year and then into next but.

Speaker Change: Could you could you also just help us think through I know you gave some some color around the new market opportunity that you have but just in terms of magnitude like what kind of impact could be sizes as we look out in 'twenty five and 'twenty six.

John Aballi: That's a great question. At the surface, yes, we're extremely excited. We fully expect these new markers to be accretive to our individual advised CTD pricing. Therefore, you know, top line certainly gets impacted. They'll be margin accretive as well. So these are very positive from a financial performance standpoint. And again, this is me super excited. So I'm trying to convey that from my standpoint.

Speaker Change: That's a great question at the surface, yes, we're extremely excited we fully expect these new markers.

Speaker Change: It could be accretive to our individual.

Speaker Change: ICD pricing, therefore, topline certainly gets impacted there'll be margin accretive as well. So these are these are very positive from a financial performance standpoint and again. This is this is me super excited so.

Daniel Gregory Brennan: I think about the impact that these markers will have clinically. They're the most sensitive markers on the T-cell side. They're the most sensitive markers for the detection of SLE. On the rheumatoid arthritis side, you know, this sets the standard in the industry from our perspective. So, you know, to hit both of those milestones clinically is huge. And then to have it be a significant benefit for the organization, we expect, you know. I think this is a no-brainer internally and something that we've got.

Speaker Change: I'm trying to convey that from my standpoint, I think what the impact that these markets will have clinically.

Speaker Change: They are the most sensitive markers on the T cell side. There are the most sensitive markers for detection of SLE on the rheumatoid arthritis side.

Speaker Change: <unk> sets the standard in the industry from our perspective, so to hit both of those milestones clinically that's huge and then to have it.

Speaker Change: <unk> be a significant benefit for the organization we expect.

Speaker Change: I think this is a.

This is a no brainer internally and something that we're we've got.

Daniel Gregory Brennan: We're laser focused internally on getting these markers out as soon as possible, sometime here in Q4. We're not ready to guide at any point right now on the financial impact, really especially since we don't have a solidified launch date and we're still working through the optimization in our lab, which could change some of the cog profile, etc. But you're exactly right, 25, 26, this will be very substantial for the organization.

Speaker Change: Laser focus internally and getting these markers out as soon as possible.

I'm here in Q4, we're not ready to guide at any point right now on the financial impact.

Speaker Change: Really, especially since we don't have a solidified launch date and we are still working through the optimization in our lab, which could change some of the Cogs profile et cetera. So.

Speaker Change: But youre exactly right $25 26.

Speaker Change: This will be very substantial for the organization.

Operator: Great. Okay. Thanks, guys.

Speaker Change: Great. Okay. Thanks, guys.

Operator: Our next questions are from the line of Andrew Brackmann with William Blair. Please proceed with your question.

Speaker Change: Our next questions are from the line of Andrew <unk> with William Blair. Please proceed with your questions.

Dustin G. Scaringe: Hi, good morning. This is Dustin. I'm here on behalf of Andrew. Thanks for taking our questions. First question on the guide, just wondering what your spending priorities are for the year given Adjusted EBITDA came in better than expected, minus two million, but the full year guide is at better than minus 18 million for the year. Thank you.

Speaker Change: Hi, Good morning. This is Dawson on for Andrew Thanks for taking my questions first question on the guide just wondering what your spending priorities are for the year given.

Dawson: And our adjusted EBITDA came in better than expected minus $2 million, but.

Dawson: The full year guide is that minus eight or better than minus $18 million for the year. Thank you.

John Aballi: Dustin, good morning. Thanks for joining. Appreciate that. You know, if you take a look at R&D, and Kamal can comment a little bit on OPEX and SG&A and stuff. But, you know, you take a look at R&D and Q1, we still spent a million dollars, that's consistent with what we said, historically, annual expenditures, you know, approaching kind of that five, six million range, that's sufficient to bring, The new markers to market, T-Cell along with RA, those costs have already been baked in, they're included in that number, have a few other projects in our pipeline around disease activity in SLE, along with continuing to push along some of the technology that we licensed out of Johns Hopkins.

Speaker Change: Hey, Justin good morning, Thanks for joining I appreciate that.

Justin: If you take a look at R&D and come all can comment a little bit on opex and SG&A and stuff.

Justin: But you take a look at R&D in Q1, we still spent $1 million thats consistent with what we said historically annual expenditures.

Approaching kind of that $5 $6 million range.

Justin: Sufficient to bring.

Justin: The new markers to market T cell along with.

Justin: Those costs have already been baked in there included in that number and then we also have a few other.

Justin: Projects in our pipeline around disease activity in SLE along with.

Justin: Continuing to push along some of the technology that we licensed at Johns Hopkins So.

John Aballi: So we're not rolling back the development that we need for future growth. You know, organizationally, we're still spending. To keep our instrumentation in the lab very relevant, very up to date, you know, from a guidance standpoint, you know, how that factors into the negative 18.

Justin: We're not rolling back the development.

Justin: That we need for future growth.

Speaker Change: Organizationally, we're still spending.

Speaker Change: To keep our instrumentation in the lab.

Speaker Change: Very relevant very up to date.

Speaker Change: From a guidance standpoint, how that factors into the negative 18.

John Aballi: We're extremely proud. Maybe one thing to start off with, we're extremely proud of the progress here in Q1 and our ability to deliver strong revenue growth and, I guess, an ever-contracting adjusted EBITDA loss. But just over a year ago, we were averaging about $10 million, negative $10 million per quarter in adjusted EBITDA. Last year, we cut that in half to negative $5 million per quarter on average. So from our perspective, the recent trends have to be kept in context, we believe, especially since we had approximately $5 million in prior period collections aiding our numbers last year.

Speaker Change: We're.

Streaming proud maybe one thing to start off with we're extremely proud of the progress here in Q1, and our ability to deliver strong revenue revenue growth and I guess I ever contracting adjusted EBITDA loss, but just over a year ago, we were averaging about $10 million negative $10 million per quarter in adjusted EBITDA last year, we cut that in half two.

Speaker Change: $5 million per quarter on average so from our perspective. The recent trends has to be kept in context, we believe especially since we had approximately $5 million prior period collections aiding our numbers last year.

John Aballi: So while we have continued to outpace even our internal projections, our progress will bounce around a little bit, and we're not quite ready to establish a new run rate in terms of adjusted EBITDA. But we do feel very confident that we will achieve our goals, and we're working to do so ahead of expectations, is probably how I'll mention that.

Speaker Change: So while we have continued to outpace even our internal projections, our progress will bounce around a little bit and we're not quite ready to establish a new run rate in terms of adjusted EBITDA, but we do feel very confident that we will achieve our goals and we're working to do so ahead of expectations as maybe how I.

Kamal Adawi: I'll mention that. And Dustin, I'll just add, you know, we've been very prudent with our expense control on our pathway to profitability. When looking at SG&A and R&D, I would just factor in small expense increases, quarter over quarter, mainly due to inflationary increases.

Speaker Change: You mentioned that and desktop will just add we've been very prudent with our expense control on our pathway to profitability.

Speaker Change: When looking at SG&A and R&D I would just factor in small expense.

Speaker Change: The expense increase this quarter over quarter, mainly due to inflationary increases.

Dustin G. Scaringe: Okay, that makes sense. Thanks for that.

Speaker Change: Okay makes sense thanks for that.

Dustin G. Scaringe: And then maybe I can ask you a little bit about Salesforce productivity. You made some changes to the organization over the last year. So is there any color you can add on how we should be thinking about driving further productivity from here?

Speaker Change: And then maybe wondering if you can talk a little bit about sales force productivity.

Speaker Change: You made some changes to the organization over the last year. So is there any color you can add on how we should be thinking about driving further productivity from here.

John Aballi: It's a great question. So just to give you a sense of our current sales footprint across the U.S., when I joined the organization in late 22, we had 63 territories. We did an evaluation to take a look at how we would break even across the various territories and at least cover the cost of the sales rep. We consolidated those 63 down to 40 in December of 22, and we've been operating at that level since.

Speaker Change: It's a great question, so just to give a sense of our current sales footprint across the U S.

Speaker Change: I joined the organization in late 'twenty, two we had 63 territories.

Speaker Change: We did an evaluation to take a look at how we would breakeven across.

Speaker Change: The various territories and at least cover the cost of the sales Rep. We consolidated those 63 down to 40% in December of 'twenty, two and we've been operating at that level since we've really been working to.

John Aballi: We've really been working to coach and drive for performance within those individual territories. We had record volume in Q1 and Q2 of 2023. So we feel that 40 is the right number for us right now. We're still working through some of the adjustments that we made in July regarding our billing policy. And so, as I've mentioned, our team is heavily focused on ensuring that each individual account is serviced well and that these transitions are smooth.

Speaker Change: Coach and drive for performance within those individual territories, we had record volume in Q1 and Q2 of.

Speaker Change: 2023, so we feel that 40 is the right number for us right now.

Speaker Change:

Speaker Change: We're still working through some of the adjustments that we made in July regarding our billing policy and so as I've mentioned our team is heavily focused on ensuring that each individual account is serviced well and that these transitions are smooth.

John Aballi: As we return more to, I guess, a hunting mindset, the pursuit of new business mindset, a more traditional approach from the sales standpoint, we've got the right footprint for some time here and certainly have the ability to grow with this existing footprint. As we move into higher levels of profitability within each territory, then we'll expand, kind of empirically from there.

Speaker Change: As we return more to a I guess, a hunting mindset pursuit of new business mindset.

Speaker Change: More traditional approach from a sales standpoint.

Speaker Change: We've got the right footprint for for some time here and certainly.

Have the ability to grow with this existing footprint as we move into higher levels of profitability within each territory then will expand.

Speaker Change: Ah kind of empirically from there.

Yes.

Dustin G. Scaringe: Okay, one last one for us. Just what assumptions are you guys making either strategically or financially for the increased education for the new markers you're planning on adding later this year? Thank you.

Speaker Change: Okay, one last one for us just assumptions.

Speaker Change: Assumptions are you guys, making strategically.

Speaker Change: Strategically or financially from the increased education within new markers, you're planning on adding later this year. Thank you.

John Aballi: That's a good question as well. From our standpoint, we believe our current expense profile is sufficient to launch these new markers. There may be some additional conferences we attend. There may be some small advertisements that we do relevant to the rheumatology community. But from our point of view, there's not a huge need to have an outsized expenditure related to the launch of these products.

Speaker Change: It's a good question as well from our standpoint, we just.

Speaker Change: We believe our current expense profile is sufficient to launch these new markers there may be.

Speaker Change: Some additional conferences, we attend and there may be some small advertisements that we that we do on relevant to the rheumatology community, but from our standpoint there is.

Speaker Change: Not a huge need to have an outsized expenditure related to the launch of these products.

Speaker Change: We're preparing a manuscript we think the science.

John Aballi: We're preparing a manuscript. We think the science is really where you need to start in the messaging. Our sales team knows our current product extremely well, so layering on additional clinical utility evidence is just part of the evolution of the knowledge about our product. So from our standpoint, I wouldn't expect SG&A to change its mind.

Speaker Change: Is really where you need to start in the messaging our sales team knows our current product extremely well so layering on additional clinical utility evidence is just part of the evolution of the knowledge of our products so from our standpoint.

Speaker Change: Wouldn't expect SG&A to change much.

Dustin G. Scaringe: Okay, that's it from us. Thank you.

Speaker Change: Okay. That's it from us thank you.

John Aballi: Thank you. At this time, we've reached the end of the question and answer session, and I'll turn the call over to John Aballi for closing remarks.

Speaker Change: Thank you at this time, we've reached the end of the question and answer session now I'll turn the call over to John <unk> for closing remarks.

John Aballi: Thanks. We're off to an excellent start to the year. My confidence and optimism continue to build as our organization evolves and undergoes substantial improvements. We've set ourselves up for sustainable growth through the changes we made last year and with the updates planned for Advise CTD this year. We will continue to accelerate that growth. It's encouraging to see the dedication within the Exagen team, and I truthfully could not be more excited for our future. Thanks so much for joining us on the call today.

John: Thanks, we're off to an excellent start to the year.

My confidence and optimism continues to build as our organization evolves and undergo substantial improvements.

John: We've set ourselves up for sustainable growth throughout the changes, we made last year and with the updates planned for advise CTD. This year, we will continue to accelerate that growth. It is encouraging to see the devotion within the <unk> team and I truthfully could not be more excited for our future.

Speaker Change: Thanks, so much for joining the call today.

Operator: This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This will conclude today's conference you may disconnect your lines at this time and thank you for your participation.