Q1 2024 Spectral AI Inc Earnings call

May 7, 2024

Operator: Good day, and welcome to the Spectral AI first quarter 2024 financial results conference call. All participants will be in listen-only mode.

Good day and welcome to the spectral AI first quarter 2024 financial results Conference call.

All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touch-tone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Devin Sullivan, Managing Director of the Equity Group. Please go ahead.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Devin Sullivan manager managing director of the equity group. Please go ahead.

Devin Sullivan: Thank you, Chad. Good afternoon, everyone, and thank you for joining us for Spectral AI's 2024 first quarter financial results conference call. Our speakers for today will be Peter Carlson, Chief Executive Officer of Spectral AI, and Vince Capone, the company's Chief Financial Officer. Before we begin, I'd like to remind everyone that during this call, certain statements may be made that constitute forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including statements regarding the company's strategy, plans, objectives, initiatives, and financial outlook.

Devin Sullivan: Thank you Chad good afternoon, everyone and thank you for joining us for spectral AI is 2024 first quarter financial results Conference call.

Devin Sullivan: Our speakers for today will be Peter Carlson, Chief Executive Officer, spectral AI and Vince Capone, the company's Chief Financial Officer.

Devin Sullivan: When used in these discussions, the words estimates, projected, expects, anticipates, forecasts, plans, intends, believes, seeks, may, will, should, future proposed, and variations of those words or similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions, or results and involve a number of known and unknown risks, uncertainties, assumptions, and other important factors, many of which are outside the company's control and could cause actual results or outcomes to differ materially from those discussed in the forward-looking statement.

Devin Sullivan: Before we begin I'd like to remind everyone that during this call certain statements may be made that constitute forward looking statements within the meaning of the safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including statements regarding the company's strategy plans objectives initiatives and financial outlook.

Devin Sullivan: When used in these discussions the warrants estimates projected expects anticipates forecasts plans intends believes seeks may will should <unk>.

Devin Sullivan: Future propose and variations of those words or similar expressions or the negative versions of such words or expressions are intended to identify forward looking statements.

Devin Sullivan: Forward looking statements are not guarantees of future performance conditions or results and involve a number of known and unknown risks uncertainties assumptions and other important factors many of which are outside the company's control.

Devin Sullivan: Cause actual results or outcomes to differ materially from those discussed in the forward looking statements.

Devin Sullivan: Investors are cautioned not to place undue reliance on any forward-looking statements. Investors should carefully consider the foregoing factors and other risks and uncertainties described in the risk factors sections of the company's filings with the SEC, including the registration statement and other documents filed by the company. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statement.

Devin Sullivan: Investors are cautioned not to place undue reliance on forward looking statements investors should carefully considered the foregoing factors and other risks and uncertainties described in the risk factors sections of the company's filings with the SEC, including the registration statement and other documents filed by the company these filings identify and address other import.

Devin Sullivan: Risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward looking statements.

Devin Sullivan: With that said I'd now like to turn the call over to Pete Carlson spectral AI Chief Executive Officer Pete. Please go ahead.

Pete Carlson: Thank you, Devin, and good afternoon, everyone. We appreciate you joining us today for our first quarter financial results conference call. We had a strong start to the year with significant accomplishments in the areas of product advancement and deployment, clinical studies, and executive appointments. We also strengthened our financial profile and created a well-defined cash runway to support our growth initiatives.

Pete Carlson: Thank you Devin and good afternoon, everyone. We appreciate you joining us today for our first quarter financial results Conference call.

Pete Carlson: A strong start to the year with significant accomplishments in the areas of product advancement in deployment clinical studies and executive appointments.

Pete Carlson: We also strengthened our financial profile and created a well defined cash runway to support our growth initiatives.

Pete Carlson: We are continuing to evolve from the clinical environment to commercialization and have a well-defined business focus for 2024 and beyond. As previously announced, in February 2024, we received UKCA authorization to commence sales of Deepview AI Burn in the UK. We are excited to share the deployment of DeepView systems at three UK hospitals: Royal Victoria Infirmary in Newcastle, Stoke Mandeville Hospital in Buckinghamshire, and Broomfield Hospital in Essex.

Pete Carlson: We are continuing to evolve from the clinical environment to commercialization and have a well defined business focus for 'twenty 'twenty four and beyond.

Pete Carlson: As previously announced in February 2024, we received U K C. A authorization to commence sales of deep view AI burn in the U K.

Pete Carlson: We are excited to share the deployment of deep UV systems at three U K hospitals Royal Victoria Infirmary in Newcastle.

Pete Carlson: Stoke Mandeville Hospital and Buckingham Shire.

Pete Carlson: In Broomfield Hospital and ethics.

Pete Carlson: First and foremost, we believe these deployments help professionals at these facilities provide more effective and more efficient care to patients. Additionally, having machines deployed increases clinician familiarity with the device, integrates our technology into the facility's workflow, and provides real-world data related to its usage and output. We will deploy a total of six DeepView devices at locations across the UK this summer.

Pete Carlson: First and foremost we believe these deployments help professionals at these facilities provide more effective and more efficient care to patients.

Devin Sullivan: Additionally, having machines deployed increases clinician familiarity with the device.

Devin Sullivan: Integrates our technology into the facilities workflow.

Devin Sullivan: And provides real world data related to its usage and outcomes.

Devin Sullivan: We will deploy a total of six GPU devices locations across the U K this summer.

Pete Carlson: After a period of customer evaluation, we expect to initiate commercial transactions in the second half of this year. Although we do not expect the transactions to represent a significant contribution to revenues in 2024, we are pleased to begin commercial activity. Our clinical work to develop the DeepView platform continues, and let me share these updates. For burns, we are enrolling patients for a pivotal study at multiple burn centers and emergency departments across the US.

Devin Sullivan: After a period of customer evaluation, we expect to initiate commercial transactions in the second half of this year.

Devin Sullivan: While we do not expect these trends.

Devin Sullivan: Transactions to represent a significant contribution to revenues in 2020. Four we are pleased to begin commercial activities.

Devin Sullivan: Our clinical work to develop the deep view platform continues and let me share these updates.

Pete Carlson: The study is expected to enroll 240 patients, both adult and pediatric. As of today, we are approximately 20% towards our enrollment goal. This is expected to be the final clinical trial for burns before seeking FDA approval in 2025. For diabetic foot ulcers, or DFUs, we are advancing our training and validation clinical studies in both the US and the UK.

Devin Sullivan: For burn we are enrolling patients for a pivotal study multiple burn centers and emergency departments across the U S.

Devin Sullivan: The study is expected to enroll 240 patients both adult and pediatric.

Devin Sullivan: As of today, we are approximately 20% towards our enrollment goal.

Devin Sullivan: This is expected to be the final clinical trial for burn before seeking FDA approval in 2025.

Devin Sullivan: For diabetic foot ulcers or <unk>, we are advancing our training and validation clinical studies in both the U S and the U K.

Pete Carlson: To date, we have enrolled 470 patients across 14 total sites and anticipate completing enrollment at both studies this year. We are often asked about the timing of cash flows from the contracts with BARDA, and I want to take a few minutes to summarize this critical partnership. Through March 31st, 2024, we have received approximately $113 million in cash payments from BARDA, most of which were related to the Burn 1 and Burn 2 contracts that were completed in 2019 and 2020-23, respectively.

Devin Sullivan: To date, we have enrolled 470 patients across 14 total sites and anticipate completing enrollment in both studies this year.

Devin Sullivan: We are often asked about timing of cash flows from the contracts with BARDA and I want to take a few minutes to summarize this critical partnership.

Devin Sullivan: Through March 31 2024.

Devin Sullivan: We have received approximately $113 million.

Devin Sullivan: And cash payments from BARDA, most of which related to the burn one and burned two contracts that were completed in 2019, and 2000 2023, respectively.

Pete Carlson: This total includes approximately $11 million under the first portion of the Project Bioshield, or PBS, contract awarded in September 2023. The initial award of nearly $55 million from the PBS contract will take us through the first quarter of 2026 in support of the clinical validation and FDA approval processes for the burn indication. The next award, which we expect to commence in the first half of 2026, is estimated to be $95 million for procurement and deployment of devices to burn centers and select emergency departments across the U.S., along with funding several years of annual license fees for the devices deployed. Final amounts under this next award are subject to discussions with BARC.

Devin Sullivan: This total includes approximately $11 million under the first portion of the project Bioshield or PBS contract awarded in September 2023.

Devin Sullivan: The initial award a fifth nearly 55 million from the Cvs contract will take us through the first quarter of 2026 and support of the clinical validation and FDA approval processes for the burn indication.

Devin Sullivan: The next award, which we expect to commence in the first half of 2026 is estimated to be $95 million for procurement and deployment of devices to burn centers and select emergency departments across the U S.

Devin Sullivan: Along with funding several years of annual license fees for the devices deployed.

Speaker Change: Well I don't know amounts under this next award are subject to discussions with BARDA.

Pete Carlson: In summary, to date, BARDA has awarded contracts to Spectral AI totaling $250 million and, since 2013, has paid $113 million to the company under these contracts. Now, on to updates on the continued strengthening of our leadership team and the board. We welcome Jeremiah Sparks as Chief Commercial Officer beginning April 1st, and I am pleased to say he has hit the ground running, including joining our team in Chicago at the annual meeting of the American Burn Association.

Devin Sullivan: In summary.

Devin Sullivan: BARDA has awarded contracts to spectral AI totaling $250 million and since 2013 as paid $113 million to the company under these contracts.

Devin Sullivan: Turning to updates on the continued strengthening of our leadership team and the board.

Pete Carlson: Jeremiah was an executive at Aveda Medical prior to joining Spectral AI and brings more than 20 years of medical device marketing and business strategy experience, including experience in launching new products both nationally and globally. Prior to Aveda, Jeremiah worked at Johnson & Johnson, HealthPoint, and Allergan. Additionally, we named Stan Misik as Interim Chief Operating Officer on April 8th, providing continuing leadership to our engineering team. Dan brings extensive experience in product deployments along with strong project management skills.

Devin Sullivan: We welcome Jeremy Sparks as Chief Commercial Officer, beginning April one.

Jeremy Sparks: I am pleased to say he hit the ground running including joining our team in Chicago at the annual meeting of the American Burn Association.

Jeremy Sparks: Sure My I was an executive at Aviva medical prior to joining spectral AI and brings more than 20 years of medical device marketing and business strategy.

Jeremy Sparks: Including experience in launching new products, both nationally and globally.

Jeremy Sparks: Prior to a Vida Jeremiah worked at Johnson, <unk>, Johnson Health point and Allergan.

Jeremy Sparks: Additionally, we named Stan My sick as interim Chief operating officer on April eight providing continuing leadership to our engineering teams.

Jeremy Sparks: Dan brings extensive experience in product deployments, along with strong project management skills.

Pete Carlson: As disclosed in our proxy filing last month, we nominated Marion Snyder to our Board of Directors. Marion is a highly accomplished healthcare executive, currently serving as Senior Director of Corporate Accounts at Shockwave Medical, a medical device focused on the treatment of cardiovascular disease. Her prior experience is in both medical device and pharmaceuticals, with executive positions at Memedex and Pfizer. My last update is about our newly formed healthcare intellectual property-focused subsidy area.

Pete Carlson: As disclosed in our proxy filing last month.

Jeremy Sparks: We nominated Marion Snyder to our board of directors.

Jeremy Sparks: <unk> is a highly accomplished health care executive currently serving as senior director corporate accounts Shockwave medical.

Jeremy Sparks: Our medical device focused on the treatment of cardiovascular disease.

Jeremy Sparks: Her prior experiences in both med device and pharmaceuticals with executive positions at the medics and Pfizer.

Jeremy Sparks: My last update is about our newly formed healthcare intellectual property focused subsidiary yet.

Pete Carlson: Spectral IP We are fortunate to have a well-known expert in intellectual property, Eric Spanenberg, as our largest shareholder. As you saw, we named Eric as CEO of this subsidiary, and his primary focus will be identifying assets for this entity to acquire and exploring the potential spin-off of Spectral IP to shareholders, providing additional value for our current investors. It is important to know that the activities of this IP-focused subsidiary require limited management resources and no additional capital from the company. Additionally, no core operating assets of the company will be involved in the subsidiary.

Jeremy Sparks: Spectral IP.

Jeremy Sparks: We are fortunate to have a well known expert in intellectual property Erich spangenberg as our largest shareholder.

Jeremy Sparks: As you saw we named Eric as CEO of this subsidiary and his primary focus will be identifying assets for this entity to acquire and.

Jeremy Sparks: And exploring the potential spin off of spectral IP to shareholders, providing additional value for our current investors.

Jeremy Sparks: It is important to know that the activities of this IP focused subsidiary require limited management resources and no additional capital from the company.

Pete Carlson: Additionally, no core operating assets of the company will be involved in the subsidiary.

Pete Carlson: Before turning things over to Vince, I want to stress that we believe we are on the proper path to deliver reduced pain and suffering, faster and more appropriate treatment plans, and reduced risk from complications for patients, better information for treatment decisions by clinicians, improved efficiencies and lower healthcare delivery costs for facilities, meaningful economic benefits for payers through objective and validated assessment, and long-term value for our shareholders. With that, I will have Vince Capone, our Chief Financial Officer, provide an update on our financial results.

Jeremy Sparks: Before turning things over to Vince I want to stress that we believe we are on the proper path to deliver.

Vince Capone: Reduce pain and suffering faster and more appropriate treatment plans and reduced risk from complications for patients.

Vince Capone: Better information for treatment decisions by clinicians.

Jeremy Sparks: Improved efficiencies and lower health care delivery cost for facilities.

Jeremy Sparks: Meaningful economic benefits for payers through objective and validated assessments.

Vince Capone: And long term value for our shareholders.

Vince Capone: With that I will have Vince <unk>.

Vince Capone: Capone, our Chief Financial Officer provide an update on our financial results Vince.

Vince Capone: Thanks, Pete, and thank you all for joining us today. We issued our press release this afternoon, which contains additional detail on our operating results, and we are filing our 10-Q with the SEC today as well. With that in mind, I will focus my remarks on select highlights and key items.

Vince Capone: Thanks, Pete and thank you all for joining us today.

Vince Capone: We issued our press release this afternoon, which contains additional detail of our operating results and we are filing our 10-Q with the SEC today as well.

Capone: With that in mind I will focus my remarks on select highlights and key items.

Vince Capone: We are pleased to report that research and development revenue for the first quarter rose 24.6% to $6.3 million from $5.1 million in the first quarter of last year. This growth reflects an increased level of activity under the BARDA Project BioShield contract, which was awarded to the company in September 2023. Gross margin also improved, rising to 46.6% from 42.9% in the first quarter of last year, due to the higher reimbursement rate under the BARDA Project BioShield contract as compared to the reimbursement rate under the BARDA Burnt II contract under which we operated in last year's first quarter. General and administrative expenses in the first quarter were flat at $5.1 million.

Vince Capone: We are pleased to report that research and development revenue for the first quarter Rose 24, 6% to $6 3 million from $5 1 million in the first quarter of last year.

Vince Capone: This growth reflects an increased level of activity under the BARDA project Bioshield contract, which was awarded to the company in September 2023.

Vince Capone: Gross margin also improved rising to 46, 6% from 42, 9% in the first quarter of last year.

Vince Capone: Due to the higher reimbursement rate under the BARDA project Bioshield contract as compared to the reimbursement rate in the BARDA burn to contract under which we operated in last year's first quarter.

Vince Capone: General and administrative expenses in the first quarter were flat at $5 $1 million.

Vince Capone: Non-revenue generating research and development activities decreased by approximately $100,000 for the three months ended March 31st, 2024, compared to the first quarter of 2023, and that was offset by an increase of approximately $100,000 related to other administrative expenses for the three months ended March 31st, 2024 as compared to the first quarter of 2020. Other expenses for the first quarter of 2024 were up approximately $500,000 from the first quarter of 2023 and reflected borrowing-related costs of $300,000 and transaction costs of a million dollars, each related to the company's previously announced financing arrangements. We trimmed our net loss for the quarter to $3.2 million, or $0.19 per share, as compared to a net loss of $3.6 million, or $0.27 per share, last year.

Vince Capone: Non revenue generating research and development activities decreased by approximately 100000 for the three months ended March 31 2024.

Vince Capone: Compared to the first quarter of 2023.

Vince Capone: And thats offset by an increase of approximately $100000 related to other administrative expenses for the three months ended March 31, 2024 as compared to the first quarter of 2023.

Vince Capone: Other expenses for the first quarter of 2024 were up approximately 500000 from the first quarter of 2023 and reflected borrowing related costs of $300000.

Vince Capone: And transaction costs of $1 million each related to the company's previously announced financing arrangements.

Vince Capone: We trimmed our net loss for the quarter to $3 $2 million or <unk> 19 per share as compared to a net loss of $3 6 million or 27 cents per share last year.

Pete Carlson: At March 31st, 2024, we had 17,482,333 shares outstanding. Moving to the balance sheet, as of March 31st, 2024, cash and cash equivalents totaled $10.2 million, up from $4.8 million at year-end. We enhanced our access to capital by completing a common stock purchase agreement with an investment bank under which the company netted $2.7 million; the company still has the ability to draw down an additional $3 million under this facility. In addition, we entered into a standby equity purchase agreement with a long-owning investor that includes 12.5 million dollars of prepaid advance.

Vince Capone: At March 31, 2024, we had $17 million 482333 shares outstanding.

Pete Carlson: Moving to the balance sheet as of March 31, 2024, cash and cash equivalents totaled $10 $2 million up from $4 8 million at year end.

Pete Carlson: We enhanced our access to capital by completing a common stock purchase agreement with an investment bank under which the company netted to $7 million.

Pete Carlson: The company still has the ability to draw down an additional $3 million under this facility.

Pete Carlson: In addition, we entered into a standby equity purchase agreement with a long only investor that includes $12 $5 million of prepaid advances.

Pete Carlson: As of March 31st, 2024, the company received $4.6 million net from the Standby Equity Purchase Agreement. The company anticipates receiving $5 million shortly after our May 14, 2024 annual meeting and the final advance of $2.5 million, 60 days thereafter. As a reminder, any drawdowns above the prepaid advances of $12.5 million are solely at the discretion of the. For 2024, we are reaffirming our revenue guidance of approximately $28 million, an expected increase of 55% from the $18.1 million we reported in 2023.

Pete Carlson: As of March 31, 2024, the company received $4 $6 million net from the standby equity purchase agreement.

Pete Carlson: And the company anticipates, receiving $5 million shortly after our may 14th 2024 annual meeting.

Pete Carlson: And the final advance a $2 $5 million 60 days thereafter.

Pete Carlson: As a reminder, any draw downs above the prepaid advances of $12 $5 million is solely at the discretion of the company.

Pete Carlson: For 2024, we are reaffirming our revenue guidance of approximately $28 million and expected increase of 55% from the $18 1 million we reported in 2023.

Pete Carlson: This growth reflects our work on the BARDA Project Bioshield Contract, with additional contributions from the ongoing handheld contract. As a reminder, we recently announced a new contract with the Defense Health Agency that provides significant additional support for the development of the handheld version of our DeepView system device, valued at over $500,000, bringing the total for the development of this device to greater than $6 million. This guidance does not include contributions from sales of the Deepview system for burns in the UK in the second half of 2024, which is not expected to be material. Thank you. And with that, I will turn the conversation back over to Pete.

Pete Carlson: This growth reflects our work on the BARDA project Bioshield contract.

Pete Carlson: With additional contributions from the ongoing handheld contract.

Pete Carlson: As a reminder, we recently announced a new contract with the Defense Health Agency that provides significant additional support for.

Pete Carlson: The development of the handheld version of our deep UV system device valued at over $500000, bringing the total for the development of this device to greater than $6 million.

Pete Carlson: This guidance does not include contributions from sales of the deep UV system for burn in the U K in the second half of 2024, which is not expected to be material.

Pete Carlson: Thank you for your time and with that I will turn the conversation back over to Pete.

Pete Carlson: Thank you Vince.

Pete Carlson: We are pleased with our progress in the first quarter, as we welcomed both Jeremiah and Stan to our leadership team and strengthened our financial position. I want to thank our entire team for their dedication and commitment to our promise to develop and commercialize our DeepView system. Their achievements to date, and those on their horizon, drive our success.

Pete Carlson: We are pleased with our progress in the first quarter as we welcome both Jeremy and stand to our leadership team and strengthened our financial position.

Pete Carlson: I want to thank our entire team for their dedication and commitment to our promise to develop and commercialize our deep view system.

Pete Carlson: Third achievements to date and those on the Horizon drive our success.

Chad: Chad, let's open the call for questions. Thank you. We will now begin.

Pete Carlson: Chad, let's open the call for questions.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. And the first question will be from Ryan Zimmerman from BTIG. Please go ahead.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Operator: And the first question will be from Ryan Zimmerman from <unk>. Please go ahead.

Izzy: Hi Pete, Vince, this is Izzy on behalf of Ryan. Thanks for taking the questions and congratulations on the progress so far. So just to start out, it's great to see that you guys have these initial placements in the UK, and I was wondering if you could provide any feedback on what you guys are hearing from those initial placements, just qualitatively, what are surgeons thinking about the system?

Operator: Hi, Pete this is Eddie on for Ryan Thanks for taking the questions and congrats on the progress. So far so just to start out it's great to see that you guys have these initial placements in the U K and I was wondering if you could provide any feedback on what you guys are hearing from those initial placements I'm just qualitatively what are surgeons thinking about the system.

Pete Carlson: Thanks, Izzy. It's good to talk to you.

Pete Carlson: Thank you Susie good to talk to you and we've had positive reactions from the field surgeons are excited about the opportunity to use the tool.

Pete Carlson: We've had positive reactions from the field. Surgeons are excited about the opportunity to use the tool. An interesting aspect is that in the UK, with the single-payer system, they are very focused on the quality of care, and the economics are just so different than here in the U.S.

Pete Carlson: No.

Pete Carlson: Interesting aspect is in the UK with the single payer system. They are very focused as well.

Pete Carlson: The quality of care.

Pete Carlson: And then the economics are just so different than here in the U S. So, whereas we've talked to them and as we get received this feedback it is all about the.

Pete Carlson: So as we've talked to them and as we hit and receive this feedback, it is all about improving quality of care. They find the device easy to use and easy to understand. It is usable by all people in the clinics. So, nurse practitioners, and nurses are able to take these images and get the diagnosis back from the device, which essentially gives them the ability to get that critical diagnosis regardless of how skilled they are at assessing a burn. So facilities enjoy the consistency and quality of the assessment that happens when using the device.

Pete Carlson: Improving quality of care they find the device easy to use.

Pete Carlson: Sure.

Pete Carlson: In the easy to use it is usable by all coordinate all people in the clinics. So nurse practitioners nurses are able to do.

Pete Carlson: To take these images and get the diagnosis back from the device.

Pete Carlson: Which essentially gives them the ability to get that critical diagnosis, regardless of how skilled.

Pete Carlson: Skilled they are on assessing a burn so that the.

Pete Carlson: The facilities enjoy the consistency and quality of the assessment that happens by using the device.

Pete Carlson: And next, on the U.S. burn trial, I heard you guys say that enrollment's up to 20%, which is great to see. We've heard some commentary from others in the industry saying that incidence of burns was down in the first quarter in the U.S., so I was just wondering if you guys have seen any impact in terms of the pace of enrollment so far?

Speaker Change: Good that's helpful to hear.

Pete Carlson: Next on the U S burn trial I heard you guys say that enrollment up to 20%, which is great to see but we've heard some commentary from others in the industry, saying that incidents of Burns were down in the first quarter for the U S. So I was just wondering if you guys had seen any impact in terms of the pace of the enrollment so far.

Pete Carlson: But we would agree with that about the incidents of burns. We hear the same industry analysis and update.

Pete Carlson: But we would agree with that about the incidents of burn we are.

Pete Carlson: We see are the same.

Pete Carlson: History says and updates.

Pete Carlson: For us, the other aspect is that we were just getting going in the quarter. But yes, we did see that there were fewer burns. There is some seasonality to burns. Some holiday weekends and things like that can be indications of it. One of the things we've seen is, unfortunately, a greater concentration of burns in pediatrics, where that's gone quicker than we anticipated. But I do think your assessment is correct, that the burn incidence rate was lower in the first quarter, and we would expect it to be higher here in the second and summer months in the U.S.

Pete Carlson: For us the other aspect is we were just getting going in the quarter, but yes. We did see that there were fewer burns there is some seasonality to burns.

Pete Carlson: Some holiday weekends and things like that can be indications of it.

Pete Carlson: One of the things we've seen is unfortunately.

Pete Carlson: The a greater concentration of burns and pediatrics, so where that's gone quicker than we anticipated, but I do think your assessment is correct that the burn.

Pete Carlson: Incidence rate was lower in the first quarter and we would expect it to be higher here in the second in summer months in the U S.

Vince Capone: Got it. And then, last one for me before I jump back in line, your BARDA revenue for the quarter came in just a little bit shy of our estimates. So, given you guys are still expecting to see that $28 million for the full year, I was just wondering if you could provide some commentary around how you're thinking about the cadence of revenue for the rest of the year. Thanks for taking the question.

Speaker Change: Got it and then last one for me before I jump back in queue.

Speaker Change: Your BARDA revenue for the quarter came in just a little bit shy of our estimates.

Vince Capone: So given you guys are still expecting to see that 28 million for the full year I was just wondering any surprise.

Speaker Change: Commentary around how you are thinking about the cadence of revenue for the rest of the year. Thanks for taking the question.

Vince Capone: Thanks Izzy again. One of the drivers of that is a specific trigger for the billings. And so the ramp-up period in the first quarter was, as I said, just a touch slower than what we had anticipated. But we're very pleased with where we are to date and the current momentum. That being said, we do think the revenue would be, you know, a little bit back-ended to the second half of the year.

Speaker Change: Thanks, Susie again, one of the drivers of the revenue is enrollment in the trial.

Vince Capone: That is a specific trigger for the billings and so the ramp up period in the first quarter was the as I said, just a touch slower than what we had anticipated, but we're very pleased with where we are to date and the current momentum.

Vince Capone: That being said, we do think the revenue would be.

Vince Capone: A little bit.

Vince Capone: Back ended to the second half of the year. So as you think about the next quarter I think we would see a slight somewhat of an increase but it may not get up to that pro rata amount for the remaining three quarters and we think the second half would.

Vince Capone: So as you think about the next quarter, I think we'll see a slight, somewhat of an increase, but it may not get up to that pro-rata amount for the remaining three quarters. And we think the second half will. So maybe there is, because more than half of the revenue is in the second half of the year.

Vince Capone: So maybe there is.

Vince Capone: More than more than half of the revenues in the second half of the year.

Operator: Thank you. And the next question will come from R.K. Remekanth from H.C. Wainwright. Please go ahead.

Vince Capone: Thank you and the next question will come from RK <unk> from H C. Wainwright. Please go ahead.

RK: Thank you. This is RK from HCW. Good afternoon, Pete. Hello. Continuing on some of the parts on the clinical trials, so the DFU training study that got completed and also, you know, you plan to get the validation study completed in the second half. So what, two things, one is what sort of data should we expect from these two studies and two, the data that comes out of these two studies, is that enough for any filings or you take these data and try to try to plan for a pivotal studies so that you can use that to file the DFDA?

R.K. Remekanth: Thank you this is RK from H C W.

RK: Afternoon.

RK: So.

RK: Hello.

RK: Continuing on some other targets on the clinical trials.

RK: So the D appeal.

RK: Training study that got completed.

RK: And also.

RK: Hugh.

RK: We.

RK: Planned to get the validation study completed in the second half.

RK: What two things one is what sort of data should we expect from these two studies.

RK: Two.

RK: The data that comes out of these two studies is that enough for any filings or you think these data and try to.

RK:

RK: Try to plan for the pivotal studies.

RK: So that you can use that to file.

RK: The FDA.

Pete Carlson: Okay, I appreciate the question. It's good to talk. There are a couple of different things here.

Pete Carlson: Okay I appreciate the question, it's good to talk.

Pete Carlson: A different things here the.

Pete Carlson: The training study, well, the work we've done to date, kind of combined the information we've done to date, we think prepared, provides us with the data needed to prepare a submission for the UK. So we're on track for that. It's probably a couple of months, two, three months away as we synthesize that data and prepare the submission, but we do have enough data in hand to begin our preparation of that submission in the UK.

Pete Carlson: Training study well the work we've done to date kind of combined the information we've done to date, we think prepare provides us the data needed to prepare a submission for the U K. So we're on track for that it's probably.

Pete Carlson: A couple of months to three months away as we.

Pete Carlson: Synthesize that data and prepare the.

Pete Carlson: Prepare the submission, but we got we do have enough data in hand to begin our preparation of that submission in the U K.

Pete Carlson: It is completion of the validation study that would be the information we believe we will need for a U.S. submission. So, again, that's something we look to complete this year and thus would be in a position to begin preparing that submission, and end of this year, early next year for the diabetic foot ulcer. What I will say is, as we think about burns and diabetic foot ulcers, we very well may end up in a spot where we think burns is the better first submission to the FDA.

Pete Carlson: It is completion of the validation study that would be the information. We believe we will need for a U S submission.

Pete Carlson: So again, that's something we look to complete this year.

Pete Carlson: And thus would be in a position to begin preparing that submission.

Pete Carlson: And end of this year early next year from a for the diabetic foot ulcer.

Pete Carlson: What I will say is as we think about burn and diabetic foot ulcer.

Pete Carlson: We we very well may end up in a spot where we think burn is the better first submission to the FDA.

Pete Carlson: We're going for a de novo application here, and we have 10 plus years of data on burn. So, that's our strong point to leverage the first triple crown race here in the U.S. You ride your good horse in. And so, I think we're considering the order, but... Separately, the data would be there, and the information needed for also the diabetic hood ulcer submission. I mean, we'll work with the FDA on the kind of timing of all this.

Pete Carlson: We're going for a de novo application here.

Pete Carlson: And we have 10 plus years of data on burn.

Pete Carlson: That's our strong point of leverage so far.

Pete Carlson: First triple Crown race here in the U S. You ride your good horse in and so I think.

Pete Carlson: We're considering the order but.

Pete Carlson: Separately, the data would be there and the information needed for also the diabetic foot ulcer submission and then we will work with the FDA and I'm kind of timing of all of this.

Pete Carlson: Very good Thanks. And then I'm assuming from what you just said, the 76 patient study that is being conducted in Ireland. That also kind of plugs into what you were just talking about, the study that's going on in the U.S. Is that how we should think about it? And the other question is... At a later point, once you get through the burn indication in the U.S., can you take some of this data and use it for the U.S., or do you need to kind of do separate studies?

Speaker Change: Okay. Thanks.

Speaker Change: Thanks, and then I'm assuming.

Pete Carlson: From what you just said.

Speaker Change: That's how under fixed station.

Pete Carlson: And that is being conducted in Ireland.

Pete Carlson:

Pete Carlson: That also kind of plugs into what you are just talking about the study that's going on in the U S.

Pete Carlson: How we should think about it.

Pete Carlson: And the other question is.

Pete Carlson: At a later point once you get through the Bun indication in the U S. Can you take some of this data and use it for U S or do you need to enter them dose studies.

Pete Carlson: We can use the data from the UK for activities in the US associated with reimbursement and procurement, so with payers and with buyers. The FDA does look for us to have US data, and again, we think we have a robust set of training data; we have more work to do on the validation side to meet what we think is the threshold here in the US, with US-specific data. The way to think about that work in the U.K. is that it's a subset of the overall study. But it does give us a concentrated group on which to think about, assess, and maybe potentially do some publication.

Pete Carlson: We are.

Pete Carlson: We can use the data from the U K for activities in the U S associated with reimbursement.

Pete Carlson: And procurement.

Pete Carlson: So.

Pete Carlson: Here's and with buyers at the FDA does look for us to have U S data and again, we think we are.

Pete Carlson: Or have a robust.

Pete Carlson: Set of the training data, we have more work to do on the validation side to meet what we think is the threshold here in the U S with U S specific data.

Pete Carlson: To think about that that work in the U K is it's a subset of the overall study.

Pete Carlson: But it does give us a concentrated group on which to think about SaaS and maybe potentially do some publications.

Pete Carlson: Now that you have Jeremy on board, I'm sure he's kind of tasked with kind of watching the deployment in the UK. And as you stated, the UK is kind of weird in terms of reimbursement because you only have one entity to work with. But what sort of learnings would Jeremy be looking for from that experience? Because once we come back to this side of the pond, things are quite different, you know, both in terms of commercialization and also in terms of reimbursement.

Pete Carlson: Okay.

Pete Carlson: Now that you have Jeremy on board So I'm sure. He is.

Pete Carlson: Kind of constant kind of watching the deployment in the U K.

Pete Carlson: Santa Uk's kind of weird.

Pete Carlson: In terms of reimbursement because we only have one entity to work with.

Pete Carlson: But what sort of learnings or Jeremy haven't been looking from that.

Pete Carlson: Expedience, because once we come back to this.

Pete Carlson: This side of the pond things quite.

Pete Carlson: Quite different.

Pete Carlson: In terms of commercialization and also in terms of reimbursement.

Pete Carlson: Yes, so there are several aspects of it, a couple of which were in my prepared remarks. It's how clinicians and facilities are using the doc, and the device; it's capturing real-world data. It also is a start to commercial transactions, and so understanding the ebb and flow, or put some takes on it, entering into commercial transactions with facilities and caregivers, and that certainly is a good help for us. You know, anytime you can begin commercial transactions, get terms and conditions, get financial terms in place, all of those are very helpful inputs into our strategy here in the U.S. And we do look to leverage the continuing real-world data We think that will be very useful while also leveraging the trial here in the US for the FDA discussion.

Pete Carlson: Yes. So there are several aspects of it a couple of which were in my prepared remarks, it's how clinicians and facilities are using the dock the device.

Pete Carlson: It's capturing the real world data. It also is start to commercial transactions and so understanding.

Pete Carlson: The.

Pete Carlson: Ebb and flow or puts and takes of.

Pete Carlson: Entering into commercial transactions with facilities and caregivers.

Pete Carlson: Certainly as a good help for US anytime you can begin commercial get through terms and conditions get financial terms in place all of those are very helpful.

Pete Carlson: Input into our strategy here in the U S and we do look to leverage the continuing real world data, we received in the U K for payers and for our facilities as we have those conversations we think that will be very useful.

Pete Carlson: While also leveraging the trial here in the U S for the FDA discussions.

Pete Carlson: One last question from me, you know BARDA is a huge force behind you, behind the company, which is excellent. So, I'm trying to understand where all BARDA can actually help you, or is it a part of the plan in terms of how much they can help you in terms of not only the regulatory process but also in the commercial process, certainly in the regulatory process. Are they involved in trying to make sure that you run your studies in such a way that you can get the product approved?

Speaker Change: Okay. One last question from me.

Pete Carlson: BARDA has a huge force behind you.

Pete Carlson: Behind the company, which is which is excellent.

Pete Carlson: So I'm trying to understand where it all BARDA can actually <unk>.

Pete Carlson: Or is it.

Pete Carlson: Part of the plan in terms of.

Pete Carlson: How much they can help you.

Pete Carlson: So not on the regulatory process, but also in the commercial process currently in the regulatory process are they anyway in New Orleans trying to make sure that you run your studies in such a way that you can get the product approved of course for BARDA. They don't care about the bi that'd be approval they can still take the product.

Pete Carlson: Of course, for BARDA, they don't care about FDA approval. They can still use the product as long as they're comfortable with the data and the utility of the product, but I'm just trying to understand what sort of help you are getting in terms of the regulatory process in the U.S.

Pete Carlson: As long as they're comfortable.

Pete Carlson: With the data and the utility.

Pete Carlson: At the end of the product, but I am just trying to understand what sort of help are you getting.

Pete Carlson: In terms of the regulatory process.

Pete Carlson: The U S.

Pete Carlson: is a great partner. We very much enjoy working with them. We think our interaction with them has created a good discipline inside our company for interacting with a federal agency. So we think we're well-prepared for interactions with the FDA. BARDA certainly is holding us to standards that they think are appropriate for the clinical trials, and I do believe that's informed by their experience with other companies working with the FDA. They do have a working relationship; I think it's formalized somewhat in a document between the two groups, but so.

Speaker Change: <unk> is a great partner, we very much enjoy working with them, we think our interaction with them.

Pete Carlson: Has created a good discipline inside our company for interacting with a.

Pete Carlson: Federal agency so.

Pete Carlson: We are well prepared for interactions with the FDA a.

Pete Carlson: BARDA certainly is holding us to standards that they think are appropriate.

Pete Carlson: Or the clinical trials and I do believe that's informed by their experience with other companies working with the FDA.

Pete Carlson: They do have.

Pete Carlson: Our working relationship I think it is formalized.

Pete Carlson: And Ah.

Pete Carlson: A document between the two groups but.

Pete Carlson: So.

Pete Carlson: We like the advice we receive from BARDA, relative to the clinical trial work. They've been helpful in, for instance, wanting the specific participation of pediatricians. They're focused on having the device in both the burn centers and the emergency departments. And those things, we think, that not only support BARDA's mission but are good for approval by the FDA. And then as far as deployment is concerned, we think of BARDA as a bit of a distribution Channel in that they are funding, but also supporting and encouraging user facilities to take the device on. So there will be some number of facilities covered within this next round or option of the Project BioShield contract, and then we'll work together with BARDA on further penetration across emergency departments in the U.S.

Pete Carlson: We like the advice we received from BARDA.

Pete Carlson: Relative to the clinical trial work.

Pete Carlson: They've been.

Pete Carlson: Informative on.

Pete Carlson: For instance, wanting the.

Pete Carlson: Eric participation of the pediatrics, there they're focused on having the device in both the burn centers and the emergency departments and those things we think those are.

Pete Carlson: So it not only support bartos mission, but are good for approval by the FDA.

Pete Carlson: And then as far as deployment, we think of BARDA as a bit of a distribution channel.

Pete Carlson: In that they are funding, but also supporting and encouraging.

Pete Carlson: Users facilities to take the device on so there'll be some number of facilities covered within this next round or option of the project Bioshield contract and then we'll work together with BARDA.

Pete Carlson: On a further penetration across emergency departments in the U S.

Pete Carlson: Perfect. Thank you very much, Pete, for taking all my questions. I appreciate it, and I'm looking forward to continuing discussions.

Speaker Change: Perfect. Thank you very much for taking all my questions I appreciate it and looking forward.

Pete Carlson: Two continued decisions.

Speaker Change: Thank you RK.

Operator: And the next question will be from John Vandermosten from Zax. Please go ahead.

Speaker Change: And the next question will be from Jon Vander most in from Zacks. Please go ahead.

John Vandermosten: Great, thank you, and hello and good afternoon, Pete and Vint. I've been going down the rabbit hole of how providers are diagnosing DFU and burns and triaging and things like that and are we aware of the factors that the AI systems consider when making a diagnosis and how that relates to, and how that relates to how the system and the provider would do that? Any correlation there between those two that you've been able to tease out?

John Vandermosten: Great. Thank you and Hello, and good afternoon, Pete and Vince.

John Vandermosten: They've been going down the rabbit hole of how how providers are diagnosing D. A few and burn and you know triaging and things like that and.

John Vandermosten: Are we aware of of how the factors that the AI systems consider when making a diagnosis and how that relates to and how that relates to how the how the system and the provider would do that.

John Vandermosten: Any any correlation there between those two that you've been able to tease out.

Pete Carlson: I don't know that we've been able to tease out a correlation as we're still in our early days of working with the payers here in the U.S. Obviously, the care setting matters; just even the difference between a burn center and an emergency department is going to be important for reimbursement. Those are two different reimbursement schemes, if you will, or approaches. What we believe this device does is better inform existing diagnoses.

Speaker Change: I don't know that I'd say theres been a correlation we have been able to tease out is we're still in the early days of working with the <unk>.

Pete Carlson: Are the payers here in the U S.

Pete Carlson: Obviously, the care setting matters.

Pete Carlson: Just even the difference between the burn center in an emergency department is going to be important on reimbursements.

Pete Carlson: Those are two different.

Pete Carlson: Reimbursement.

Pete Carlson: Schemes, if you will or approaches.

Pete Carlson: The.

Pete Carlson: What we believe this tool device does is better informed existing.

Pete Carlson: Diagnoses. So the process is still going to be the same I think for.

Pete Carlson: So the process is still going to be the same, I think. Once you get into caregiving, what we're doing, what this device will do is allow practitioners to be better informed. In a couple of ways, just a more consistent, we think, and certainly, as you get away from experts into the emergency departments, a better-informed assessment of the viability of the skin, as well as some pretty specific measurements of where the viability, non-viability edge is.

Pete Carlson: Good.

Pete Carlson: Once you get into the caregiving, what we're doing with this device will do is allow practitioners to be better informed.

Pete Carlson: And a couple of ways just a more consistent we think and certainly as you get away from experts into the emergency departments are better informed.

Pete Carlson: Assessment of viability of the skin as well as some pretty specific measurements of where the viability non viability edge is so how much of a burn for instance needs to be addressed through skin grafts or something else versus doesn't.

Pete Carlson: So, how much of a burn, for instance, needs to be addressed through skin grafts or something else versus doesn't. And what's important there is the more precise you can be there, the less impact you have on the patient. Generally, these skin grafts are autologous, so the less impact you have on the patient somewhere else in their body at what is already a traumatic time.

Pete Carlson: And what's important there is the more precise you can be there the less impact you have to the patient generally these skin grafts are autologous. So the less impact you have to the patient somewhere else in their body of what is already a traumatic time.

Pete Carlson: And it's been my sense, you know, AI, we're still in kind of the early days of approval for AI type, ML type products. And my sense has been that regulatory authorities and payers kind of want to know how it works and what it's looking at. I mean, do you have that same sense as well? Or are they just looking for kind of the end result? You know, looking at those high percentage of accurate assessments.

Pete Carlson: Okay, and it's been my sense.

Pete Carlson: Still in kind of the early days of approval for AI ml type products and my sense has been that regulatory authorities and payers. They kind of want to know how it works and what its looking at I mean do you have that same sense as well or are they just looking for kind of the end result.

Pete Carlson: Looking at those those high percentage of accurate assessment.

Pete Carlson: I think they very much want to understand what is going on, and the thing that's important for people to understand about our device is that this is a closed loop AI. It is not an iterative AI. So it does not have some of the risks and concerns you have with a different approach to AI, such as some of these chatbots or things like that. Said another way, our artificial intelligence tool is running an algorithm against a closed database, and it is making an instantaneous assessment considering, you know, millions and millions of data points within that database. And that's what the power of the algorithm is.

Pete Carlson: I think they very much want to understand what is going on and the thing that's important for people to understand about our devices. This is a closed loop AI. It is not an iterative AI.

Pete Carlson: So it does not have some of the risks and concerns you have with them.

Pete Carlson: A different approach to AI such as.

Pete Carlson: Some of these chat bots or things like that said a different way or artificial intelligence tool is running an algorithm against the closed database.

Pete Carlson: And it is making a instantaneous and assessment assessment considering.

Pete Carlson: And millions of data points.

Pete Carlson: Within that database and that's what the power of the.

Pete Carlson: Algorithm is so this is helping practitioners see what the human eye cannot see.

Pete Carlson: So this is helping practitioners see what the human eye cannot see. But again, it's within a closed, I'll call it a closed loop. I don't think that's the most technical term, but within a finite amount of data, there is no iterative learning where the device starts going different ways. There is iterative learning from adding additional data to the database, but it is still a closed environment. Okay. Yes. That being said, I do think, to your point, the regulators very much want to understand what is going on. And it's even where there is really an approval process needed per indication because they want to understand, as we understand it now, they want to know what's going on with each data set and each indication.

Pete Carlson: But again its within a closed I'll call. It close loop I don't think that's the most technical term.

Pete Carlson: But within a finite amount of data and there is not interactive learning where the.

Pete Carlson: The device start.

Pete Carlson: Going different ways, there is iterative learning from adding additional data into the database, but it is still a closed environment.

Pete Carlson: Okay, Yeah step being said I do think to your point. The regulator is very much wanted to understand what is going on.

Pete Carlson: And it's even where.

Pete Carlson: There is really an approval process needed per indication because they want to understand as we are.

Pete Carlson: We understand it now they want to know what's going on with each data set in each indication.

Pete Carlson: Okay.

Pete Carlson: And I wanted to also ask about how sales will go forward. As I understand it, there are BARDA sales, and then there are non-BARDA sales in the U.S. related to burns. Maybe you can explain that just a little bit better. I assume that there are probably certain hospitals that they would target first, and then you could expand out from there to other locations that might also be appropriate candidates for buying them. Is that how it works, or is there another methodology that you expect to apply when it's approved and ready to be deployed?

Speaker Change: And I wanted to also ask about the how sales will go forward as I understand that there is there a BARDA sales and then there are non water sales in the U S related to burn.

Pete Carlson: And maybe you can explain I just want to understand a little bit better I assume that there's probably certain hospitals that they would target first and then you can expand out from there to other other locations that might also be appropriate candidates for buying it does that is that how it works or or is there another methodology.

Pete Carlson: Do you expect it to apply when it's approved and ready to be deployed.

Pete Carlson: and sold. You are generally on point, John.

Pete Carlson: The old <unk>.

Pete Carlson: You are generally endpoint, John what I would say is it's a partnership working together with them.

Pete Carlson: What I would say is it's a partnership working together with them. Yes, this next phase, the next option of the PBS contract, has revenue that you would think of as a commercial sale because it would be for the deployment of a device and for annual license fees. We will work together with BARDA on what..., centers in which emergency departments the devices would go. So they will have a significant say in where we get that first wave and the sites for which they're paying.

John Vandermosten: Yes. The this next phase next option of the PBS contract.

Pete Carlson: <unk> revenue that you would think of as a commercial sale because it would be for deployment of a device and for annual license fees.

Pete Carlson: We'll work together with BARDA on what.

Pete Carlson: Centers, and which emergency departments the devices would go.

Pete Carlson: So.

Pete Carlson: They will have a significant say in where we get that first wave and the.

Pete Carlson: The sites for which they're paying but again the goal is to get this.

Pete Carlson: But again, the goal is to get this, have this penetrate across the 5,000 emergency departments in the U.S. in a significant way. That's what BARDA wants us to do. And we'll be working with them, even if it's not through a direct funding situation; we will be working with them to strategize on the priority locations and to leverage their contacts in those locations, so we sort of have a warm lead across the emergency department population, the way we think about it.

Pete Carlson: This penetrate across the 5000 emergency departments in the U S. In a significant way that's what BARDA wants us to do and we will be working with them.

Pete Carlson: Even if it's not through a direct funding situation, we will be working with them to.

Pete Carlson: To strategize on the.

Pete Carlson: The priority locations and to leverage their contacts in those locations and we sort of have a warm lead across the emergency Department population is the way we think about it.

Pete Carlson: Okay, and would you sell all of the, you know, there may be some capacity constraints, would you sell all of the incremental units to the BARDA contract targets first and then go to the, you know, the other ones that aren't included as part of the contract, or would you kind of do them in parallel? I mean, there could be, I guess, capacity constraints that might limit you to do that. What is your sense of how that might...

Pete Carlson: Okay and would you would you sell all of the you know there may be some capacity constraints would you would you sell all the incremental units to the BARDA contract.

Pete Carlson: Targets first and then go to the you know the other ones that arent included as part of the contract or would you kind of do them in parallel I mean, there could be I guess capacity constraints that might limit you to do that.

Pete Carlson: Is your sense on how that might.

Pete Carlson: Play out.

Pete Carlson: We don't see any capacity constraints relative to getting these devices out. We think we can work with our, well, we know we can work with our manufacturing partner to produce the devices needed to not only distribute them to the locations anticipated within the BARDA contract but to others. I do think it would be something relatively parallel. Whether, you know, there's a lead time where we work exclusively within the BARDA deployment for a quarter or two, but overall, I think it would be a parallel process.

Pete Carlson: We don't see any capacity constraints relative to getting these devices out we think we can.

Pete Carlson: Okay. And the last one for me is on the IP subsidiary.

Pete Carlson: Work with our what we know we can work with our manufacturing partner to produce the devices needed to not only distribute to the.

Pete Carlson: Locations anticipated within the BARDA contract, but to others I do think it would be something somewhat relatively parallel.

Pete Carlson: Now, whether there's a lead time, where we work exclusively within.

Pete Carlson: The BARDA deployment for <unk>.

Pete Carlson: Quarter or two but overall I think it would be a parallel process.

Speaker Change: Okay and last one for me is on the IP subsidiary I think you alluded a little bit to this in the call that there wouldn't be any cash I guess exchanging hands. So.

Pete Carlson: I think you alluded a little bit to this in the call that there wouldn't be any cash, I guess, exchanging hands. So will that entity, I guess, raise cash separately after it's spun off, or will they allocate any cash to you, maybe in terms of debt or something like that? I just was wondering how the cash flow might work between the two entities when it spins off.

Pete Carlson: So will that in any of the I guess raised cash separately after it spun off or or will they are allocated any cash to you maybe in terms of debt or something like that I. Just was wondering how that how the cash flow might work between the two entities when it spins off.

Pete Carlson: Yeah, so we don't anticipate any cash flow between the two entities. It is looking to be self-funding, and it's demonstrated that through a million dollar funding from an affiliate of Eric's, our large shareholder, and as part of the work he will do as CEO, he will also secure additional funding for the activities of that subsidiary. That would be separate and different sources than we would go to for capital for our organization, and no, we don't see that there would be cash flow going between the two entities.

Speaker Change: Yes, so it would be we don't anticipate any cash flow between the two entities. It is looking to be self funding.

Pete Carlson: And it's demonstrated that through a million dollar.

Pete Carlson: Funding from an affiliate of Eric's are large shareholder and as part of the work he will do as CEO as he would also secure additional funding for the activities of that subsidiary that would be separate and different sources. Then we would go to for capital for our organization and no we don't see.

Pete Carlson: There would be cash flow going between the two entities.

Pete Carlson: All right. Thank you, Pete. Thanks, John. Good to talk to you.

Speaker Change: Got it alright, thank you Pete.

Speaker Change: Thanks, John good to talk.

Operator: And again, if you would like to ask a question, please press star, then 1. The next question is from Christopher Rocoso from Partner Cap Group. Please go ahead.

Pete Carlson: And again, if you would like to ask a question. Please press Star then one.

Christopher Rocoso: The next question is from Christopher Caso from partner Cap Group. Please go ahead.

Christopher Rocoso: Good afternoon, Peter and Vincent. I have a couple of, I think, brief questions. The first one, apart from the efforts that you've obviously made in the United States and the U.K., can you comment on any efforts in other regions of the world? I know that you've spent a fair amount of time in the Middle East, and you could characterize how those efforts are going and any timing in terms of, you know, potential yields, so to speak, on those efforts.

Christopher Rocoso: Good afternoon, Peter and Vincent.

Christopher Rocoso: I have a couple of I think brief questions.

Christopher Rocoso: The first one.

Christopher Rocoso: Apart from the.

Christopher Rocoso: The efforts that you've obviously made in the United States in the U K can you comment on any efforts in other regions of the world I know that you've done.

Speaker Change: Thank you Jeremy.

Christopher Rocoso: Leased.

Christopher Rocoso: If you could characterize how those efforts are going.

Christopher Rocoso: Any timing in terms of.

Christopher Rocoso: Potential yield so to speak on those efforts also.

Christopher Rocoso: Also, I know that you've given guidance for the full year 2024. Is it possible to look out beyond that? And if not, citing nominal numbers, at least, what your aspiration is in terms of companion growth rates over the next few years in terms of your

Christopher Rocoso: I know that you've given guidance for full year 2024 is it possible to look out beyond that and it's not.

Christopher Rocoso: Citing nominal numbers at least.

Christopher Rocoso: What your aspiration is in terms of compounded growth rates over the next few years in terms of your revenues.

Pete Carlson: Christopher, good to talk to you. Thanks for the questions. You have a couple of different ones here. First, as far as geographies are concerned, we are focused on the U.S. and the U.K., primarily here. That being said, we do have interactions going on in the Gulf Council countries. I don't know that I'd characterize it as a significant amount of time, but we have interacted with parties there.

Christopher Rocoso: Christopher Good to talk thanks for the questions you've got a couple of different ones in there first as far as geographies, but we are focused on the U S and the UK.

Pete Carlson: Primarily here.

Pete Carlson: That being said we do have.

Pete Carlson: Interactions going on in the Gulf Council countries, I don't know that I'd characterize it a significant amount of time, but we have.

Pete Carlson: We have attended some conferences, and we do think that this is a situation where there is an opportunity to get some devices in the field and begin some testing and understand what the market opportunity might be. In that environment, the Gulf Council countries generally will look to a UK approval like this CA mark that we have for regulatory reasons, so it sort of removes one burden, and obviously, you're dealing with a totally different regulatory environment in that, and particularly, say, in Saudi Arabia, where it can be almost an individual decision-maker that can make some things happen as far as allowing the device in the region.

Pete Carlson: Interacted with parties there we have attended conferences.

Pete Carlson: And we do think Thats, a situation, where there's an opportunity to get some devices in the field and begin some testing and understand what the market opportunity might be.

Pete Carlson: That environment, the Gulf Council countries generally will.

Pete Carlson: Look to a U K approval like this see a mark that we have.

Pete Carlson: For the regulatory so it sort of removes one burden and obviously you're dealing with a totally different regulatory environment in that.

Pete Carlson: And particularly say in Saudi Arabia, where there can be almost an individual decision maker can make some things happen as far as allowing the device in the region.

Pete Carlson: Whatever we did would be putting a toe in the water, I would say, to start testing and trials and understanding the interest and things of that nature, and there are other markets that we would look at a little bit, but our primary focus would be here in the U.S. and the U.K. Another one you would hear us talk about seeking approval would be in mainland Europe. That's the CE mark.

Pete Carlson: Whatever we did would be.

Pete Carlson: Putting their toe in the water I would say.

Pete Carlson: To start testing and trials and understand the interest and things of that nature.

Pete Carlson: And there are other markets that we would look at a little bit but our primary focus is going to be here in the U S and the U K.

Pete Carlson: Another one you would hear us talking about seeking approval would be in mainland Europe. That's the CE Mark that's a longer process than what the U K process was and then you also have to go a little bit country by country. After that so we wanted to do that but we wanted to really focus on meeting the timelines.

Pete Carlson: That's a longer process than the U.K. process was, and then you also have to go a little bit country by country after that, so we want to do that, but we want to really focus on meeting the timelines we've established here in the U.S. and the U.K. Secondly, now I'm going to forget your other part of your question. I didn't write it down. The other part of the question was, I know that you've got growth rates. Yeah, growth rates. Sorry

Pete Carlson: We've established here in the U S and the UK.

Pete Carlson: Secondly, no I'm going to forget.

Pete Carlson: The other part of your question didn't write it down.

Pete Carlson: The other part of your question was.

Pete Carlson: I know that you've got some growth rates, yes growth rate sorry, yes, I would.

Pete Carlson: Yeah, I would not think about it as compounded growth rates right now because the nature of our revenue is going to shift. What we've talked about is 28 million for 2024, and that's our R&D revenue. I would remind you what I talked about regarding this first part of the Project Bioshield contract that has a total value of $55 million and runs through the first quarter of 2026. So you can probably do some math and figure out the order of magnitude of 2025 revenues from that.

Pete Carlson: Not I would not think about it is compounded growth rates right now because the nature of our revenue is going to shift.

Pete Carlson: Sure.

Pete Carlson: What we've talked about is the $28 million for 2024.

Pete Carlson: And that's our R&D revenue.

Pete Carlson: But I would remind you what I talked about regarding the first part of the project Bioshield contract that has a value total of $55 million and run through the first quarter of 2026. So you can probably do some math and figure out the order of magnitude of 20 to 25 revenues from that.

Pete Carlson: And then the 95 million would spread, would be reflected over several years as we would begin the commercialization, and would begin to add up in the U.K., along with the deployments, as we just talked about, that would be parallel to our activity under the BARDA Project BioShield contract. So it's not necessarily, it's such a chunky and almost contract-driven revenue that wouldn't necessarily talk about growth rates, but there will be some growth in that.

Pete Carlson: Yeah.

Pete Carlson: And then that the $95 million would spread would be reflected over several years as well as we would begin the commercialization and would begin to add up in the U K along with the deployments as we just talked about that would be parallel to our activity under the BARDA.

Pete Carlson: Project Bioshield contract, so its not necessarily its such chunky and almost.

Pete Carlson: <unk>.

Pete Carlson: Contract driven revenue that wouldn't necessarily talk about growth rates.

Pete Carlson: But there will be some growth in that it's not that there's not growth, but its just not a recurring item on which to base. The number of people will have this first phase R&D revenue for the first quarter of 2026, and then we'll you know we'll have some commercial revenue beginning that will grow.

Pete Carlson: It's not that there's not growth, but it's just not a recurring item on which to base the number. We'll have this... first phase R&D revenue for the first quarter of 2026. And then we'll, you know, we'll have some commercial revenue beginning that will grow. And so you would see compounding there. And then we would have new commercial revenue coming in from the U.S. for burn or DFU, and then the U.K. for DFU. So multiple types of revenue coming in. And it's not until we get into the commercial transactions that you really would look at something on which it would be appropriate to start building growth rates.

Pete Carlson: And so you would see compounding there and then we would have new commercial revenue coming in in the U S for burn or in the U S for D. If you.

Pete Carlson: In the U K for <unk>, so multiple types of revenue coming in and it's not until we get into the commercial transactions that you really would look at something on which it would be appropriate to start building growth rates.

Pete Carlson: One more brief question by me in terms of this spin-off announcement that you gentlemen made. Should I be conceptualizing this as almost like a hold-co-op-co structure or somewhat of a True Subsidiary? If you think about it from a schematic perspective, is it essentially like a sidebar subsidiary where MD-AI holds an either significant minority or majority stake in it?

Pete Carlson: Okay.

Speaker Change: And one more brief question if I may.

Pete Carlson: In terms of this.

Pete Carlson: Spinoff announcement.

Pete Carlson: Should I be conceptualizing. This is almost like a holdco opco structure or.

Pete Carlson: Similar to the.

Pete Carlson: True subsidiary.

Pete Carlson: If you think about it from a schematic.

Pete Carlson: Our perspective is it.

Pete Carlson: Sure.

Pete Carlson: Aside from our subsidiary.

Pete Carlson: Our MDI.

Pete Carlson: Holds.

Pete Carlson: Neither.

Pete Carlson: Significant minority or majority stake in it.

Pete Carlson: It would be a brother-sister type arrangement within an org chart, so no, it's not a hold-co-op-co. Spectral AI is the holding company. Spectral MD is our U.S. operating company. There's a U.K. company in the U.S., and then there is a Spectral IP. So they're all one tier down from the holding company.

Pete Carlson: It would be a brother sister type arrangement within an Org chart. So no. It's not a whole go up co spectral AI as the holding company spectral M D. As our U S operating company.

Pete Carlson: As a U K company in the U S. And then there's the spectral IP so they're all that one tier down from the holding company.

Pete Carlson: Thank you. Thank you.

Pete Carlson: And ladies and gentlemen, this concludes today's question and answer session. I would like to turn the conference back over to Pete Carlson for any closing remarks.

Pete Carlson: And ladies and gentlemen. This concludes today's question and answer session I would like to turn the conference back over to Pete Carlson for any closing remarks.

Pete Carlson: Thank you, Chad, and thank you, everyone, for your participation and continued interest in Spectral AI. We're very pleased with the progress we continue to make and remain optimistic about our prospects for growth. We hope to speak with some of you at upcoming events, including the Sudoti MicroCAP virtual conference on May 8th and 9th, later this week, at our annual meeting of shareholders next week on May 14th, at the Northland Virtual Growth Conference in late June and various other investor conferences that we will announce throughout the year. Thank you.

Pete Carlson: Thank you Chad and thank you everyone for your participation and continued interest in spectral AI. We're very pleased with the progress we continue to make and remain optimistic about our prospects for growth.

Pete Carlson: We hope to speak with some of your upcoming events, including the Sidoti Microcap Virtual conference on May 8th and ninth later this week.

Pete Carlson: At our annual meeting of shareholders next week on May 14th.

Pete Carlson: At the Northland Virtual growth conference in late June and various other investor conferences that we will announce throughout the year.

Speaker Change: Thank you and have a good evening.

Operator: And thank you, sir. The conference has now concluded. Thank you for joining us for today's presentation. You may now disconnect.

Speaker Change: And thank you Sir the conference has now concluded. Thank you for joining today's presentation you may now disconnect.

Operator: [music].

Q1 2024 Spectral AI Inc Earnings call

Request a DemoDemo

MDAI

Spectral AI

Earnings