Q4 2024 Semler Scientific Inc Earnings Call
Good afternoon and welcome to the Semler Scientific fourth quarter and full year 2024 financial results conference call.
All participants will be in a listen-only mode. After today's prepared remarks, as time permits, management will take questions submitted prior to the call via email.
Please note this event is being recorded. Before we begin, Semler Scientific needs to remind you that certain comments made during this call may constitute forward-looking statements and are made pursuant to and within the meeting of the Safe Harbor Provisions Act.
of the Private Securities Litigation Reform Act of 1995 as amended.
510k clearance from Quantaflow and our Bitcoin treasury strategy and plans to acquire additional Bitcoin
Such forelooking statements are subject to both known and unknown risk and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and our SEC filings.
The forelooking statements made today are of the date of this call and the company does not undertake any obligation to update the forelooking statements. If you do not have a copy of today's press release, you may obtain one by visiting the investor relations page of the website, SemlerScientific.com.
Speaker Change: I would now like to introduce Dr. Doug Murphy-Katorian, CEO of Semler Scientific. Please go ahead, sir.
Good afternoon, everyone.
Thank you for joining us.
for our 2024 fourth quarter and full year results call.
Speaker Change: Once again, we achieved strong performance and cash generation from our health care operations. In 2024, we...
Speaker Change: deployed much of this cash and truly the proceeds from our ATM offering into the purchase of Bitcoin.
Speaker Change: Now, I will hand it over to the call to Eric Semler, our chairman, who will provide you with the next update on our Bitcoin treasury strategy. Eric?
Eric Semler: Thanks Doug and thank you all. Thank you to all of our stockholders for listening in today and for your support of our mission.
Eric Semler: 2024 was a transformational year for Semler Scientific. One of our major accomplishments was adopting Bitcoin as our primary Treasury Reserve asset in May 2024.
Eric Semler: In doing so, we became the second U.S. public company to adopt a Bitcoin treasury strategy. Since that time, we have made substantial, accretive purchases of Bitcoin, and we now own 3,192 Bitcoins, valued at more than $300 million.
Eric Semler: In addition, we have generated a positive Bitcoin yield of 152% since the quarter after adopting our Bitcoin Treasury Strategy.
Eric Semler: According to bitcointreasuries.net, Semler Scientific is the 10th largest corporate holder of Bitcoin.
Eric Semler: The company's market capitalization has grown by more than 200% since adopting Bitcoin nine months ago. We have accumulated Bitcoin using our operating cash flow and using the proceeds from our at-the-market offering and from our recent $100 million convertible senior notes offering.
Eric Semler: We also recently monetized a portion of our minority investment in Monarch Medical and used the three and a half million of proceeds to buy more bitcoins.
Eric Semler: In our healthcare operations, we achieved record cash generation of over $24 million in 2024. We also announced that we are seeking a new $5K-$10K clearance for a product extension of our Quantaflow technology.
Eric Semler: In addition, as Jen will discuss later, we are pursuing other revenue opportunities in the cardiovascular space that we believe will appeal to our strong and well-established customer base.
Eric Semler: We could not be more thrilled with the progress we are making in growing our Bitcoin stockpile.
Eric Semler: We were especially pleased with our successful convertible notes offering, which we completed in late January. The overnight offering had strong interest and demand from investors and was substantially oversubscribed.
Eric Semler: Given the robust demand, we decided to upsize the offering from the originally expected amount of $75 million to $85 million and the initial purchasers exercised in full their option to acquire additional notes resulting in $100 million of notes issued.
Eric Semler: Together with the capped call transactions, the notes have a conversion premium of 75% and carry a 4.25% interest rate and they mature in August of 2030.
Eric Semler: As an operating business, we have strategically used cash flows alongside equity and debt issuances to acquire Bitcoin. To date, we have invested $280 million in Bitcoin, a move we believe is highly accretive to our equity.
Eric Semler: We have strong conviction in Bitcoin's long-term investment potential. We consider it digital gold.
Eric Semler: With this confidence, we remain committed to significantly growing our Bitcoin arsenal.
Eric Semler: We will act prudently with equity or other financing options when we believe it is accretive to do so. All equity and financing options will be thoroughly evaluated and pursued methodically and responsibly as we seek to maximize stakeholder value.
Speaker Change: Now, I'm pleased to introduce our COO, Jennifer Oliva-Herrington, to provide an overview and update of our core medical products and services business. Jen.
Jennifer Oliva-Herrington: Thank you, Eric. Today, I'll be presenting an overview of our market developments and opportunities. Renee Cormier, our CFO, will be providing information about fourth quarter 2024 financial results.
Jennifer Oliva-Herrington: Semler is a pioneer in developing and marketing technology products and services to help care providers to combat chronic diseases.
Jennifer Oliva-Herrington: Our unwavering focus on our core medical products and services business, alongside our Bitcoin treasury strategy, ensures that we maintain our position at the forefront of healthcare technology.
Jennifer Oliva-Herrington: Cardiovascular disease ranks as the top concern in health care expenditures and global mortality, underscoring the need for early identification of cardiac conditions.
Jennifer Oliva-Herrington: We are committed to expanding our product offering and advancing research to stay at the forefront of medical innovation.
Jennifer Oliva-Herrington: As we continue to innovate, we are pursuing a new 510K clearance for an extension to our Quantaflow product line, with hopes of obtaining this clearance sometime in 2025.
Jennifer Oliva-Herrington: Additionally, we are test marketing other established FDA cleared products in the cardiovascular care space that we believe will appeal to our current customer base.
Jennifer Oliva-Herrington: Should we see any material revenues from these efforts, we will conduct a formal product introduction in the future.
Jennifer Oliva-Herrington: In the meantime, we are actively promoting QuantiFlow as a valuable tool as an aid in the diagnosis of PAD and working to establish it as the standard of care.
Jennifer Oliva-Herrington: Our strategy includes expanding our customer base by adding new medical centers, growing within the value-based care provider, and targeting new markets that will benefit from testing. I will now turn the call over to Renee to discuss our financial highlights. Renee?
Renee Cormier: Thank you, Jen. I will cover our fourth quarter financial results and then speak more about our Bitcoin holdings, use of our ATM, and convertible notes offering.
Renee Cormier: Following our remarks, and as time permits, we will answer questions that have been submitted via email.
Renee Cormier: Total revenues in Q4 2024 were $12.4 million, which was down about 18% compared to the fourth quarter of 2023.
Renee Cormier: We expect we may see some further pressure on revenues in 2025 following the additional phase-in of the 2024 CMS rate announcement.
Renee Cormier: In the fourth quarter of 2024, our two largest customers, including their related affiliates, comprised 39% and 31% of quarterly revenues respectively.
Renee Cormier: Income from operations was $3.5 million, an increase of 40% compared to $2.5 million in the prior year.
Renee Cormier: We have elected to early adopt ASU 2023-08, which is the new standard issued by the FASB for accounting for and disclosure of cryptoassets.
This accounting standard
Renee Cormier: Update requires Bitcoin assets to be measured at fair value, with gains and losses from changes in the fair value to be recognized in net income in each reporting period.
Renee Cormier: While this may introduce volatility into our reported net income, it will not impact our cash flow from operations, which we intend to invest in additional Bitcoin purchases.
Renee Cormier: 3.64 per basic share and 3.41 per fully diluted share compared to net income of $4.2 million or $0.62 per basic share and $0.55 per fully diluted share in Q4 2023.
Renee Cormier: Cash, cash equivalents, and restricted cash at December 31, 2024 was $8.9 million.
Renee Cormier: Outside of working capital needs, we intend to use our liquid assets, including operating cash generation, to acquire more bitcoins.
Renee Cormier: Last year, we filed a $150 million shelf registration statement on Form S-3 and related ATM offering prospectus covering the offering, issuance, and sale of common stock.
Renee Cormier: As of December 31, 2024, we sold approximately 2.2 million shares for net proceeds of approximately $119.6 million.
Renee Cormier: In late January, we completed a convertible senior notes offering with $100,000.
Renee Cormier: million dollar aggregate principal amount of five and a half year four point two five percent notes due in August 2030 including the exercise in full of the initial purchasers option to purchase up to an additional fifteen million dollars in principal amount of the notes
Renee Cormier: Together with CapCall Transactions, the conversion premium is 75%, leading to an initial effective conversion price of Semler's stock of approximately $107 per share, which significantly reduces potential conversion delusion.
Renee Cormier: We use net proceeds from the ATM and convertible note issuances, as well as cash from operations to purchase additional bitcoins.
Renee Cormier: During the fourth quarter of 2024, we purchased 1,280 bitcoins for an aggregate cost of $121.3 million.
Renee Cormier: Subsequent to quarter-end, we purchased an additional 894 bitcoins for an aggregate cost of $90.7 million and now hold 3192 bitcoins with an average cost basis of $87,854 per bitcoin.
Eric Semler: Now, we will begin our Q&A. We received some questions ahead of the release that we tried to address in the prepared remarks. We do have some time for some additional questions. The first one, why did you decide to do the convertible note offering? Eric, I'll let you take that one.
Thanks, Renee. Thanks.
Eric Semler: We decided to raise capital in the convert market because we believe it is a cheaper source of funding for us and That's less dilutive to our stockholders
Eric Semler: and because it gave us the opportunity to raise a large amount of capital in a very short amount of time.
Eric Semler: We intended to raise $75 million, but because of outsized demand for the offering, we were able to increase the total offering size to $100 million, including the exercise in full of the initial purchaser's option to buy up to an additional $15 million of notes.
Eric Semler: In addition, with the CAP call, we were able to create a conversion premium 75% higher than where our stock was trading at the time of the announcement of the offering.
Eric Semler: Thanks, Eric. Jen, you can take our next question. What's driving the underlying trends in the business and what do you expect for 2025?
Thank you, Renee.
Speaker Change: Despite the government decision about payment for risk adjustment for PAD, we continue to add new clients for software licenses relating to our Quantifil product. We're expanding our customer base beyond managed care by reaching clinics and value-based care providers who recognize the clinical importance of PAD testing.
Eric Semler: Our next question, what are your expectations from the new government in Washington, D.C. regarding crypto? Eric, you can take that one.
Thanks for listening.
Eric Semler: We are excited about the strong government support Bitcoin is finally getting. We are especially encouraged by the repeal of SAB 121.
the expansion of custody to the world's top banks.
Eric Semler: may substantially increase the chances that large public companies will add Bitcoin to their balance sheet. We do not believe that the benefits of the repeal of SAB 121 are fully reflected in the current price of Bitcoin.
Eric Semler: Thank you, Eric, and thank you everyone for your questions. As we wrap up this conference call, we want to emphasize our ongoing commitment to our medical software licensing business and continued execution of our Bitcoin Treasury strategy.
Eric Semler: We appreciate your participation in today's discussion, and thank you for your ongoing support. Operator?
Eric Semler: Thank you everyone for joining. This now concludes the conference call. You may now disconnect and have a pleasant day. Thank you.