Q4 2024 Precipio Inc Earnings Call
Speaker Change: Welcome to the Precipio Q4 and Year End 2024 Shareholder Update Conference call.
Speaker Change: Risks and uncertainties that could cause our actual results to differ materially from those set forth in any forward. Looking statements include but are not limited to the matters listed under risk factors in our annual report on Form 10-K for the year ended December 31st 2024, which is on file with the Securities and Exchange Commission.
Speaker Change: Well as the other risks detailed in our subsequent filings with the Securities and Exchange Commission. These.
Speaker Change: These reports are available at Www Dot S E C dot Gov.
Speaker Change: Statements and information, including forward looking statements speak only to the date. They are provided unless an earlier date has indicated and we do not undertake any obligation to publicly update any statements or information, including forward looking statements, whether as a result of new information future events or otherwise except as required by law.
Ilan Daniela: Now, let me hand, the call over to Ilan Daniela <unk> Presidio CEO. Please go ahead.
Ilan Daniela: Yeah.
Ilan Daniela: Good afternoon, and thank you for joining our 2024 Q4 and year end shareholder update call.
Ilan Daniela: Thank you for those who submitted questions, we'll do our best as always to address them during the call.
Ilan Daniela: Before we dive into our review and update I'd like to take a moment to reflect on the business. We're in and the difference we make everyday People's lives.
Ilan Daniela: To illustrate the true meaning of our work I encourage our listeners to check out online the testimony of Andrew a patient. We helped last year you can find this testimony on our website at www Dot precipitate, TX Dot com Slash, Andrew and we're Gonna played for you at the end of this call.
Ilan Daniela: His story one of many patients we hope everyday helps make our impact real and tangible.
Ilan Daniela: Our financial results represent much more than revenue and share price they reflect our impact on real people and I take immense pride in the role we play in supporting patients and their families in their battle against cancer.
Ilan Daniela: Now, let's turn to a review of the business performance in 2024.
Ilan Daniela: At the start of 'twenty 'twenty four we declared our goal of reaching breakeven by year end.
Ilan Daniela: This quarter reflected our commitment to and the dilutive structured capital raises that we had experienced in pik and bring the company into a new era, where we can deliver appreciation and shareholder value.
Ilan Daniela: I'm pleased to report that in Q4, we achieved our goals with both positive and adjusted EBITDA and positive cash flow.
Ilan Daniela: With the company's current cash reserves growth pipeline, we believe we're on track to turn the corner and become a profitable company.
Ilan Daniela: I'd like to take a moment to explain how this impacts the way we manage the business well.
Ilan Daniela: I think a business that is an ongoing need of capital raises for survival as opposed to raising capital for growth creates a different not always produces an ideal set of decision factors for the business I like to think of it is constantly playing defense.
Ilan Daniela: Every decision made every dollar spent is viewed through the lens of whether it's shortened or length of the runway and that's a licensed pilot myself the concern about having a long enough runway is literally a die for that factor, which impacts how you fly the plane.
Ilan Daniela: Although this developed strong organizational discipline frugality and the ability to do more with less and it's not always conducive to maximizing growth.
Ilan Daniela: This disciplined approach to financial management, the ball, sometimes ligament limited growth is also still a level of rigor that proved invaluable through careful financial modeling scenario planning and assumptions laid out and spreadsheets, we planned our projected cash flow assessed runway, which guided every spending decisions we made.
Ilan Daniela: As long time entrepreneur, where bread with a healthy skepticism as to whether the assumptions. We made in the models, we created mix, how well actually match up with reality in our bank accounts.
Ilan Daniela: The last several quarters have shown us the numbers in the spreadsheet can and did become real.
Ilan Daniela: Now is the time for our organization to begin to change its mindset and I don't mean to be throw away the discipline like fugazi, we've developed but rather we look at a dollar spent as an investment in the future debuted decisions with a longer horizon to grow our business and create value in other words, it's time to start playing offense.
Ilan Daniela: Looking back to one of the words I used at the end of 2023 conversion management entire focus was on taking our leads introductions and pipeline of customers and converting them into existing business revenue and cash.
Ilan Daniela: During 2024, we began to leverage our structure, where our expenses are mostly fixed and as we grew revenues, we reduced our cash burn substantially.
Ilan Daniela: So the Q4 quarter, we delivered revenue growth of nearly 26%.
Ilan Daniela: Compared to the previous year quarter, while also improving our profitability for the full year, we drove revenue growth of close to 22% while I'm pleased with the result, I am by no means content, we can and will do much better.
Ilan Daniela: Now, let's review each of our divisions performance in detail.
Ilan Daniela: Yeah.
Ilan Daniela: For the second consecutive quarter, our pathology revenues exceeded the division is breakeven point of $1 3 million per month.
Ilan Daniela: Our target for 2025 is to continue growing this division organically with our sales team and our goal is to reach approximately 25 million run rate by the end of the year.
Ilan Daniela: Keeping in mind that the goal of the pathology business was and continues to be to generate positive cash flow for the company, while serving as a driving force in developing our next generation of products, which is the future growth engine of this company.
Ilan Daniela: I'm confident that with the current team the division will continue to execute ensuring that our pathology services Division will continue to serve as a positive operational and financial contributor to our broader strategy.
Ilan Daniela: Now, let's turn to the products Division.
Ilan Daniela: Q4 revenues remained the same as Q3 at 700000, which might give the somewhat misleading impression so I'd like to take a few moments to provide further insight into our products division customer base and the Onboarding process.
Ilan Daniela: Last year, we discussed our progress of adding customers and we referenced three large customers with whom we were working at various stages, whether to onboard our products complete validation golar clinically.
Ilan Daniela: Or add new panels to the program.
Ilan Daniela: They are all still progressing in various stages.
Ilan Daniela: As you can imagine that our business there often challenges that we face with those stages and therefore.
Ilan Daniela: We were able to add more customer, while we were able to add more customers those childhood often delayed the progress of customers going live translating those delays into orders and subsequent revenues.
Ilan Daniela: I'd like to share some of those challenges with you today.
Ilan Daniela: There are three main categories of challenges we've experienced.
Ilan Daniela: The first type of challenge is regulatory.
Ilan Daniela: Our field is driven by science, and therefore is ever changing with new requirements and regulations constantly arising.
Ilan Daniela: These require our customers to adapt their test and our systems and modifying our products to meet the new regulatory requirements let.
Ilan Daniela: Let me share. One example, with you.
Ilan Daniela: Recently, one of them the regulatory agencies changed at standards or evaluating an important factor in the test performance called the limit of detection often referred to as L. O D B.
Ilan Daniela: L. O D is intended to show the lower limit of how sensitive. The test is in other words below that level that test might not be able to provide an accurate answer.
Ilan Daniela: Diagnostic test has this metric.
Ilan Daniela: In order to demonstrate the L. O do you have an assay a series tests need to be conducted by the customer and their lab by running a few unique place, which we provide.
Ilan Daniela: The change in the L. A D requirement meant we had developed a new set of L. O D play for our customers something that can take a couple of months.
Ilan Daniela: Once we develop the play and testing in our lab. It is ready for distribution to our customers, who then have to run. These plays in their lab record the results and submit that to the regulators for approval.
Ilan Daniela: The total time for the process can take anywhere from three to six months and unfortunately is entirely unexpected unexpected.
Ilan Daniela: From a company forecasting perspective, it means that revenues that we're expecting in January may not happen until April.
Ilan Daniela: The good news is that requirement is not specific to our company and so every competitor is faced with a challenge.
Ilan Daniela: Because of our unique model, where as a manufacturer. We also operate a clinical lab, we can develop test and offer these L O the updates much faster than any other competitor.
Ilan Daniela: So ultimately it's not an if it's a when do we begin to see revenues with its customers with face. This challenge this type of charge.
Ilan Daniela: A second type of challenge is what we referred to as equipment lab process challenges let.
Ilan Daniela: Let me give you an example of the type of these challenges.
Ilan Daniela: Our haynesville assay detects genetic mutations which are tested on DNA <unk>.
Ilan Daniela: Batori typically received a blood sample and has to extract DNA from a blood through a process, it's called DNA extraction process.
Ilan Daniela: There are numerous methods and kids to use used to extract DNA and although we usually recommend to the customer a certain type of method. This may not be always be the method that they are used to.
Ilan Daniela: We recently had the situation with a specific customer that tried to adapt their DNA extraction method to our assay and after about three months of testing they realized it wouldn't work this.
Ilan Daniela: This is a trial and error process, which sometimes is unavoidable ultimately the customer ended up changing to an extraction processing, we recommended but it wasn't until they were convinced that their method would work.
Ilan Daniela: As frustrating as it is we had no choice, but to watch as the customer went through those traveled tribulations until they arrive the ultimate conclusion and made the change again not an if it's a web but we experienced a three month delay in starting their revenue.
Ilan Daniela: One final example is some of our customers encountered personnel challenges lapsed.
Ilan Daniela: Lab staff come and go most labs I know of are always short staffed and that sometimes means that our lab has to make a choice of which tests they need to pause until they retire adequate staff one of our largest and earliest customers recently lost to other molecules <unk>, who are running our tests and at the stop ordering reagents until they rehired.
Ilan Daniela: A trained new staff cleaning and gap of almost six months of revenues from that customer thankfully. They have hired two decks and are in the process of completing their training. So we expect to see them ordering reagents shortly for that revenue to bounce back.
Ilan Daniela: What's the solution to these challenges there are a couple of changes we've made with the goal of improving and shortening the onboarding process and ensuring consistent revenue from each customer.
Ilan Daniela: First we try to anticipate the regulatory changes as early as possible and be prepared for them. Our scientific advisory team is constantly combing literature publications to ensure that we remain ahead of the curve. We recently updated one of our panels to better distinguish between two very similar mutations that began to appear in various publications and.
Ilan Daniela: Which we believe will soon become part of the guidelines haven't been having that modification already in our product means we dramatically reduced in fact eliminate any downtime and loss of revenue due to any regulatory changes.
Ilan Daniela: In terms of customer laboratory workflow. After a few of these situations such as the one I described with DNA extraction kit, we developed the detailed checklist that we review with each customer it was part of it.
Ilan Daniela: Initiation process to ensure we don't fall into those potholes again.
Ilan Daniela: We continuously monitor the onboarding process and keep a log of the timeline it takes and when we expect to see a significant improvement in the onboarding process as a shortening of the timeline to the customers, placing an order.
Ilan Daniela: There's two points I'd like to make following this up.
Ilan Daniela: First that our revenue J, you don't always reflect the continuous growth in our customers and that over time, those bumps will smooth out and creates a nice increasing growth curve.
Second is that we continue that we are a continuous learning organization, we debrief every customer experience good or bad and see that we can learn from it to improve the next experience delivering better results to the customer and to us.
Speaker Change: Finally on the products Division, we're excited to announce that Steve Miller, our former Chief commercial officer will be rejoining the team at the same role focused on accelerating growth in the products Division.
Speaker Change: Steve was a precipitous chief commercial officer for 2017 to 2020 at the time, our products Division didn't yet exist in our pathology division as well as our company was facing various struggles however, with the successful launch and growth of the product Division, we're thrilled to welcome him back because it's something as exciting time.
Speaker Change: <unk> return now with a strong suite of products that we have and the distribution partnerships that we've built is perfect timing for him to lead the division and accelerated growth both through direct sales as well as enhance collaboration with our distribution partner.
Speaker Change: With Steve's extensive background in the diagnostics field and years of executive leadership experience. He is uniquely positioned to drive our growth initiatives.
Speaker Change: We're confident that Steves leadership will play a critical role in driving sustainable rapid growth for the company and I'm personally excited to have Steve in our corner.
Speaker Change: Now looking into 'twenty, two new hires for our products Division.
Speaker Change: Historically direct sales have accounted for the majority of our revenue in the latter part of 'twenty 'twenty four we worked closely with our distributor leadership team to review, what we did and identify the changes needed in order to accelerate revenue through our distribution partners because that's the way. We believe we can scale this business up the fastest.
Speaker Change: We applied key learnings to build a structured high impact strategy and we're now beginning to see the results.
Speaker Change: This coming quarter, we will be onboarding, two large institutional customers that will be adopting our entire <unk> suite of products.
Speaker Change: Both of these customers came through our distributors.
Speaker Change: Going forward, we anticipate a gradual increase in the revenue share generated through our distributor network versus a direct sale.
Speaker Change: We still believe distribution is the fastest way to scale of growth, we are committed to making those relationships work.
Speaker Change: What you can expect to see from us in 'twenty two to five is consistent and accelerated conversion of pipeline into active revenue generating accounts each of them serving as another building block of recurring revenue to the company.
Speaker Change: We ended Q4 with revenues of 700000, which is approximately $2 $8 million run rate, we're able to double that by the end of 2025.
Speaker Change: I'd now like to touch upon our plans for enhancing visibility within the financial markets, which is a key strategic focus for this coming year.
Speaker Change: As we continued to deliver strong consistent performance across multiple quarters, we will be well positioned to provide investors with clear insights into our trajectory through management guidance on key financial metrics, such as revenue and EBITDA.
Speaker Change: Two things need to happen for us to feel more comfortable providing guidance first we need to learn to better adapt to the challenges described above anticipate and offer solutions that ensure revenue stability for each customer.
Speaker Change: Second we need to grow our customer base to achieve a bit more diversity and benefit from the law of large numbers, where a large number of customers will help smooth the ups and downs that comprise the everyday life of growth.
Speaker Change: I believe 2025 will be a year, where we achieve those goals and begin to begin to project and predict stable growth of the business.
Speaker Change: Lastly, our investor relation strategy will include our participation in industry and investor conferences, increasing analyst coverage and.
Speaker Change: In implementing targeted investor engagement initiatives, we hope that these efforts combined with strong execution, while meeting and exceeding our performance guidance will drive greater market awareness increased trading volume and although ultimately enhance our valuation creating meaningful long term value for our shareholders.
Speaker Change: In summary, while challenges remain we are entering 2025 with strong momentum and a clear path forward. Our diagnostic services Division has validated the business model by consistently exceeding breakeven and serving as a platform for continued growth and development for the products Division.
Speaker Change: We've revitalized our distribution strategy, creating new about your opportunities for scalable growth beyond direct sales and are building a strong execution team to deliver this consistent growth.
Speaker Change: And lastly, the fundamental financial structure of our company is strong we have a business that we anticipate will no longer need cash to cover burn or losses, and we can turn our attention to resources and to growth of this company.
Speaker Change: I sincerely appreciate your continued trust and support for those of you who would like please stay on to watch Andrew's video in here story I look forward to reconnect reconnecting after the next quarter and the share of future updates. Thank you and have a great evening.
Thank you at this time, we will play the recording which can be found online at www Dot Presidio Dx Dot com slash Andrew.
Speaker Change: My initial reaction was just like the whole world is gonna comes in.
Speaker Change: And I I think I said, it's a three different doctors I said, where do you want to see my grandchildren.
Speaker Change: My name is Andrew Bentley Ritchie from London, and the United States for 28 years My wife's initially notice some lumps on my neck, we weren't quite sure. What it was my G. P was like Oh, you've got lymphoma.
Speaker Change: And which was quite a shock.
Speaker Change: Those are my biggest fear everyone's biggest series to hear those words it turned out the oncologists, who did the pet scan and the blood biopsies and everything else missed.
Speaker Change: Diagnosed me as having a low risk or medium low to medium risk type of chronic lymphocytic leukemia. In my case. It was an aggressive one so when I was working as a chaplain with local hospital I've seen a lot of different all the different types of cancers that people can get in some of the outcomes can be bad and how doctors can miss things.
Speaker Change: Stuck to the human precipitous looks into those genetic markers, which define whether you're chemo intolerance. They are.
Speaker Change: Caught my poor genetic markers, which implies poor prognosis.
Speaker Change: There was something wrong in the beginning something not lineup in that bundle and the full picture.
Speaker Change: The diagnosis is base.
Speaker Change: On multiple factors not just the blood work or the result on the sheet, but actually it's like a big button any gains that were locked into winter.
Speaker Change: We deal with it as if we are the fresh pair of eyes were looking to get.
Speaker Change: <unk> learning, what's happening and try to better serve the patients it has to be a mix between the science and the medicine because at the end of the day medicines and build off times when you see the patient in real life. When you talk to them you have that different feeling that you'll see the value of what you're doing and smarter.
Speaker Change: And number and then I got a call and it was no it's not a wait and see approach for you which is the normal approach to standard of care is wait and see.
Speaker Change: It would be aggressive and it could transform something else in the wait and see approach was the absolute wrong approach and that was where the misdiagnosis loss and so precipitate basically saved my life I've been in remission for February will be two years and I think if it wasn't for that I mean, I probably wouldn't be here sitting.
Speaker Change: Talking to you now.
Speaker Change: Yeah.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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