Q1 2025 Spectral AI Inc Earnings Call
Speaker Change: Good day, and welcome to the Spectral AI Inc. 1st quarter 2025 Financial Results conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by a zero.
Speaker Change: After today's presentation there will be an opportunity to ask questions. To ask a question you may press star then one on a touchstone phone. To withdraw your question please press star then two. Please note that this event is being recorded.
Speaker Change: I would now like to turn the conference over to Sarah Prendergast. Please go ahead.
Sarah Prendergast: Thank you, Nick. Good afternoon, everyone. And thank you for joining us for Spectral AI's 2025 First Quarter Financial Result Conference call. Our speaker for today will be Vincent Capone, the company's Chief Financial Officer.
Sarah Prendergast: Before we begin, I'd like to remind everyone that during this call, certain statements made are forward-looking statements within the meaning of the safe harbor provisions of the United States' private security's litigation reform act of 1995.
Sarah Prendergast: including statements regarding the company's strategy, plans, objectives, initiatives, and financial outlook.
Sarah Prendergast: When used on this call, the words estimate, projected, expects, anticipates, forecasts, plans, and
Sarah Prendergast: These forward-looking statements are not guarantees of future performance, conditions or results and involve the number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside of the company's control.
Sarah Prendergast: That could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements.
Sarah Prendergast: Investors should carefully consider the foregoing factors and the other risks and uncertainties described in the risk factors sections of the company's filings with the SEC, including our registration statement and the other documents filed by the company.
Sarah Prendergast: 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.
Sarah Prendergast: With that said, I would now like to turn the call over to Vince Capone, Spectral AI's Chief Financial Officer.
Thank you, Sarah, and good afternoon everyone.
Speaker Change: We appreciate you joining us today for our first quarter financial results conference call.
Speaker Change: We are pleased to report we had a strong start to the year with significant accomplishments in the areas of product advancement and continued operating efficiencies.
Speaker Change: We also strengthened our financial profile and created a well-defined cash runway to support our growth initiatives throughout the foreseeable future.
Speaker Change: We have continued to evolve from a research company to a commercial organization and have a well-defined business focus for 2025 and beyond.
Speaker Change: We have had some significant developments as we move forward into 2025, which I'd like to address now.
Speaker Change: First and foremost, our FDA submission. Our team is continuing to work hard as we move towards our FDA-denovo classification submission by the end of the second quarter of 2025.
Speaker Change: Second, I'd like to talk a little bit about our Verne Validation Study results.
Speaker Change: In March 2025, we also released the results of our Burn Validation Study, utilizing over 340 billion clinically validated data points.
Speaker Change: Our study which began in January 2024 and concluded in March 2025, represented one of the largest burn trials ever conducted in the US across burn centers and emergency departments.
Speaker Change: The goal of the burn validation study was to further demonstrate the innovative and versatile nature of Spectral AI's deep-view technology.
Speaker Change: As well as its ability to predict burn wound healing potential on the first day of injury with greater performance and speed than the methods currently used today.
Speaker Change: As our results have shown, together with a rigorous statistical analysis, the deep-use system continues to outperform the clinical judgment of burn physicians by a large margin.
Speaker Change: We are very pleased with the results from the study, which we will be utilizing as part of our FDA submission for a Denouvo classification.
Speaker Change: As we also announced in March, the company successfully completed a debt-financing agreement with Avenue Capital of up to 15 million in funding with an initial drawdown of 8.5 million.
Speaker Change: In connection with this debt financing, the company also raised approximately 2.7 million of equity financing from institutional and existing investors.
Speaker Change: With total cash on hand now of over $14 million and potential access to an additional $6.5 million of debt and a reduced operating burn rate which I will discuss later.
Speaker Change: Our company has significant financing in hand for the foreseeable future to enable us to accelerate our product commercialization efforts and our operations.
In the thrift force of the future.
Speaker Change: Next, let me talk a little bit about our MTECH development. We continue to drive the development of our deep use system handheld device, the deep use snapshot M. That's part of our MTECH development contract.
Speaker Change: We've successfully assembled two development prototypes, each with fully functional hardware. This marks a key milestone in our development timeline.
Speaker Change: Looking ahead, the next major activities include Advancing Arendt Justrial Design,
Speaker Change: Conducting environmental testing to evaluate the performance of the device under rugged and military operational conditions.
Speaker Change: and continuing our AI software development and integration to enable a total body surface area measurement and AI non-feeling prediction functionality.
Speaker Change: We're on track for development of this technology and we will continue to build momentum through the next phases of this contract.
Speaker Change: Lastly, I want to talk a little bit about Spectral IP. This is our healthcare intellectual property focused, intellectual property focused subsidiary. We are fortunate to have a well-known expert in intellectual property Eric Spangenberg as our largest shareholder.
Speaker Change: As we previously stated, we named Eric a CEO of the subsidiary, and its primary focus with respect to this entity has been to identify assets.
http://TheBusinessProfessor.com
Speaker Change: This entity continues through its SEC registration process, and it has recently filed an amended registration statement for its initial public offering.
Speaker Change: It is important to note once again that the activities of this IP focused subsidiary requires limited management resources and no additional capital from the company.
Speaker Change: Additionally, no core operating assets or intellectual property of the company will be involved in the subsidiary.
Speaker Change: We have issued our earnings releases afternoon, which contains additional details of our operating results, and we will be filing our form 10Q with the SEC later this week.
Speaker Change: With that in mind, I will focus my remarks on select highlights and key items.
Speaker Change: First off, we are pleased to report that research and development revenue for the first quarter rose 6% to $6.7 million from $6.3 million in the first quarter of last year.
Speaker Change: This growth reflects an increased level activity under the part of Project BioShield Contract, which was awarded to the company in September 2023, as we work towards our FDA DeNovo submission.
Speaker Change: Gross Margin rose to 47.2% from 46.6% in the first quarter of last year due to the higher concentration of direct labor as a component of our revenue under the Bardo Project BioShield contract.
Speaker Change: General and administrative expenses for the first quarter of 2025 were significantly reduced from 5.1 million in the first quarter of 2024 to 4.1 million in this quarter.
Speaker Change: The reduction in general and administrative expenses primarily relates to our focus on the BART of Project BioShield contract as we move to complete our DeNovo submission by the end of the second quarter of 2025, with less work being done on other potential indications.
and continued cost-cutting and efficiency measures of the company.
Speaker Change: The reduction in general and administrative expenses resulted in an operating loss for the first quarter of 2025 of only $896,000 as compared to a net loss of $2.1 million in the first quarter of 2024.
We continue to drive operational efficiencies throughout the organization.
Speaker Change: Other income for the first quarter of 2025 was up 4.9 million from other expenses.
Speaker Change: which accounted for an expense of 1 million in the first quarter of 2024 as the company recorded a decrease in the fair value of its publicly traded warrant liability of $4.4 million.
Speaker Change: This resulted in the company reporting net income of 2.9 million as compared to a net loss of 3.2 million in the first quarter of last year.
At March 31st, 2025, we had 25,588,121 shares outstanding.
Speaker Change: Now moving over to the balance sheet as of March 31st, 2025.
Speaker Change: Cash and Cash equivalents totaled $14.1 million, up from $5.2 million on December 31, 2024. This is primarily due to the company completing its financing as noted above.
Speaker Change: As stated earlier, this financing also includes a second tranche which would provide the company with an additional $6.5 million of debt and an intended equity raise of another $7 million upon FDA approval of our DeNovo submission.
Speaker Change: With our reduced spending levels, we believe this level of funding is sufficient to provide the company with a necessary capital throughout the foreseeable future.
Speaker Change: For 2025, we are reiterating our revenue guidance of approximately 21.5 million. This guidance does not include contributions from the sales.
Speaker Change: of the deep use system for the burn indication in the UK or in Australia, which, if any, are not expected to be material for this year.
Speaker Change: I want to thank you for your time and attention today and with that Nick let's open up the call for questions from our analyst.
Thank you.
Speaker Change: We will now begin the question and answer session to ask a question you may press star than one on your touchtone phone. If you are using a speaker phone please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question please press star and then two.
Speaker Change: At this time, we will pause for a brief moment to assemble our roster.
Speaker Change: And your first question today will come from Ryan Zimmerman with BTIG. Please go ahead.
Good afternoon. Thanks for taking the questions, Vincent.
Speaker Change: I'm on the guide and I guess I'll start there. You know, you're calling, I think for 21.5 million, just from Barter Revenue. You're tracking ahead of that. So, you know, any pull forward there in terms of what you saw in the first quarter.
Speaker Change: because if I hold everything steady, arguably just to maybe a little bit better than what your guidance is calling for.
Speaker Change: Yeah, Ryan. I appreciate the question. I think for us, we have a strong start to the year and it's reflective of our efforts to
Speaker Change: to focus on an FDA submission by the end of the second quarter.
Speaker Change: I think the second half of the year is looking, you know, probably less revenue with respect to the Barda contract
Speaker Change: as we continue to work on further developments of the debut system.
Speaker Change: But as of now, I think when we're not that far through the first through 2025, I think we're confident in the revenue guidance.
Speaker Change: Yeah, no, I can appreciate that early in the year, that's fair. And then you're job-tailing in the next question, just...
Speaker Change: You're going to submit end of the second quarter. So any color in terms of how you're preparing for that submission, what you're doing to de-risk this submission, any kind of flavor for your interactions with FDA at this point I think would be appreciated by investors.
Speaker Change: 12-year relationship with Barta. Barta has been very helpful with us. They've been a fantastic partner for us.
Speaker Change: As we work through this process, we're working with them as part of our submission. The FDA we've had, you know, over 10 free sub meetings with the FDA.
We're working as an organization, frankly.
Speaker Change: Very hard to get this submission in a form. We think the burn validation study results were also supportive and we've identified the three metrics that we are confident that the FDA is going to look at in our submission.
Speaker Change: and so, you know, to give some color there, I think…
Speaker Change: We've done the things we can do to de-risk our submission as best we can.
Speaker Change: and I think we feel confident on the outcome, but obviously we don't control that, but...
Speaker Change: BARD has been helpful, the FDA has been very helpful in our pre-sub meetings and we're just really working aggressively as an entire organization to get that submission completed and in.
Speaker Change: Okay. I'll leave it there and hop back into you. Thanks for taking the questions.
Thanks, Ryan.
Speaker Change: And your next question today will come from Carl Byrnes with Northland capital markets. Please go ahead.
Thanks for the question. Congratulations on your progress.
Carl Burns: Just to kind of follow up a little bit, with respect to the 10 pre-sub meetings that you've had with FDA, have you incurred or been hit with any additional requests or deliverables that are in process? And so can you elaborate on that? Thanks.
Speaker Change: Carl, thanks for the question and thanks for attending the call.
Carl Burns: I mean, we've kind of been walking through this process with the FDA over, you know, as we've walked through the submission process.
Carl Burns: I don't really want to get into specifics on the deliverables as part of our FDA submission, but suffice to say when we when we released the
The press release in March, identifying...
Carl Burns: You know, we're confident that those are benchmarks that the FDA is going to look at.
Carl Burns: as we work through these pre-subs with them. So I think that we've tried to de-risk our submission as best we can. We feel, frankly, excited as an organization to get the submission in.
Speaker Change: Great, thanks. And then just a foul up unrelated, but on general administrative it seemed to be a little bit lower than expected in the first quarter. How do you see that from the balance of the year? Thank you.
Speaker Change: No, great. I appreciate you picking that up. Obviously that has driven our results for the quarter of the idea that we are.
Speaker Change: and no pun intended, burning less than a million dollars per quarter. We've focused somewhat on operational efficiencies.
Speaker Change: We see that as helping us with a long runway of the cash we have on hand.
Speaker Change: I think this is going to provide us with what we need as we move forward. I would anticipate general and administrative expenses to stay consistent with our first quarter results.
Speaker Change: But, you know, that's what keeps me up at night and we'll continue to drive towards those numbers.
Excellent. Congrats again. Thanks.
Thank you, Corrie.
Speaker Change: Your next question today will come from John Vandermosten with his axe, please go ahead.
Great and good afternoon, Vince.
John Vandermosten: I thought I'd start out with just another question on snapshot M. I heard you say you had a couple prototypes made ready and I think we were expecting it to be available for military use in 2027. Is that it sounds like maybe you might be able to beat that? What do you think about the timing at this point for snapshot M.
Speaker Change: Hi, John . Thanks for participating on the call. No, look, I don't necessarily know if we're going to be able to beat the timeline. I think the message that should be taken away from here is that...
Speaker Change: We, as we are focused on the FDA submission for the deep view system, we also continue to work very hard on the M-Tech contract. We see deep view snapshot M as a very good second indication of our technology.
and we're working hard through those contracts too.
Speaker Change: to get into the position that we want to be with the device and the durability to assist the U.S. military.
Speaker Change: really in the battlefield. It is an absolute fantastic use of our technology and one that we are quite pleased to support the US government and our military brothers and sisters.
Okay.
Speaker Change: When you get approval, you kind of have a market that's there ready for you, which really limits the amount of effort you're going to have to put in on that. But will you have any some kind of awareness campaign or something to perhaps sell a few extra devices outside of maybe the core area where Barta is focusing or are you just going to focus mainly on just what Barta will sell for you initially.
Speaker Change: You look, it's a great question. As I said earlier, Bartett has been a fantastic partner for us, not just with the non-deludive financing that we've taken into date, but they've been a great sounding board, they've been a great partner.
Speaker Change: Obviously we need to focus on that relationship and the parameters around that contract.
Speaker Change: But, you know, our commercialization team is working hard towards expanding our commercialization efforts once we get FDA approval as a vice and moving into the commercial phase.
Speaker Change: Even outside of the board of the environment, but I do want to say, you know, board is there, you know, a strong partner and our primary focus.
Speaker Change: And finally, after you submit, you know, as soon as that'll be in probably late June , you'll have the second half to kind of reorder your focus. What will that focus be on? I mean, we'll be spending your time doing.
You know, with Spectral AI [inaudible]
Speaker Change: Well, John , we have continuing advancements of the Deview system as part of not just the first phase of the PBS contract, but also as part of the second phase.
Speaker Change: We're going to be working hard on advancing it through the different stages of the Barta contract so that once we get FDA clearance.
Speaker Change: If not before, we'll be able to access that second tranche of the Barta contract, not just with respect to the delivering of devices, but the further advancement of the device.
Speaker Change: as we move through 2025 into 2026, but I would tell you that I would expect a large portion of the work we do in the second half of this year will be to continue to refine and develop and expand the deep use system as part of the PBS BARTIC contract.
Great. Thanks, let's...
Thanks a lot John .
Speaker Change: If your next question today will come from Denny Montgomery with SP Angel, please go ahead.
Vadim: Sorry, Vincent, I think I got my name wrong, but it's the team here. Thanks for all that. I think I'll
Speaker Change: Big a lot of the questions have been answered on Barda, but I am I'm interested in just kind of this is a little bit further in the future, but can you give us a little bit more color on how discussions go with the DOD?
Speaker Change: Because obviously, you know, if you could develop that into a similar relationship as you had with Barda, the great diversification, you know, of revenues from an agency that's, you know, much larger. So I mean, how does that develop?
Speaker Change: The contract's the date I've been getting ever bigger. Obviously they're not the size of the bar to contracts, but they're obviously a bit earlier stage. But how is that going? I mean, how, how, how is that? Can you just give us a bit, a bit of an example of how those, how those contracts develop? Yeah.
Speaker Change: With Dean, I appreciate you getting on this call, especially knowing your time zone in the UK, so thank you.
I mean we've had the...
Speaker Change: You know, we've had the luxury of a long-standing relationship with Barta. We've had a luxury of working hard with EmTech and DHA, you know, throughout the DOD. We're continuing to work on those relationships. You're right. It takes time to develop those relationships.
. . . . .
Speaker Change: We're quite pleased with the development of the Snack Shot M product so far, and we just need to continue to work hard.
Speaker Change: through research and development to improve that device and further build on that DOD relationship. It's not something that I could point to and say, oh, well, you know...
Speaker Change: It's something that would render itself very easily but we continue to drive that and I think that continued development of our device will drive further development and relationships and contracts with the DOD.
Speaker Change: Okay, is it fair to say that it has barred up equivalent potential in the future?
Or is that too early to tell?
Speaker Change: Yeah, I don't I don't want to I don't want to that I can't I can't make a statement like that. Yeah, yeah, I can't make a statement like that. You know, you do remember you do know I'm still the general counsel of the company as well. Excellent. Excellent. Well, thanks. Alright, that's all the questions for tonight. Thank you.
Speaker Change: Who's our question and answer session? I would like to turn the conference back over to Vince Capone for any closing remarks.
Speaker Change: We are very pleased with the progress we continue to make and we remain optimistic about the prospects for the growth and development of our company.
Speaker Change: We continue to work hard on our FDA submission and we look forward to having future announcements on the progress of these goals in the near term. Again, thank you all and have a nice night.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
John Vandermosten, John Vandermosten, John Vandermosten