Q2 2019 Earnings Call
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone as a reminder, this conference call may be recorded I would like to turn the conference over to your host Mr., Robert Jaffe Investor Relations for not until you may begin.
Hello, everyone and thank you for joining us today to discuss nano.
2019 second quarter financial results.
On the call today are Dr., Patrick Schoen, Chief Executive Officer, Ron Lewis, Chief Operating Officer, Bottrell, Chief Financial Officer, and Dr., Sandeep Reddy, Chief Medical Officer.
Playback will be available for three months on that website.
I would like to make a cautionary statement and remind everyone that all of the information discussed on today's call is covered under the safe Harbor provision.
The litigation Reform Act.
The company's discussion today will include forward looking information, reflecting managements current forecast of certain aspects of the company's future and actual results could differ materially from those stated or implied.
In addition, during the course of this call we may refer to non-GAAP financial measures that are not prepared in accordance with US generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies.
Investors are encouraged to review Nantel its press release announcing its full 2019 second quarter financial results.
The company's reasons for including those non-GAAP financial measures in its financial results announcement.
The reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is also contained in the company's earnings press release issued earlier today.
Shortly Ron will provide a brief overview of the quarter and discuss the business lines, followed by Bob who will discuss the financial results in more detail.
We will then open the call for questions.
With that said I will now turn the call over to Ron looks Ron.
Thanks, Robert Good afternoon, everyone and welcome to now is 2019 second quarter financial results Conference call.
The national team is delivering on our corporate goals and prove our financial performance. During this year's second quarter financial results and provide our customers with a high quality service and support.
Comparing to 2019 second quarter in the second quarter last year total revenue increased 17% to $25.7 million and $22 million to 2019 second quarter represents the fourth consecutive quarter and total revenue growth.
Our SaaS revenue increased 13% to $18.3 million over last year's second quarter and was up 3% from first quarter 2019.
Our gross margin improved to 62% of total net revenue.
2% in last year's second quarter. We also continue to make progress reducing operating expenses, Bob will further discuss our financial results in more detail shortly.
Turning to our software and services business and our clinical decision support Division, we showcased in mid June and the connect solution. Our evidence based treatment intelligence and web based oncology decision support platforms at America's Health insurance plan into two excellent 2019.
Also during Q2 as we previously announced we signed a substantial every contract with care source, a leading non profit and multistate elephant with the signing of this three year contract and reconnect total covered lives and seats 25 minute.
In addition, we released version 7.8 over any products within and called Smart revenue search, which actually entry on treatment plan to be intelligent regimen, driven joint ventures.
For an avenue to irrigation solution in Q2 and also in Asia.
We shouldn't we show a little bit.
Our share multiplayer platform, so as payers and providers exchange vital administrative and clinical information.
We released a number of enhancements to our NAV, an open authorization application, which enable our health plans offer more configuration options. These include reducing the need for manual intervention vehicle and tax processes and saving the provider side managing their authorization requests spending on delivery of care.
Also in Q2, we launched an avnet.
Anyway, which allows our partners to interact directly with our standard method, reducing reliance on custom integration methods and an 8 million payer flexibility for their provider networks.
And for our connected care product line in Q2, we showcased device next each box and let us get asked to Europe .
Decision makers at the 2009, and Oems and L 2.0 yearly arms, where we participated in the first ever USA pavilion.
In May I tell us the largest element event in Scandinavia, we presented our latest connected care solutions in sponsor be intelligent Hospital pavilion.
Where we demonstrated our latest device centsfive, one flight a medical device integration solution.
In Q3, we entered into a memorandum of understanding with Ascom tumor lighter, Denmark clients increased visibility other device parameters, our combined capabilities provide clinicians with increased visibility of intelligent alert notifications driving more informed decisions at the point of care. This benefits our entire customer base by closing digital information gas and aligned for the best possible decisions throughout the hospital ecosystem.
Turning to our sequencing and molecular analysis business.
36 total test for in the second quarter. This included 86, GPN NTM straight affinity liquid you get us test the lower number of Telesats was expected and reflects our newly implemented billing policy that will limit the number of tests performed without reimbursement from a cover held an organization directly. In addition, we have ceased commercial sales are illiquid GPS test product in favor of performing a study to measure the clinical utility of the RMB 70, Annaly will continue. This study will also pursuing other strategically aligned clinical studies that support our liquid biopsy platform and then we only hear more unique and targeted products for the company in the future.
On the science and medical front in Q2 scientific teams from now financial and Ics presented at ASCO, and HCR, along and collaborators from Virginia Commonwealth University.
University, California, San Diego and Duke University.
With that overview of our business lines I will turn the call over to Bob to discuss our financial results in more detail Bob.
Thank you Ron as Ron mentioned earlier for the second quarter of 2019 revenue grew approximately $3.7 million or 17% to $25.7 million from 22 million reported in the same quarter of the prior year.
Sequentially revenue was up 8% in Q2, compared with Q1 2019.
Our largest revenue category SaaS grew approximately 13% in Q2 to $18.3 million from $16.2 million a year ago. This was mainly driven by organic growth as well as the attainment of new customers.
Due to sequencing molecular analysis revenue was approximately 491000 down from 924000 in the same quarter of the prior year.
This decline was primarily driven by a lower volumes as we implemented a new billing policy to cloud cash upfront for non reimbursed to us we expect to continue to decline in this revenue category.
Q2 revenue from our connected care products grew 72% to $5.6 million from 3.3 million in the same quarter of 2018 and was up 60% sequentially from Q1 2019.
As we have mentioned before revenue from this line item often varies from quarter to quarter due to the timing and completion of connected care implementations, but a big portion of the increase in Q2 stems from added software licenses recognized in the first half of 2019.
Q2, gross profit of $15.9 million or 62% of revenue increase compared with $11.5 million or 52% of revenue in the same quarter a year ago.
The gross margin improvement was primarily due to changes in product mix as our continued growth as being spurred by the growing software related businesses.
Q2, total operating expenses declined 2% to 24.8 billion from $25.3 million in the prior year second quarter, reflecting our continued cost management efforts on a non-GAAP basis operating expenses declined 15% to $18.5 million from $21.8 billion.
For the second quarter net loss from continuing operations was $14.7 million or 13 cents per square, which improved from $21.8 million or 20 cents per share in the prior year second quarter.
On a non-GAAP basis net loss from continuing operations, which excludes the losses from our related party equity investment of $2.2 million and intangible asset impairment charge of $4 million and again from a change in the fair value of the bookings commitment liability of $1 billion. Among other things was $4.4 million or four cents per share.
Down from 11.1 million or 10 cents per share for the second quarter of last year.
In Q2, we divested our Cisco product line incurring a loss on the sale of 582000.
Finally, cash and cash equivalents were $7.1 million at June 32019, compared with 12.4 million at the end of our first quarter, representing a net usage of $5.3 million. We continue to manage our cash position and have not drawn on our 100 billion dollar line of credit.
With that I will now turn the call back over to Robert.
Thanks, Bob Operator, we've completed the prepared portion we're now ready to open up the call to questions.
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We now have a question from Graben cool yard.
Okay Jefferies. Your line is now open.
Hi, Thanks, good afternoon.
Just starting with GPS I guess I was under the impression that your newer approach to.
Trying to collect more cash up front for those cases, where you didnt have reimbursement went into place in prior periods. You just tell us when that went into effect and then perhaps give us an update on your status with the FDA.
Yes, Hi, this is.
Well go ahead, Matt.
Then a circa I think Bob you know George So maybe you go ahead and give them the uptick.
And then I will talk about the update yeah sounds good. So the policy went into place at the beginning of the Q. So was in April and so this reflects I think that change and as we've stated prior we expect this going forward I think the the way that I'd like to think about it is that if you compare Q over Q or even compared to last year, you will see that actually the revenue number you know, although it's down it's from a percentage basis is only down slightly compared to the volume of test. So the other way to think about that obviously as the revenue.
Per test has gone up significantly and as we said we expect that we're not focused necessarily on driving significant revenue from this at this time, while we're waiting approval. Once we have approval, we can I think drive that back through the Mark.
And then maybe I will let me give you run a little bit of the update on it.
So we just had another meeting recently with the FDA and we're getting a good received responses.
From the FDA and just to.
Confirmed the test would be doing is the tumor mutation burden test.
So what will be cutting in and.
Completely.
Novel about the tests that we have.
Generated unlike the current tests in the market where.
The tests and the market is just taking a panel of genes.
And then extrapolating the tumor mutational burden.
To 20000 genes based on a 500 plus panel.
We are measuring actually the issue in the actual tumor mutational burden of the entire 20000 genes.
And going backwards to look at the two mutation burden of the five genes.
And on top of that comparing that to tumor normal.
So what's exciting about this this will be probably the most accurate tumor mutational burden test.
The FDA so far is very supportive.
Of.
Filing.
They've asked us to provide more information, which we have.
And we are hopeful anticipate so within the next quarter.
To get good news.
Okay, and then you just touch on any plans you have for financing with a that's a million cash on the balance sheet do you expect to draw down on that 100 million.
Revolver here in the coming months.
You know, we obviously, putting the budget together and Bob speak to that but better but I think we as the did not match the cash very well they like the for the first time in the history of the company. The software business is not just cash flow positive it's profitable.
So I think.
The good news, we have $100 million line of credit. So it's not an issue in terms of running and operating the business yes.
We don't expect the drawn out through this quarter and managing accordingly through Q4, so a expectation in the short term is that.
On those ones.
Okay chance you can help us with Directionally, perhaps.
Opex and cash burn expectations for the back half.
Oh on Opex again, I, we should see some marginal decline or more to the divestiture of the product lines and steel that I'd reference earlier, so there will be a bit of a decline, but again at the end of the day, we're continuing to manage and invest where it makes sense. So I don't foresee is growing substantially but I don't foresee it a declining so I think we're.
Somewhere in the realm of where we are now through the latter half of the year.
Okay, and then on the cash side again.
As we will have a small cash burn through this quarter, but a fairly small and that's really nice quarter.
We will get to a lower level, but again continued Matt.
Through the rest of this fiscal year.
Great. Thanks.
Thank you.
And there are no further questions at this time I'll now turn the call over back to our management.
Thanks, operator, thanks, everyone for joining us today, we look forward to sharing our progress on our next scheduled conference call. Thanks again for joining us today have a great weekend.
This concludes today's conference call you may now disconnect. Thank you so much and have a good thing.