Precipio, Inc.
Q4 2021 Earnings Call Transcript

Published: 4 Apr 2022

[Operator:]

Welcome to the Precipio Fourth Quarter 2021 Shareholder Update Conference Call. All participants will be in listen-only mode. Please note that the conference is being recorded. Statements made during this call contain forward-looking statements about our business. You should not place undue reliance on forward-looking statements as these statements are based upon our current expectations, forecasts, and assumptions, and are subject to significant risks and uncertainties. These statements may be identified by words such as may, will, should, could, expect, intend, plan, anticipate, believe, estimate, predict, potential, forecast, continue, or the negative of these terms or other words or terms of similar meaning. 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 31, 2021, which is on file with the Securities and Exchange Commission, as well as other risks detailed in our subsequent filings with the Securities and Exchange Commission. These reports are available at www.sec.gov. Statements and information, including forward-looking statements, speak only to the date that they are provided unless an earlier date is 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. Now, let me hand over the call to Ilan Danieli, Precipio's CEO.

[Ilan Danieli:]

Thank you, Anthony. Hello and good afternoon, everyone. And thanks for joining our 2021 fourth quarter year-end shareholder call. Thanks also to those who sent in your questions, we've done our best to incorporate them into today's call. My goal today is to give you some insight into how we cleared the recent quarter, and how we closed out 2021 overall, beyond what you read in our financial statements that were filed last week. And lastly, to give you some insight as to how we view the upcoming year, the expected contributions of each division, and the expected impact on shareholder value. Let's begin with fourth quarter results. In Q4, we got back on track closing the quarter with revenues of 2.4 million, an increase of 8% from the prior quarter and year-over-year increase of 0.5 million or 25% in Q4 2020. For the full year of 2021 revenues increased from 6.1 million to 8.8 million, a 2.7 million or 44% increase from 2020. Our sales team and our internal lab operations are back . We resolved the operational issues and are humming on all cylinders. From sales conversion metrics, the turnaround time results from COGS to DSO, I'm pleased to report that all metrics are moving in the right direction. This is important, because it enhances the performance of the diagnostic services division, and it also enables the company’s leadership to focus on growing our new products division, more on that in a few moments. I'd like to take a moment to discuss Carl Iberger’s resignation. Obviously, we were saddened to see Carl resign as our CFO. Carl joined us in late 2016 several months before we completed the merger and became a public company. I don't think there were many moments in my career where I was more concerned with the adventure we were about to embark on than at the months leading up to us going public. Remember, I was a tank commander in the Israeli army. But having Carl in our corner gave me the confidence to know we had what it would take to pull this off. It's safe to say we wouldn't be where we are today without Carl. The organization control, structure and discipline he brought to the company were critical to getting us through the tough times to a point where we now have a solid operation, and a clean strong balance sheet that enabled us to execute on our growth plans. But most important in his capacity, Carl accomplished what many managers fail to see are the key goal a manager could achieve, to build a team to the point where the team can function without them. And that's precisely because of this skill that I know that Carl leaves the finance team that is well equipped to continue to support the company's growth. Matt Gage, our Director of Finance has stepped in as interim CFO. Matt has over 20 years of public company finance experience, and was Carl's right hand guy throughout the past five years. I look forward to work with Matt and have full confidence that he and his team will continue to function as well as they did with Carl. Next, I'd like to review some of the actions we've taken to position the company for further growth. As mentioned, our revenues in diagnostic services grew both Q-on-Q and year-over-year. I'd like to mention a few key drivers of this growth. First, improved sales team management and performance. Our team is now better trained, better equipped and better positioned to deliver our message to our customers. We're also seeing access to customers improved with the ability to meet with customers in-person, which significantly impact the prospecting and sales process, as well as interaction with existing customers. This resulted in an increase of 23% in case volume in 2021. Improved operation with the various steps to revamp some of the lab operations, resulting in an increase in cases reported within the committed turnaround time from 80% to 96%. Third, cross pollination between products and our services division. Last quarter, one of our HemeScreen customers also became a diagnostic services customer. This is the first time that we've seen this cross pollination effect actually materialize, where the relationship and quality of our product opened up a discussion to the other side of our business of diagnostic services, and we ended with a customer served by both divisions. This single customer at full throttle is expected to generate over $1 million in combined diagnostic and HemeScreen revenues. This is an exciting validation of our business model, and we expect to see other customers follow through. Our product division continues to grow in two dimensions. First, they add more customers. The second is the customer is growing revenue organically by ordering more of our products. Most our HemeScreen customers begin with a conservative volume they commit to knowing they will grow into their full revenue potential. This has been the case with the majority of our customers which increased our commitment volume, sometimes by more than double since they started. In a recent conference we attended we were able to finally meet in-person with many of our prospects to whom we've previously presented only via video calls. To anyone who's tried to build a business relationship, you know that making a sale over videocalls is virtually impossible. That's why the in-person meeting, especially in this recent conferences were such a huge boost to our ability to gain more customers. We anticipate that over the next couple of quarters, we're going to see accelerated growth as our sales team can visit with the customers in-person build the relationship and the trust, which translates into business. Our HemeScreen product portfolio currently includes three panels, the NPN, AML and Anemia panel. We recently completed the update of the Anemia version 2.0 panel following changes to the guidelines to be launched this quarter. We also expect to launch the long awaited CLL panel, which has been delayed due to multiple changes in guidelines expected to be adopted by the various regulatory bodies, such as the NCCN and the WHO also this quarter. As for IV-Cell, we're beginning to see the relaxation of the strict policies laboratories adopted during COVID and we hope this translates into active customers, more on that to come in the coming months. We focus on the product side for two reasons. First, this is a new development division in our company compared to the diagnostic service division, which is well established. Second, we believe each product addresses a substantial total available market and has significant demonstrable and sustainable competitive advantages. Management expects that the company will continue to evolve over the next 12 to 24 months to build its technology biotech product business with the portfolio of proprietary technology that is expected to generate revenues and strong margins, while staying true to our mission of eradicating the problem of misdiagnosis through our diagnostic services. Diagnostic services side and our laboratory will remain mission critical components. After all, none of our products would have existed were it not for the experience we developed in the laboratory using processes that needed a better solution. Our experience also taught us, we gained substantial credibility with our customers when we tell them that we are user of each technology we develop. Being able to support our customers via our own lab experience delivers a credibility level that no other manufacturer in our industry can provide. It's that precise cross collaboration between the two divisions