Precipio Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 18, 2024

There are 2 speakers on the call.

Operator

Please note that the conference is being recorded. Statements made during this call contain forward looking statements about our business.

Operator

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 ks for the year ended December 30, 2022, 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 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.

Operator

Now, let me hand the call over to Ilan Daniele, Precipio's CEO. Please go ahead, sir.

Speaker 1

Thank you and good afternoon. Thank you all for joining our 2024 Q3 shareholder update call. Thanks to all those who submitted questions. As always, we'll do our best to address them during this call. Before we jump into the numbers, I'd like to take a moment to remind everyone of the business we're in and the impact we have.

Speaker 1

We recently crossed the 10,000 case mark for the year, compared to close to 8,000 in 2023. For us, those aren't just numbers that translate into revenue and share price. These are real people, parents and grandparents, siblings and children who have to deal with the awful battle against cancer. I'm really proud of the impact we have on those patients and their families' lives and as we execute on our mission to battle misdiagnosis. I can assure you that many of those 10,000 people are better off because they were diagnosed by our company.

Speaker 1

Now let's jump into the business performance. At the end of last year, we declared our goal of reaching breakeven in 2024. Beyond bringing the business to this important successful operational milestone of a company that starts making money, the objective reflects our commitment to avoid raising dilutive structured capital and to bring the company into a new era, we are able to deliver appreciation and shareholder value. I'm pleased to report that our Q3 results demonstrate that we are well on track to achieve our goal this year. Let's review each of the division's performances in a bit more detail, starting with the pathology division.

Speaker 1

For the 2nd consecutive quarter, our pathology revenues exceeded the division breakeven point and at $4,500,000 per quarter represents a robust 18% increase from the previous quarter of Q2. We're going to continue to grow this division organically with our existing sales team and our goal is to reach approximately $20,000,000 run rate for this division and remain above that. This creates a division that does 2 key things for our company. First, the division will generate positive cash flow. 2nd, it provides a self sustained, cost free R and D platform that enables us to support our product customers and build our next generation of products, which is the future growth engine of the company.

Speaker 1

Our current sales team of 5 members enabled us to deliver this revenue. We may be hiring 1 more salesperson to provide additional revenue stability, so we remain well above that breakeven point. I'm really proud of the team, both our commercial team and our lab operations for their contributions to reaching this point. I know of no other lab that can reach breakeven at these revenue levels. Indeed, if you look at some of the other competitors in the lab services market, even at revenues tenfold hours, they're still struggling to generate cash.

Speaker 1

This is a testament to our efficiency of operations, the quality of our service and our business structure that enables us to achieve this financial milestone. I'm also confident that with the current team, the division will remain in this position ensuring that the pathology services will continue to serve as a positive operational and financial contributor to our broader strategy. Moving along to the Products division. Although this division has not yet hit breakeven, we are making steady progress and moving closer. Q3 revenues increased by 13% over Q2, reaching $680,000 As we discussed, we're building a robust customer pipeline, among which we have 3 key customers who are in various onboarding stages.

Speaker 1

We anticipate that in this 3rd quarter as well as in the next quarter, we're going to see the full weight of those 3 customers as they onboard our products and that's going to have a significant impact on the division's performance. Going forward, this division is going to become the main engine of growth for our business and as one, let me recap and remind you of the three reasons for that. Number 1, recurring revenue. The products generate consistent reliable income streams unlike the variability of the pathology division. Number 2, customer retention.

Speaker 1

Product customers are committed to this pathology, which means there is less likelihood of customer turnover, which in turn contributes to stable and predictable revenue generated. And the last point is margins. The margins for our products are significantly higher than those generated by the product the Pathology Services division. Developing products require R and D investments, which in our case, thanks to our Pathology division, is relatively minimal. Cellarum requires less overhead, simpler operational complexity and a small sales force and less management attention.

Speaker 1

This results in a far higher contribution to the bottom line from the products division. The product commercial team consists of 3 members and for the foreseeable future, we intend to keep this small team as is. The strategy is to leverage our distribution channel and ultimately reach their full potential. To this date, the majority of our revenues is from direct sales, but going forward, we expect to see a gradual shift increasing the share of revenue that's generated by our distributors. Although our distributors receive 20% of the margin, we in turn gain access to hundreds of sales reps that are not on our payroll and have access to essentially every customer in the country.

Speaker 1

But with that access supported by the brand and reach of these distributors, we're able to get in front of many more customers than we would have likely achieved having gone direct the direct sales route. Moving to our cash position. In terms of our cash position, as you saw in our filings, our change in cash balance from the end of Q2 to the end of Q3 was $226,000 in cash burn. This is compared to approximately $1,000,000 of cash burn during the same period in 2023, a reduction of 75% in cash burn. I don't think there is a better metric to show you the impact of our company growth and improved performance than our cash position as we are rapidly approaching breakeven.

Speaker 1

With our current quarterly performance and our cash balance, at this point management sees no need for capital raises. With our current market cap, we remain committed to building cash reserves through our organic growth and customer sales, avoiding shareholder dilution. This is a very exciting time for us. Our team is working tirelessly to achieve the goal of financial independence, and it's exciting to see it within reach. Turning the corner from survival mode to build mode is going to be a very refreshing change for us and we're ready to embrace this new chapter building on the strong foundation we've established.

Speaker 1

Some of the questions we received revolved around how to translate the company business performance into future shareholder value. In our analysis, up until now, two main things have held us back, and I'd like to address both. Number 1 is the risk of continued capital raises, and the second is the lack of education of our company vision and market opportunity within the investor community. I think we've reached a turning point in addressing the first concern. With our business performance, progress toward breakeven and cash reserves, we are now in a position where capital raises to cover cash burn as we've done in the past are no longer necessary.

Speaker 1

This marks a significant step forward and we can confidently say that this challenge is behind us. As to the lack of education about our company, this is going to change next year. Once the company has achieved several consecutive strong performance quarters, we will then be able to point back to both solid past performance as well as provide investors with insights into what they can expect. This will be done through management guidance on certain parameters such as revenues and EBITDA performance going forward. Our plan also includes participating in investor conferences, building analyst coverage and other investor related activities that will help provide more visibility to the company.

Speaker 1

That alongside solid consistent growth and performance, meeting and exceeding our guidance should hopefully provide a substantial boost to our visibility, increasing trading volume and ultimately impact our share price, adjusting the market cap to revenue multiples higher than the current split. In summary, it's really exciting to see the company approach these milestones. We have been through a loss and as Vincent Giorgio said, if you're going through hell, keep going and we did. I think we can end the year strong and go into next year even stronger. With the holidays approaching, I want to wish everyone a joyous holiday season with family and friends and a Happy New Year to everyone.

Speaker 1

I'd like to thank you all for your support and I look forward to connecting with you in our next call in 2025. Happy holidays and have a nice evening. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • Precipio is on track to achieve its 2024 breakeven goal, with Q3 results confirming progress toward operational profitability without dilutive capital raises.
  • The Pathology division delivered $4.5 million in Q3 revenue—an 18% increase quarter-over-quarter—and has now exceeded its breakeven threshold for two consecutive quarters, providing positive cash flow and a self-funded R&D platform.
  • The Products division saw Q3 revenues grow 13% to $680,000, and the onboarding of three key customers is expected to significantly boost future performance as this division becomes the company’s main engine of high-margin recurring revenue.
  • Q3 cash burn dropped by 75% year-over-year to $226,000, leading management to conclude that no new capital raises are needed and marking a transition toward financial independence.
  • To translate operational gains into shareholder value, the company plans to introduce formal guidance, increase investor conference participation, and secure analyst coverage to enhance market visibility and trading liquidity.
AI Generated. May Contain Errors.
Earnings Conference Call
Precipio Q3 2024
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