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spk00: Welcome to the Precipio Shareholder Fourth Quarter 2021 Shareholder Update Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal Conference Specialist by pressing the star key followed by zero. 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. Risk and uncertainties That could cause our actual results to differ materially from those set forth in any forward-looking statements that 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, 2021, which is on file with the Securities and Exchange Commission, as well as other risk details in our subsequent filings with the Securities and Exchange Commission. These reports are available at www.scc.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 statement 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 the call over to Elon Danielli, Precipio's CEO.
spk01: Thank you, Anthony. Hello and good afternoon, everyone, and thanks for joining our 2021 fourth quarter near-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 experienced 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 into 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 half a million, or 25% from 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 to the throttle. We resolved the operational issues and are humming on all cylinders. From sales conversion metrics to turnaround time results from COGS to DSO, and Lisa reports 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 enables us to execute on our growth plan. But most important, in his capacity, Carl accomplished what many managers fail to see as a key goal a manager can 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 leads a 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 working 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 from diagnostic services grew both year over year 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 operations. We took 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 heave screen 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, the diagnostic services, and we ended up with a customer served by both divisions. This single customer at full throttle is expected to generate over $1 million in combined diagnostics and heave screen revenues. This is an exciting validation of our business model, and we expect to see other customers follow suit. Our product division continues to grow in two dimensions. First, we continue to add more customers. But second, we see customers growing revenue organically by ordering more of our products. Most of our heat and clean customers begin with a conservative volume they commit to, knowing they will grow into their full revenue potential. This has been the case for the majority of our customers, which increased their 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 had previously presented only via video call. To anyone who's tried to build a business relationship, you know that making a sale over video call is virtually impossible. That's why the in-person meetings, especially in this recent conference, 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 Heapscene product for Corio currently includes three panels, the NPM, 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 a 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 have adopted during COVID, and we hope this translates into active customers. More on that to come in the coming months. We'll focus on the product side for two reasons. First, this is a new development division in our company compared to the diagnostic services 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 a portfolio of proprietary technologies 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 a mission-critical component. 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 that we gain substantial credibility with our customers when we tell them that we are a 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, diagnostic services and product division, that differentiates our company from any other diagnostic company. We developed a unique two-pronged business model. On the one side, we have an R&D team that can develop proprietary technologies that solve real-world problems. In parallel, we have a functional operating diagnostic laboratory where we identify the technological needs, we test the products we develop, and end up using them within our own laboratory. Let's not forget, the diagnostic laboratory is a revenue-generating, nearing cash flow break-even division, essentially creating a low-cost R&D function. If you look at other competitors, they are either diagnostic services companies facing continuous scale-up revenue and margin challenges, or they are biotech companies creating products while spending tens of millions of dollars on R&D, and they seldom become the user of their own technologies. We feel that we have a unique value proposition, both from a customer, operational, and financial perspective through the combination of both divisions. I'd like to close with a few thoughts on our company goals for 2022 and how we see those goals translating into shareholder value. Keep in mind that while we feel that with the focus and dedication, they're attainable, we also need to be mindful of the fact that we live in a world where pandemic, hostile nation invasions, and other market instabilities can always impact our ability to achieve these goals. But I thought it'd be helpful to share them with you so you know how we're looking at the future and where we want to go. As my marketing professor from business school recited the famous Alice in Wonderland quote, if you don't know where you're going, any road will take you there. Well, we're laser focused on our goals and where we want to go. So let me map out for you where I'd like to see our company and each of our divisions at the end of 2022, and then I'll discuss the potential impact it should hold of value. We have three goals in mind. Number one, we start with the goal of our diagnostic services divisions. We ended the year at a run rate of approximately $8 million in revenue. Given the business operation and cost structure of operating a lab, this division breaks even at around $12 million. Our goal for 2022 is to reach that revenue mark. At that point, we'll not only have a division that could potentially grow to profitability from there, but we'll also have a cash-neutral R&D operation that enables our product division to create new products at virtually no cost. This is unparalleled in the biotech healthcare world. As mentioned, we recently added a new customer with a $1 million revenue potential. So with that account, we will be at 25% on the way to achieving that goal. Goal number two is for the product division. We are at a current annualized revenue run rate of approximately $2 million per product deal, all generated solely from our team screen and PN panels. Our goal by the end of 2022 is to reach an annual run rate of $10 million, led by our two current products, Newscreen, with its four panels live, and IvyCell, each with a total available market north of $100 million, and with customers generating recurring revenue both domestically and internationally. Our sales pipeline is more than adequate to help us reach that goal, even without the organic growth I described previously. Our team will be working hard to add customers every month. The goal is aggressive, but I also believe it's attainable. I also want to see us live with two to three new products from our development pipeline with similar market potential ready to be launched in 2023. At that point, given the attractive margins that the product division generates, our company is expected to be either close to or profitability with a strong growth trajectory for this division. The combination of these goals will make us one of the few biotech companies that are able to reach profitability and cash independence at a $20 million revenue runway. Look around the industry and challenge you to find another company with that kind of attractive financial structure. Goal number three is our balance sheet and cash position. We ended Q1 2022 with $9.3 million in cash. That gives us approximately five quarters of runway if we were to remain at our current operating cash burn rate, which we are decreasing with each new customer we onboard. If we achieve our goals, as mentioned earlier, we expect that we will have no need to raise capital defensively, in other words, to cover operating cash losses. We'll be able to move into the profitability zone, building up our cash reserves to further reinvest in our growth. Now, I'd like to consider what would be the value of a company that has accomplished the following. A, has a revenue-generating diagnostic service division that doubles as a cash-neutral R&D facility to develop future products. B, has a product division with existing products that have demonstrated their value within major markets and are primed to capture major market share, and a division with a pipeline of additional disruptive technologies in the pipeline. And C, a company with a strong balance sheet, either at or very close to cash flow positive, and with plenty of runway to achieve profitability. Now ask yourself, what might a company like that be worth? At our current market cap, we're trading at approximately four times revenue, and this is with a split between diagnostic services and product revenues of approximately 90 to 10. Now imagine if it's 50-50, with strong margins and demonstrated market penetration both domestically and internationally, and a company that's cash flow positive with a strong balance sheet. What might the multiple be then? I leave you with those thoughts. That's where I'd like to see the company at the end of the year of 2022. I hope these closing thoughts have provided you with an insight beyond our recently filed financial statements. These are the goals that our management team is focused on, and this is the best way we believe the company can create tremendous shareholder value. Thank you all for your ongoing support, and have a great evening. The conference is now concluded.
spk00: Thank you for attending today's presentation. You may now disconnect.
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