Semler Scientific, Inc.

Good afternoon and welcome to the Semler Scientific First Quarter 2025 Financial Results Conference call. All participants will be in a listen-only mode. After today's prepared remarks, as time permits, management will take questions submitted prior to this call via email. Please note this event is being recorded. Before we begin, Semler Scientific needs to remind you that certain comments made during this call may constitute forward-looking statements and are made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. These include express or imply statements regarding the expectations for our Bitcoin treasury strategy, plans to acquire additional Bitcoin, opportunity to upsize, and the price expansion on the healthcare business and the development and marketing of additional products, including receipt and timing of an additional 510K clearance for quanta flow, and for our proposed settlement with the U.S. Department of Justice. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and our SEC filings. The forward-looking statements made today are as of the date of this call, and the company does not undertake any obligation to update the forward-looking statements. If you do not have a copy of today's release, you may obtain one by visiting the Investor Relations page of the website semlerscientific.com. I would now like to introduce Dr. Doug Murphy-Katorian, CEO of Semlar Scientific.

Good afternoon, everyone. Thank you for joining us on our first quarter 2025 results. We believe our healthcare business is well positioned this year as we pursue a new revenue opportunities in the cardiovascular space with our existing large enterprise customer base. While we pursue a new revenue opportunities, we will manage the healthcare business to generate cash, which we plan to primarily use for additional Bitcoin purchases. Now I will hand a call over to Eric Semler, who will provide you with an update on our preliminary strategy.

Thanks, Doug, and thank you to all our stakeholders for listening in today and for your support of our company. We were thrilled to participate in Strategy's Bitcoin for Corporations conference last week in Orlando, where we had a chance to meet many of our passionate stockholders and fellow Bitcoiners in person. A special thank you to Michael Saylor, Fong Lee, and the Strategy Organization for all their wonderful support and for hosting such a fantastic, well attended event. The corporate Bitcoin treasury movement is gaining powerful momentum and scale. We are a Bitcoin first company. Nearly one year ago, we became the second US public company to adopt the Bitcoin standard. Since then, we have intelligently and creatively acquired 3,808 Bitcoins that are now worth almost $400 million, which we believe makes us the fourth largest Bitcoin treasury company in the US and the ninth largest corporate holder of Bitcoin in the US. So far in 2025, we acquired 1,510 Bitcoins and had a BTC yield of 22.2%. This resulted in BTC gain of 510 Bitcoins and BTC dollar gain of $52 million. Since the quarter that we adopted Bitcoin as our primary treasury reserve asset on May 28, 2024, we have achieved .8% positive Bitcoin yield. This has resulted in a BTC gain of 1,447 Bitcoins and a BTC dollar gain of $139 million. Over that same period, our stock has appreciated 64% in less than 12 months versus only 9% for the S&P 500. We were able to generate these strong returns despite headwinds in our healthcare business. We have ambitious goals for growing our Bitcoin arsenal in 2025 and we have tremendous firepower backed by a new $500 million ATM program that became effective on April 22. During the first quarter of 2025, we completed a $100 million convertible note financing round using most of the net proceeds to buy Bitcoin. As a result, we believe we now have the highest leverage ratio among publicly traded Bitcoin treasury companies positioning us for outsized upside should Bitcoin prices rise. Semla Scientific is a pioneer in developing and marketing. We believe this is a defining moment for Bitcoin. It cannot be tariffed, it doesn't issue earnings or guidance, it doesn't have counterparty risk, and it continues to trade at a huge discount to gold. Most importantly, statements by the current administration suggest that Bitcoin may soon be considered for strategic reserve purchases by the US government. Our corporate strategy is underpinned by three core principles. Our Bitcoin treasury strategy is our highest priority. Our healthcare business must generate cash and complement our Bitcoin treasury strategy. We must intelligently and exponentially increase our Bitcoin holdings and hold them. We look forward to continuing to get out on the road to tell our story. We will be participating at the BTC Conference in Las Vegas at the end of this month and at BTC Prague in June. We hope to have the chance to meet many of you at these events. Now I'm pleased to introduce our COO, Jen Oliva Harrington, to go over our healthcare business.

Thank you, Eric. While our healthcare business has seen the impact from payment changes made by CMS for our customers that became effective last year, we believe our business is in a good place to capitalize on current initiatives to drive future growth. We are starting to see green shoots in areas we have targeted for future growth, including diversifying our customer base and introducing additional FDA-cleared products and other services in the cardiovascular space to our strong and well-established customer base. Additionally, as we continue to innovate, we are pursuing a new 510K clearance for a product extension to aid in the diagnosis of heart failure with hopes of obtaining this clearance sometime in 2025. Semler is a pioneer in developing and marketing technology products and services to healthcare providers to combat chronic diseases. Our unwavering focus on our core medical products and services business alongside our Bitcoin treasury strategy ensures that we maintain our position at the forefront of medical and financial freedom. Now I'm pleased to introduce our CFO, Renee Cormier, to go over our financial results. Thank you, Jen. I'll cover our first quarter financial results and then speak more about our Bitcoin holdings. Following our remarks and as we move into the next quarter, we will be answering questions that have been submitted via email. Total revenues in Q1 2025 were $8.8 million, which was down about 44% compared to the first quarter of 2024. We saw further pressure on revenues following the additional phase-in of the 2024 CMS rate announcement. Operating expenses in Q1 2025, which includes the cost of revenues, were $39.9 million versus $8.9 million in Q1 2024. I wanted to highlight a few unusual items that were included in operating expenses in Q1 2025, including a $29.8 million contingency reserve related to our agreement and principal to settle the DOJ CID. It also includes $1.5 million in non-cash stock compensation, $400,000 in state and sales youth tax accruals, and another $400,000 in legal fees related to the DOJ CID. Further details are laid out in our press release. The loss from operations was $31.1 million given these items, a decrease compared to income from operations of $7 million in the prior year. Other expenses net were $43.8 million and included a net unrealized loss of $41.8 the change in fair value of our bitcoin holdings. Accounting standards require bitcoin assets to be measured at fair value with gains and losses from changes in the fair value to be recognized in net income in each reporting period. While this may introduce volatility into our reported net income, it does not impact our cash flow from operations. For some perspective on how dramatic the change in fair value measurements can be, as of March 31, 2025, the net unrealized loss on our bitcoin holdings was $17 million. As a reference, had bitcoin been priced around its current level of $104,000 per bitcoin, we would have had a net unrealized gain of over $51 million. That's a large swing in just over a month. For the first quarter of 2025, our net loss was $64.7 million or $6.74 per basic and fully diluted share compared to net income of $6.1 million or $0.88 per basic share and $0.78 per fully diluted share in Q1 2024. Cash, cash equivalents and restricted cash at March 31, 2025 was $9.9 million. As we discussed in our last earnings column, as Eric mentioned, in late January, we completed a convertible senior notes offering with $100 million aggregate principal amount of five and a half year .25% notes due in August 2030. Together with capped call transactions, the conversion premium is 75%, leading to an initial effective conversion price of similar stock of approximately $107 per share, which significantly reduces potential conversion delusion. We use net proceeds to purchase additional bitcoins. Last year, we had filed, excuse me, my script just disappeared here. So last year, we had filed for $150 million ATM. We had utilized that ATM until our new ATM of $500 million became effective, and that was on April 22, 2025. For our initial ATM, we sold approximately 2.4 million shares for net proceeds of approximately $126 million. In our new program, our $500 million shelf, we have issued through May 12, approximately 1.8 million shares for net proceeds of approximately $61 million. We have got proceeds from the ATM issuance for general corporate purposes, including the purchase of additional bitcoins. Since March 31, 2025, we purchased 616 bitcoins for an aggregate cost of $59.6 million. We now hold a total of 3,808 bitcoins, valued at approximately $400 million, representing an unrealized fair value gain of $59 million. We also launched a Bitcoin dashboard today at .similarscientific.com, where investors will be able to find our Bitcoin-related statistics in one location. We encourage investors to check back often, as it will track additional Bitcoin purchases as we announce them and provide a real-time snapshot of our market and Bitcoin metrics. Now we'll begin our Q&A. We received some questions ahead of the release that we tried to address in the prepared remarks, and we do have some additional questions. So the first one is, what are your plans this year for accumulating more bitcoins? Eric, I'll let you take that one.

Thanks, Renee. We have extremely ambitious plans to creatively acquire more bitcoin. We want to aggressively increase our $388 million, or close to $400 million now, bitcoin stockpile, and are well on our way with our recently authorized $500 million ATM. We are confident that we can use our $500 million ATM this year and access additional sources of financing to buy more bitcoin. We believe that Michael Saylor and Strategy's success tapping into the preferred markets with Strike and Strife creates a playbook for yet another great opportunity for us down the road.

Great. Jen can take our next question. So what's driving the underlying trends in the business, what do you expect for 2025? Thanks, Renee. Despite the government decision about payment for risk adjustment for PAD, we continue to see ongoing testing and additions to our customer base, albeit at decreased volumes for PAD. Our priority for 2025 is to minimize declines to quantiflow revenue while maintaining sufficient infrastructure to support, innovate, and grow our operations related to other cardiovascular disease states. This includes the marketing of other FDA cleared products that we are licensing to our valuable customer base. We seek to diversify and expand our customers and target new markets that will benefit from using these potentially life-saving products. We will be managing the healthcare business to generate cash, which we plan to use for general corporate purposes, including buying more bitcoin. Thanks, Jen, and thank you everyone for your questions. As we wrap up this conference call, we want to emphasize our ongoing commitment to continued execution of our bitcoin treasury strategy and our healthcare business. We appreciate your participation in today's discussion and thank you for your ongoing support. Operator? Thank you everyone for joining. This now concludes the conference call.