PRPO - Earnings call transcript Q2 2019

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Operator

Welcome to the Precipio Incorporated Second Quarter 2019 Corporate Update Call for shareholders. [Operator Instructions]. 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. our of file under identified intend, annual that include such predict, not meaning to risk are plan, continue risks the those factors filings our the in listed ended Commission be should, which may, potential, in Securities detailed on forth forward risks XX, may looking other statements Commission. set to or subsequent expect, or differ other Exchange with could could, year anticipate, report negative actual the and statements limited uncertainties well for by terms, cause with Form-XXK XXXX matters as Securities as the words and will, forecast, words Exchange in as that These or terms December our similar results is these any the believe, on from estimate, and materially

statements only earlier they including available information, obligation are information forward by new forward-looking any and to reports indicated. publicly is or as date provided events except required speak statements not otherwise are information, whether result we update a And at undertake These looking including or future do of any date the unless law. www.sec.gov, statements as to statements, an

Now Ilan, to hand let me the Precipio's CEO. conference over

Ilan Danieli

very thank much. Okay, you

afternoon, good everyone. So Thank you call. for today's joining

remarks. an today will and provide a advance, our CFO final best do financial I'll perspective questions on to Carl, we'll thanks On close always, then in who them. our those with a As call send to the few give address I'll Precipio's update business,

and small subsequent up in we Carl recent to as resulted team statements, deadline together our goal the despite and put streamline relatively filing tonne accomplishing company file and the year with the of Two to our us successful before delighted and auditors. a lean flying the complicated team his was the XXQ. complex two filing his and with in place meet combination to remaining with and team, extensions a as the we recognize of deadline lean and begin, set our I to came led see things work by mark merger since better the together a for that goal colors. team with the finance Marcum, processes Carl tasked our Before first, in the auditors financial frequently like a a team our financial In transactions continuously got of preparation past, we review of statements this of to to company's for advance week I I'd

far further it got and moments simply at our story Second, different Carl in it discuss but put, tells balance financial ago. example, did few a our this will very if in years two you detail call. for statements look simpler sheet than a cleaner

So kudos done. to and Carl his team, well job

business side Now I'll the the of pathology both cover sides business, performance, side. and onto the services our product

with our technology Let me start services.

in you we QX financial the we continue growth. right as last provided saw the results, well head from with week as showing on update to the As metrics metrics, direction our recent news

reinvest to our build and to show in the results to adding in continue We investment growth this further our continues sales revenue. team positive headcount of

hospitals. practices our revenue growing, evolved only smaller base customer but impact larger average volume. course will Our with working adding changing other to metrics, to such customer This is not as in we per addition and also as from case of growth it's groups

their perceived door to indicative from jumping new metrics lab. is rate part on -- recurring the for prospects is high services, often of comment been conversion as contrast, is extraordinarily to we around customers metrics. only commodity. and to have with of about another the In a able in reflected somewhat our customer an complain nature is switching of our also industry the unique customer like from not we had trying our This to trial, because in most to Many to diagnostics revolving which lab industry. I'd as this our have repeat a lab trial business customers from

to also We rate. I attribute attrition low a have things. this two

the The that first patients, deeply to sales is hard our this is indeed our of is customers, who eradicated. problem here vision outstanding our their the delivery message diagnosis out ensure are care our carried team, and working by and of about

The to our that laboratory win in us who value ability to truly work second to This but only and a the which a sales model network critical recognized pathologists not is what our revenue by call done our grow. outstanding creates creating stickiness, customer, is recurring helps customer in by customers. keep is the exceptional provide team world we class that the

big here of product who know the business, waiting that me, Moving is side the I believe you I'm edge happen myself to contract announced and proceeding. to on [indiscernible] my there's faster assure that seat you today is with and to our be process for that to of their nobody team. wants everyone on than this

dealing and they have We organizations their time. takes large own that process with process are and

received will recently substantially successfully result never and outcome. our doubt Novamed, this more successful results. we as well that first at seen have We have advantages from no showing any process internal in operational our market. IV-cell confident in of However, point, its not current the benefit over will been as that testing, reason shipment in manufacturer not the completed products our I've from I've IV-cell the clinical product customers excellent and a

I don't to to find very process patience out, it who this have you wait As those challenging. email, you or of stomach will by with the communicate several

with that be with rewarded weight that stuck soon us. am For is I behind to those and will confident down, the that us I through bulk the who us your of believe the and be patients ups confident

their in some is HemeScreen the sale. will towards the on to of also and the help As first process Both as onboarding toughest top line should flow progressing into move positive. validating anyone products and laboratories. essay are become company we're is the bottom and cash revenue working the knows, us that as line these in strong well accounts contributors sales always cash large

PCR, mentioned. most we work Those development. some be as to ICE-COLD in previously of have progress. announced work make continue partnerships And on an expressed interest them us further Regarding the on of to with continuing will we

into Lastly, healthcare effort on the to I'd We've by led largest international comment inroads like institutions of worldwide. incredible made Ori. some our

in with Just is multiple one we trials our commencing will this lab. of returned met laboratories, I and I premier with where their healthcare This Brazil, the morning, be to from implement products the some of advantages we with them as products solely East. of relying be America, South away the from Middle efforts and market. to diversification the This our will revenue expand U.S. Asia, the Europe another on cash contributor yet and

on turn call Now financial. for the session it the Carl? Company's over the let me

Carl Iberger

the for Good Ilan you, Thank introduction. afternoon.

on On Let I'm today's up I a to significant welcome Carl call, to call. me bringing extend date Chief XXXX. will this on you Financial everyone shareholder be transactions Officer. in Iberger, Precipio's completed

Our obtain operations. and operating breakeven balance we to to need accomplish what performance sheet and our

a us taken on benefit will financial and concluded with either during Let my has been company negative drain significant several our to-date. items When and future. they company the have material these considering individually QX. addressing resource these me or behind the collectively, discussion items start Getting

reported been these in items on of have our All XX-Q.

company past claims Transgenomic significant had it. entered from the as this both end XXXX two First, Precipio XXXX legal related the Both company matters. the holdovers merger. pre-merger the settled facing By were of quarter, investor

on claim first Transgenomic. is Crede matter Capital The

has the and matter dating this XXXX, been material fully off weight with XXXX financial May Crede the obligations is of Transgenomic settling to concluding liability inherited paid its of lifted origin Capital As settled July company. to and a back

documents a on activities et pre-merger. from a our financials. is In been quarter parties Transgenomic impact second stemming have The All of QX. settlement legal settlement. Campbell negotiations All al. accounted a June, will for be agreed is during action the Transgenomic completed in second have were completed. lawsuit. Final matter

but by year. also At vendors. with The release and outstanding in also non-legal LLC. all to Leviston dealing conclusion with settled, item of more has three do legacy was item agreement Leviston Precipio contractual completed settlements the related has with QX, Precipio and has with third fully satisfied item, was this merger and settlement. Resources accounts This post-merger payable counterclaims signed June, of completed May executed major and obligations during fourth remaining claims a A

With the page turn company the finally these settlements, legacy can on payables. the

adjusted we outlays of stock stock the worked debt and years, split an $X the During April of this and XX, to two the shareholder executed company million the last remain previous on in call on million. The through reverse in press reverse has cash in in company million provided minimizing The XX action. possibly exchange. order information been June QX the settlement addressed Also the for financial of to split XX Q NASDAQ as outstanding negotiations, releases, shares, In legacy Ilan has a approximately and May, incorporate X.X off XXXX. XX. X claims excess

The management to footnotes operating disclosure, XXQ on financials, business filed our activities. Moving reporting company to our and X, I'd performance, our exhibits it's like August address discussion legal analysis.

XXth. six month quarter the During revenues ending for grew period, over Total the this and over covering reported six period year period and reporting XX% June month quarter three X% year. of

services taking annualized pathology continue testing on the rate this we Of the services rate the diagnostic the XX%. pharma believe exceeding our approximately period, amount as account for back second XX%. to our revenues. for of provides reported and Pharma all annualized in half, services a look our at of will projections revenue. represent remaining additional this growth current growth Stepping of contracts Based increase, reporting all of almost XX% from

its August. pathology New license lab [indiscernible] in Connecticut Our cap approval received recently Haven,

securing practices. In our with Miller, expanding additional key directly force. believe in diagnostic cap led sales we related will Growth that by sales Steve to into from recent oncology translate team certificate sales our pathology conversations is the

the from built this During the pharmaceutical balance. have pharma XX force relationships comes of The office revenues the quality the is our expansion, cover multi-oncologist projects. to physician services account and first revenues developers. revenue and the centers our generated comprised is companies, diagnostic contracts clinical we These Paramount half pathology revenue. hospitals force to states. steadily house make in comprise direct sales oncologists of approximately through and sales down remaining for contract and/or now These up assigned reported research from success a projects with based physician patient and testing from generate of XXXX, Breaking customer doc majority testing XX% cases. Medical increased profiles, groups. team we

Our pharma facility. the by provided research company's Omaha, services Nebraska are

of the laboratories economies time we their needs, revenues, are technical currently late will we are not requirements placed, being and capacity the IV-cell for Currently, expand affording throughout most overall touched leverage cytogenetic XXXX previously, these for HemeScreen testing noted the to developed management scale. have will improved volume our only lab team clinical application. and reference demonstrated volume. two reducing to processes When and ability and as and new marketed about launched XXXX. IV-cell lab media is and take in to on its help recently, confident own processes, providing expenses, the U.S., Ilan Asia laboratory us upon, QX, Brazil. the HemeScreen supplant has extremely As results, and lab molecular significant have orders Internally staff The costs. technology hospitals existing launching Both increased products saving but

turnaround outcomes have as new and New our to processes services Haven, well expand Connecticut to clinical improved it's These pathology lab markedly offer as lab improved time. allowed

with external not all labs very has disappointed time to We we the it However, in remain validation of taken encouraged we're testing. complete satisfied. said, length that but are

edge confident can We we are to valuation. all closer and doing completion we're external

significant We as to the a but seen margins by sales and increases. generated project continuing proven gross to we've or volume markedly only margins, volume. improvement margin gross be Gross can build improved

operating to SG&A. and Moving expenses

result force. level made on the in been curtailed, have and G&A while have not material sales These essentially the expenses year material of and expenses half. of changes over in reinvested for grown expenses are discussed year our support. obvious finalizing Legal operate shall are in reporting reductions to savings are the public certain is legal. size to we What that Legal IT progress previously G&A have has required expenses XX%. we the reducing our Our expenses, are been Key sales second direct business focused by auditing settlements. see have a is cost in as expense. We X% the G&A significantly

Going forward, continue to to need we reduce expenses.

associated expenses, and expenses expense public specifically our item financial accounting valuation for from noted, public technical expenses from reporting services to analysis size fees in. states financial provide they're reporting NASDAQ, business. today, and the single largest that and Multiple our related business public Precipio to Stepping and comprised reporting Delaware well that on accounting of the As instruments. corporate instruments, from by taxes back driven audit for guidance through as accounting we for franchise incorporating reporting of our our

our Taken as are excessive a company. costs whole, for public reporting

While and remainder invest we to the the business. building making XXXX, throughout tools are force progress we G&A grow into all or expense on expenses sales repurpose expanding reporting the reductions customer will

of Looking I forward, their these by financials volume. second as way the believe force drives the expansion, will half proof efforts sales to find G&A reductions funded

to modifications evaluation resulted during material the quarter and instruments and last our expenses warrant notes. financial activity derivative expenses related along other initial and price income was Moving and the to sub-convertible it and that in

and -- ended million, months million the well of XXXX XX, of X.X expense a million derivative warrant revaluation of as for from million was three net expenses especially. ended convertible of other included same for million of months and X.X XX-Q June revaluations billion issuance X.X the loss in six identified and and warrant X.X and income and the X.X from X.X notes XXXX as As of and derivative period

of months expense other gains by XX, will settlement items offset million partially the ended XXXX of three During X.X and June liabilities

for our looking million, to June reserves XX, the was cash XX/XX/XX. activities, and the DSO year to reflected revenues, at sheet the to at previously as company XX. and operations liabilities receivable proportionate assets, balance XX, cash of Accounts increase clear our at XXXX of fund in No flow X.X DSO favorable discussed settlements. as XX/XX million XXXX, were in June X.X compared year-end Moving and XX

new million also of During received the and quarter million from the X.X in issued of proceeds ending June XXth warrants. the company exercise debt, X.X

of statements payable year million liabilities operations. liability expenses million recently million decrease XX, a or [ph] reflected for the related ending X.X for compared AP of million. to cumulative use accounts gain of a amounts X.X X.X XXXX, and of our approximately concluded As June to in of accrued X.X a Changes of as XX/XX negotiated in proceeds making payment and

cash line FX company successfully and existing are provide cash reach The HemeScreen company the filed X.X flow believes August reserves, proceeds million. equity and for estimated company with should market to Recently, on breakeven sufficient profitability. an proceeds the and combined Xth, runway the IV-cell

final back some me let Now, it for turn to Ilan comments.

Ilan Danieli

Thank you, Carl, for that detailed analysis.

thoughts. final few a So

you and and to included, team reverse a hard where achieving goals the of the to split. many ago and building Our of few work you, at set at that continue the are shareholder. it out, the we've price we company I that the know promised stock disappointed post myself deliver on was months to decline I

a the market position have finances overall in a dramatic revenue will perspective well eyes this but products we've processes, very mentioned, perspective, market and stable believe a you results great institutions shorting company's Our percentage company's as around as providing its of indication is take prospects as an a company's examining around valuable validation uncertainty from stock the has are our that In which the relatively about the time see short products, and volatility view, and our in that believe short positive. capabilities. The previously the but the demonstrated suffered in stock, is a of in the leader by we aggressive completed, once the financial recent of we and not positions I can actually these some relatively which they're fund impact from the our from impactful global reflection low growth. on short performance, we've interest pressure, of share because is and to probably We price perception the reduced for as created. undergoing in have

reflects that, we subsequent meeting to clinical stabilize deliver. grow each stockholders. with value the their with in And dedicated our to achieving benefit value it that that and takes direct and to and with value confident financial will day place, entirely I patients will our believe and the customers this the that more reach volatility proposition, stock price that by, goes We're we each our more a and all the goal

been Never touches more we've Cancer cancer time patient are misdiagnosed. to more a exciting we everyone suffer created ever of has no and today. being important tools and with there where the the be should consequences

thank everyone all Thank evening. a I the want And call. next continued to you for Wishing interest your and you you I to support company. look our the forward of with nice on speaking

Operator

now concluded. for you today's attending is presentation. The conference Thank

You may now disconnect.

Precipio (PRPO) 21 Aug 192019 Q2 Earnings call transcript