Spectral AI(MDAI) - 2025 Q1 - Quarterly Results

Executive Summary Q4 & FY 2024 Performance Highlights Spectral AI announced its Q4 and FY 2024 financial results, highlighting $30 million in Research & Development revenue for the full year and successful outcomes from its US Burn Validation Study, positioning the company for regulatory submission of its DeepView System in the US - Spectral AI reported $30 million in Research & Development Revenue for the full year 2024[1] - The company achieved successful results from its US Burn Validation Study[1] - Spectral AI is on track for regulatory submission in the US for its DeepView System[1] CEO Commentary & Strategic Outlook Dr. J. Michael DiMaio, Chairman of the Board, emphasized the company's significant achievements in 2024, driven by the BARDA PBS contract and progress towards commercialization of the AI-Driven DeepView System, with a strategic focus on transitioning to commercialization and expecting first product revenue in H2 2025 - The company expects to realize its first commercial product revenue in the second half of 2025[2] - Spectral AI aims to generate commercial revenue across four DeepView System platforms covering burn and other indications within the next three years[2] - The company plans to submit regulatory filings for the DeepView System burn indication in the US in the first half of 2025[3] 2024-2025 Select Business Highlights Government Funding & Contracts Spectral AI continued to advance under its BARDA PBS contract, valued at up to $150.0 million, with an initial award of $54.9 million for development activities through Q1 2026, and secured additional grants for the development of its handheld DeepView SnapShot M system - The BARDA PBS contract is valued at up to $150.0 million, with an initial award of approximately $54.9 million[4] - Received a new contract valued at $500,000 from the Defense Health Agency for DeepView SnapShot M development in March 2024[9] - Received an additional $900,000 grant from MTEC for DeepView SnapShot M, bringing the total award to $4.9 million[9] DeepView System Clinical Progress The company announced successful results from its Burn Validation Study in March 2025, demonstrating superior performance of the DeepView System in assessing wound healing compared to burn physicians, with enrollment for the study completed in September 2024 Burn Validation Study Results The DeepView System demonstrated superior performance in identifying non-healing tissue compared to clinical judgment, with plans for FDA submission by Q2 2025 - DeepView System demonstrated statistically significant improvement for sensitivity in identifying non-healing tissue compared to burn physicians[5] Burn Validation Study Performance Metrics | Metric | DeepView System | Clinical Judgment Annotation (CJA) | | :-------------------------------- | :-------------- | :--------------------------------- | | Image-wise sensitivity (non-healing) | 86.6% | 40.8% | | Pixel-wise sensitivity (non-healing) | 81.9% | 38.8% | | Dice Score (pixel-wise evaluation) | 68.5% | 39.2% | | Image-wise specificity (non-healing) | 61.2% | 79.1% | - The company plans to submit these results to the FDA by the end of Q2 2025 and hopes for De Novo Classification Request grant in early 2026[5] Clinical Trial Enrollment Enrollment for the Burn Validation Study, including pediatric patients, was successfully completed in late 2024 and early 2025 - Completed enrollment in the Burn Validation Study in September 2024, involving 160 adult and pediatric patients at 14 burn centers[9] - Completed pediatric enrollment at US emergency departments for the Burn Validation Study in January 2025[9] Product Development Spectral AI continued the development of its handheld DeepView SnapShot M system, securing additional funding from the Defense Health Agency and MTEC - Received a new contract valued at $500,000 from the Defense Health Agency for the development of the handheld DeepView SnapShot M[9] - Received an additional grant of approximately $900,000 from MTEC for DeepView SnapShot M, bringing the total award to $4.9 million[9] Corporate & Financial Developments Spectral AI formed Spectral IP Inc. in March 2024, with plans to spin it off into an independent publicly-traded company by the end of Q2 2025, repriced its publicly-traded common share purchase warrants, regained full compliance with Nasdaq listing rules, and completed an equity financing and long-term debt transaction in March 2025, raising an initial $11.2 million - Formed Spectral IP Inc. in March 2024, a dedicated intellectual property subsidiary, with an intention to spin it off into an independent publicly-traded company by the end of Q2 2025[16] - Repriced 8,433,333 publicly-traded common share purchase warrants from $11.50 to $2.75 per share in November 2024[16] - Regained full compliance with Nasdaq listing rules by meeting minimum market capitalization requirements in December 2024[16] - Completed an equity financing and long-term debt transaction in March 2025, raising an initial $11.2 million ($8.5M debt, $2.7M equity), with total funding available up to $25.0 million[16] 2024 Financial Results Overview Research & Development Revenue Research & Development revenue significantly increased in Q4 and FY 2024, primarily driven by expanded work on the BARDA PBS contract Research & Development Revenue (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :----- | :------------------ | :------------------ | :----------- | | Q4 | $7,604 | $5,287 | +43.8% | | FY | $29,581 | $18,056 | +63.8% | - The increase in revenue was primarily due to increased overall percentage of work on the BARDA PBS contract[11][12] - Research and Development Revenue primarily consisted of funding from BARDA[15] Gross Margin Gross margin for Q4 2024 slightly decreased due to a smaller proportion of direct labor on the BARDA PBS contract, but improved for the full year 2024, reflecting the higher reimbursement rate of the new BARDA PBS contract compared to the prior BARDA Burn II contract Gross Margin | Period | 2024 | 2023 | | :----- | :--- | :--- | | Q4 | 44.0% | 46.1% | | FY | 44.9% | 43.6% | - Q4 2024 gross margin decreased primarily due to a smaller percentage of direct labor as a proportion of total work on the BARDA PBS contract[13] - FY 2024 gross margin improved due to the expansion of work under the BARDA PBS contract, which carries a higher reimbursement rate[13] Operating Expenses General & administrative expenses decreased in both Q4 and FY 2024, primarily due to reduced spending on legal and accounting consultants and less overall spending in non-revenue generating R&D activities Operating Expenses (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :----- | :------------------ | :------------------ | :----------- | | Q4 | $4,459 | $5,365 | -16.9% | | FY | $19,856 | $20,864 | -4.9% | - The decrease in Q4 2024 G&A expenses represented reduced spending on legal and accounting consultants[14] - The decrease for FY 2024 was a result of less overall spending in non-revenue generating R&D activities[14] Net Loss & EPS Spectral AI reported an increased net loss in Q4 2024 but a reduced net loss for the full year 2024, with FY 2024 net loss including significant charges related to warrant liabilities and borrowing expenses, while FY 2023 included substantial costs from its business combination Net Loss and EPS (in thousands, except per share data) | Period | Net Loss 2024 (in thousands) | Net Loss 2023 (in thousands) | EPS 2024 | EPS 2023 | | :----- | :--------------------------- | :--------------------------- | :------- | :------- | | Q4 | $(7,742) | $(3,546) | $(0.41) | $(0.22) | | FY | $(15,315) | $(20,854) | $(0.85) | $(1.48) | - FY 2024 net loss included $4.6 million of charges for the change in fair value of warrant liabilities and $2.9 million of borrowing related expenses[18] - FY 2023 net loss included $8.3 million in costs associated with its financing operations relating to its business combination[18] Cash Position & 2025 Revenue Guidance As of December 31, 2024, cash stood at $5.2 million, with the company significantly enhancing its financial position in Q1 2025 by securing $8.5 million in long-term debt and $2.7 million in equity financing, and forecasting approximately $21.5 million in revenue for FY 2025 Cash Position (in thousands) | Metric | As of Dec 31, 2024 (in thousands) | | :----- | :-------------------------------- | | Cash | $5,157 | - Received proceeds of $8.5 million via a long-term debt financing and approximately $2.7 million via equity issuances in Q1 2025[22] - The company is forecasting revenue of approximately $21.5 million for FY 2025[20] Conference Call Details The company provided details for its conference call held on March 27, 2025, to discuss the financial results, with webcast access available via its Investor Relations page - The company hosted a conference call on March 27, 2025, at 5:00 pm Eastern Time to discuss the results[21] - Access to the webcast is available via the Investor Relations page of the company's website[21] About Spectral AI Spectral AI, Inc. is a Dallas-based predictive AI company specializing in medical diagnostics for wound care, with its DeepView System offering objective and immediate assessment of wound healing potential - Spectral AI, Inc. is a Dallas-based predictive AI company focused on medical diagnostics for faster and more accurate treatment decisions in wound care, with initial applications involving burn patients[24] - The company's DeepView System is a predictive device offering objective and immediate assessment of a wound's healing potential[24] Forward-Looking Statements This section outlines the nature of forward-looking statements within the release, cautioning readers about inherent risks and uncertainties that could cause actual results to differ materially - The release contains 'forward-looking statements' regarding the company's strategy, plans, objectives, initiatives, and financial outlook, as defined by the Private Securities Litigation Reform Act of 1995[25] - Readers are cautioned not to place undue reliance on these statements, as they involve known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially[26] - Investors should review 'Risk Factors' sections in SEC filings for more details on potential risks and uncertainties[27] Investor Contact Contact information for investor relations is provided for David Kugelman at Atlanta Capital Partners LLC - Contact information for investor relations is provided for David Kugelman at Atlanta Capital Partners LLC[28] Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets The balance sheet shows an increase in total assets and total liabilities from December 31, 2023, to December 31, 2024, resulting in a larger stockholders' deficit Condensed Consolidated Balance Sheets (in thousands) | (in thousands) | Dec 31, 2024 | Dec 31, 2023 | | :----------------------------------- | :----------- | :----------- | | Assets | | | | Total current assets | $10,122 | $9,902 | | Total Assets | $12,095 | $10,692 | | Liabilities | | | | Total current liabilities | $17,644 | $12,401 | | Total Liabilities | $19,346 | $12,401 | | Stockholders' Equity (Deficit) | | | | Total Stockholders' Equity (Deficit) | $(7,251) | $(1,709) | Condensed Consolidated Statements of Operations The statements of operations show significant growth in Research and development revenue for both Q4 and FY 2024, with the net loss increasing in Q4 2024 but decreasing for the full year, influenced by various other income/expense items including changes in fair value of warrant liabilities and borrowing-related costs Condensed Consolidated Statements of Operations (in thousands, except per share data) | (in thousands, except per share data) | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Research and development revenue | $7,604 | $5,287 | $29,581 | $18,056 | | Gross profit | $3,348 | $2,436 | $13,274 | $7,880 | | Operating loss | $(1,111) | $(2,929) | $(6,582) | $(12,984) | | Total other expense, net | $(6,488) | $(638) | $(8,462) | $(7,859) | | Net loss | $(7,742) | $(3,546) | $(15,315) | $(20,854) | | Net loss per share (Basic and Diluted)| $(0.41) | $(0.22) | $(0.85) | $(1.48) | Condensed Consolidated Statements of Cash Flows Cash flows from operating activities showed a net cash outflow, though reduced in 2024 compared to 2023, while cash flows from financing activities provided a significant net inflow in 2024, primarily from proceeds from common stock issuance and notes payable, leading to a net increase in cash for the year Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | FY 2024 | FY 2023 | | :------------------------------------ | :------ | :------ | | Net cash used in operating activities | $(9,198) | $(13,240) | | Net cash provided by financing activities | $9,575 | $3,844 | | Net decrease in cash | $367 | $(9,384) | | Cash, end of period | $5,157 | $4,790 |