Semler Scientific(SMLR)2024-05-07 23:11Financial Data and Key Metrics - Total revenues in Q1 2024 were $15.9 million, a decrease of 13% compared to Q1 2023 [5] - Fixed fee revenues were $7.1 million, a decrease of 24% year-over-year [5] - Variable fee revenues were $8 million, a decrease of 6% year-over-year [5] - Equipment and other revenues were $0.8 million, an increase of 140% year-over-year [33] - Operating expenses in Q1 2024 were $8.9 million, a decrease of 25% year-over-year, representing 56% of revenues compared to 66% in 2023 [6] - Pretax net income was $7.8 million compared to $6.6 million in the prior year [7] - Net income was $6.1 million or $0.88 per basic share and $0.78 per fully diluted share, compared to $5 million or $0.74 per basic share and $0.63 per fully diluted share in Q1 2023 [7] - Cash balance at March 31, 2024, was a record high of $62.9 million [7] Business Line Data and Key Metrics - The company's revenues are driven by sales of QuantaFlo for testing peripheral arterial disease (PAD) [5] - The three largest customers, including their related affiliates, comprised 45%, 25%, and 11% of quarterly revenue [6] - The company is pursuing an additional 510(k) clearance from the FDA for QuantaFlo to broaden its utility for a wider array of cardiovascular diseases, with anticipated clearance in the second half of 2024 [8][40] Market Data and Key Metrics - The Centers for Medicare and Medicaid Services (CMS) announced the three-year phase-in of the removal of the HCC code relating to PAD without complications from the Medicare Advantage risk adjustment model, with 2024 being the first year of the phase-in [11] - The company expects revenues in 2024 to follow a similar cadence to 2023, with H1 more heavily weighted than H2 [11][44] Company Strategy and Industry Competition - The company is focused on expanding its customer base for PAD and exploring inorganic growth initiatives to diversify its product portfolio [17][49] - The company is committed to research and development to enhance existing products and data services, with a long-term vision of extending its reach to additional cardiovascular applications [36] - The company aims to establish QuantaFlo as the standard of care for PAD diagnosis and diversify its customer base by adding new medical centers and expanding within value-based care providers and the VA system [35] Management Commentary on Operating Environment and Future Outlook - The company achieved year-over-year earnings growth despite a regulatory-driven revenue decline from its PAD product [2] - The company anticipates a slight uptick in expenses as it prepares for the next phase of launching QuantaFlo with expanded use [12] - The company is encouraged by the continued testing for PAD, given the importance of early diagnosis and treatment [11] - The company believes its technology can play a central role in delivering healthier outcomes for patients and substantial economic value to customers [15] Other Important Information - The company has a $20 million share buyback authorization, with $5 million already repurchased and $15 million remaining [45] Q&A Session Summary Question: Timing and process for receiving the 510(k) clearance - The company anticipates receiving clearance in the second half of 2024 and will start marketing the expanded use of QuantaFlo to existing customers upon approval [40][50] Question: Current demand environment and potential customer loss - The company has seen continued testing for PAD but also some cleanup of underutilized units. The clinical value of testing remains the same, and the company has a robust pipeline for growth [23][24] Question: Potential uses of cash for inorganic growth opportunities - The company is exploring inorganic growth initiatives, including strategic partnerships and acquisitions, to diversify its product portfolio [17][51] Question: Revenue cadence for 2024 - The company expects revenues to follow a similar cadence to 2023, with H1 more heavily weighted than H2 [44] Question: Specific conditions QuantaFlo might identify with the 510(k) clearance - The expanded use of QuantaFlo will focus on heart dysfunction, with specific wording to be released upon FDA clearance [41]