Precipio, Inc. (NASDAQ:PRPO), a diagnostic services provider, has announced in their third-quarter earnings call for 2024 that they are on track to achieve their goal of reaching breakeven this year.
CEO Ilan Danieli highlighted the company's substantial growth in the pathology division, with revenues surpassing the breakeven point for the second consecutive quarter at $4.5 million, marking an 18% increase from Q2.
The company has also seen a 13% increase in its products division revenues, reaching $680,000 for Q3. Precipio's progress is underscored by a significant reduction in cash burn, down by 75% compared to the same period in 2023.
With a strong emphasis on avoiding shareholder dilution and maintaining financial independence, Precipio is transitioning from survival to build mode, poised to enter the new year with a robust foundation.
Key Takeaways
- Precipio's pathology division has exceeded breakeven for the second quarter in a row with an 18% revenue increase to $4.5 million.
- The products division saw a 13% revenue increase to $680,000 in Q3, signaling steady progress towards breakeven.
- Cash burn reduced by 75% compared to the same quarter in 2023, indicating improved company performance.
- Management sees no need for capital raises given current performance and cash balance.
- Precipio plans to enhance investor education and visibility to translate business performance into future shareholder value.
Company Outlook
- Precipio aims for a $20 million run rate for the pathology division and to maintain positive cash flow.
- The products division is expected to become the main engine of growth due to higher margins and recurring revenue.
- Precipio intends to leverage distribution channels to increase the share of revenue from distributors.
Bearish Highlights
- The products division has not yet reached breakeven, indicating there is still work to be done to optimize its financial performance.
Bullish Highlights
- Precipio's efficient operations and quality service are highlighted by the pathology division's success.
- The company's commitment to avoiding dilutive capital raises is seen as a positive step towards shareholder value appreciation.
Misses
- No specific financial misses were discussed during the call.
Q&A highlights
- The company addressed concerns regarding the risk of continued capital raises and lack of education within the investor community.
- Plans for participating in investor conferences and building analyst coverage were outlined to improve visibility and educate investors.
Precipio's journey to financial stability and independence is marked by significant achievements in both its pathology and products divisions. The company's strategic focus on organic growth, coupled with efficient operations, has set the stage for a promising future as they edge closer to breakeven and aim for a strong year-end finish. With the holidays on the horizon, CEO Ilan Danieli extends warm wishes and looks forward to sharing continued progress in the coming year.
InvestingPro Insights
Precipio's (PRPO) recent earnings call paints a picture of a company on the cusp of financial turnaround, and InvestingPro data provides additional context to this narrative. With a market capitalization of $9.24 million, Precipio is currently trading at a low revenue valuation multiple, which could be attractive to value-oriented investors considering the company's growth trajectory.
The company's revenue growth is particularly noteworthy. InvestingPro data shows that Precipio's revenue for the last twelve months as of Q3 2024 stood at $17.41 million, with a robust revenue growth rate of 31.31% over the same period. This aligns well with the company's reported progress in both its pathology and products divisions.
An InvestingPro Tip suggests that net income is expected to grow this year, which corroborates management's optimistic outlook on reaching breakeven. This is further supported by another InvestingPro Tip indicating that analysts predict the company will be profitable this year. These insights are particularly relevant given Precipio's focus on financial independence and avoiding shareholder dilution.
It's worth noting that InvestingPro offers 7 additional tips for Precipio, providing investors with a more comprehensive analysis of the company's financial health and market position.
While the company's progress is encouraging, investors should be aware that Precipio operates with a moderate level of debt and that short-term obligations exceed liquid assets. This underscores the importance of the company's efforts to reduce cash burn and achieve breakeven status.
As Precipio continues its transition from survival to growth mode, these InvestingPro insights offer valuable context to the company's financial narrative, helping investors better understand the potential risks and rewards associated with PRPO stock.
Full transcript - Precipio Inc (PRPO) Q3 2024:
Operator: Good day. Welcome to the Precipio Third Quarter 2024 Shareholder Update Conference Call. All participants will be in a listen-only mode. [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. 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. Risks and uncertainties that could cause our actual results to differ materially from those set forth in any forward-looking statements 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 30, 2022, which is on file with the Securities and Exchange Commission, as well as other risks detailed in our subsequent filings with the Securities and Exchange Commission. These reports are available at www.sec.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 statements 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 Ilan Danieli, Precipio's CEO. Please go ahead, sir.
Ilan Danieli: Thank you, and good afternoon. Thank you all for joining our 2024 Q3 shareholder update call. Thanks to all those who submitted questions. As always, we'll do our best to address them during this call. Before we jump into the numbers, I'd like to take a moment to remind everyone of the business we're in and the impact we have. We recently crossed the 10,000 case mark for the year, compared to close to 8,000 in 2023. For us, those aren't just numbers that translate into revenue and share price. These are real people, parents and grandparents, siblings and children who have to deal with the awful battle against cancer. I'm really proud of the impact we have on those patients and their families' lives. As we execute on our mission to battle misdiagnosis, I can assure you that many of those 10,000 people are better off, because they were diagnosed by our company. Now, let's jump into the business performance. At the end of last year, we declared our goal of reaching breakeven in 2024. Beyond bringing the business to this important successful operational milestone of a company that starts making money, the objective reflects our commitment to avoid raising dilutive structured capital and to bring the company into a new era, we are able to deliver appreciation and shareholder value. I'm pleased to report that our Q3's growth demonstrate that we are well on track to achieve our goal this year. Let's review each of the division's performances in a bit more detail, starting with the pathology division. For the second consecutive quarter, our pathology revenues exceeded the division breakeven point and at 4.5 million per quarter represent a robust 18% increase from the previous quarter of Q2. We're going to continue to grow this division organically with our existing sales team and our goal is to reach approximately 20 million run rate for this division and remain above that. This creates a division that does two key things for our company. First, the division will generate positive cash flow. Second, it provides a self-sustained cost free R&D platform that enables us to support our product customers and build our next generation of products which is the future growth engine of the company. Our current sales team of five members enabled us to deliver this revenue. We may be hiring one more salesperson to provide additional revenue stability so we remain well above that breakeven point. I'm really proud of the team both our commercial team and our lab operations for their contributions to reaching this point. I know of no other lab that can reach breakeven at these revenue levels. Indeed, if you look at some of the other competitors in the lab services market, even at revenues tenfold ours, they're still struggling to generate cash. This is a testament to our efficiency and operations, the quality of our service and our business structure that enables us to achieve this financial milestone. I'm also confident that with the current team the division will remain in this position, ensuring that the pathology services will continue to serve as a positive operational and financial contributor to our broader strategy. Moving along to the Products division. Although the division has not yet hit breakeven, we are making steady progress and moving closer. Q3 revenues increased by 13% over Q2 reaching $680,000. As we discussed, we're building a robust customer pipeline among which we have three key customers who are in various onboarding stages. We anticipate that in this current quarter as well as in the next quarter, we're going to see the full weight of those three customers, as they onboard our products and that's going to have a significant impact on the division's performance. Going forward, this division is going to become the main engine of growth for our business and as one - let me recap and remind you of the three reasons for that. Number one, recurring revenue. The products generate consistent reliable income streams unlike the variability of the pathology division. Number two, customer retention. Product customers are committed to their pathology, which means there is less likelihood of customer turnover and which in turn contributes to stable and predictable revenue generated. And the last point is margins, the margins for our products are significantly higher than those generated by the pathology services division. Developing products require R&D investment, which in our case, thanks to our pathology division is relatively minimal. Selling them requires less overhead, simpler operational complexity and a small sales force, and less management attention. This results in a far higher contribution to the bottom line from the products division. The product commercial team consists of three members and for the foreseeable future, we intend to keep this small team as is. The strategy is to leverage our distribution channel and ultimately reach their full potential. To this day, the majority of our revenues is from direct sales but going forward we expect to see a gradual shift, increasing the share of revenue is generated by our distributors. Although our distributors receive 20% of the margin, we in turn gain access to hundreds of sales reps that are not on our payroll, yet have access to essentially every customer in the country. But with that access supported by the brand and reach these distributors, we're able to get in front of many more customers than we'd have likely achieved, had we gone direct in the direct sales route only. Moving to our cash position. In terms of our - cash position, as you saw in our filings, our change in cash balance from the end of Q2, to the end of Q3, was $226,000 in cash burn. This is compared to approximately $1 million of cash burn during the same period in 2023, a reduction of 75% in our cash burn. I don't think there is a better metric, to show you the impact of our company growth, and improved performance than our cash position, as we are rapidly approaching breakeven. With our current quarterly performance and our cash balance at this point, management sees no need for capital raises. With our current market cap, we remain committed to building cash reserves, through our organic growth and customer sales, avoiding shareholder dilution. This is a very exciting time for us. Our team is working tirelessly, to achieve the goal of financial independence, and it's exciting to see it within reach. Turning the corner from survival mode, to build mode is going to be a very refreshing change for us, and we're ready to embrace this new chapter, building on the strong foundations we've established. Some of the questions we received revolves around how to translate the company business performance, into future shareholder value. In our analysis, up until now, two main things have held us back, and I'd like to address both. Number one, is the risk of continued capital raises, and the second is the lack of education of our company's vision and market opportunity within the investor community. I think we’ve reached a turning point in addressing the first concern, with our business performance progress toward breakeven and cash reserves. We are now in a position where capital raises to cover cash burn, as we've done in the past are no longer necessary. This marks a significant step forward, and we can confidently say that this challenge is behind. As with the lack of education about our company, this is going to change next year. Once the company has achieved several consecutive strong performance quarters, we will then be able to point back to both solid past performance, as well as provide investors with insight into what they can expect. This will be done through management guidance on certain parameters, such as revenues and EBITDA performance going forward. Our plan also includes participating in investor conferences, building analyst coverage and other investor related activities that will help, provide more visibility to the company. That alongside solid consistent growth and performance, meeting and exceeding our guidance, should hopefully provide a substantial boost to our visibility, increasing trading volume and ultimately impact our share price, adjusting the market cap to revenue multiples higher than the current slab. In summary, it's really exciting to see the company approach these milestones. We have been through a lot and as Winston Churchill said, if you're going through hell, keep going and we did. I think, we're going to end the year strong, and go into next year even stronger. With the holidays approaching, I want to wish everyone a joyous holiday season with family and friends, and a Happy New Year to everyone. I'd like to thank you all for your support, and I look forward to connecting with you in our next call in 2025. Happy holidays and have a nice evening. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Q –:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.