Semler Scientific, Inc. (NASDAQ:SMLR) Q4 2023 Earnings Call Transcript

Semler Scientific, Inc. (NASDAQ:SMLR) Q4 2023 Earnings Call Transcript March 5, 2024

Semler Scientific, Inc. misses on earnings expectations. Reported EPS is $0.55 EPS, expectations were $0.57. SMLR isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon, and welcome to the Semler Scientific 2023 Fourth Quarter Financial Results Conference Call. All participants will be in a listen-only mode [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] 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 statements regarding the expectations for expansion of the business and the development of marketing and additional products, including receipt and timing of an additional 510k clearance for QuantaFlo, an investment in emerging growth opportunities.

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 turn the conference over to Doug Murphy-Chutorian, CEO of Semler Scientific. Please go ahead.

Doug Murphy-Chutorian: Good afternoon, everyone. Thank you for joining us for our fourth quarter and full year 2023 results call. Year-over-year, we continue to achieve annual revenue and earnings growth. Now I’m pleased to introduce our CFO, Renae Cormier, who will provide you with further details. Renae?

Renae Cormier: Thank you, Doug. Good afternoon, everyone, and thank you for being part of today's conference call. Today, I'll be presenting an overview of our fourth quarter 2023 financial results and discussing recent corporate development. Jennifer Oliva Herrington, who leads our marketing, sales and related operations will be providing information about our market developments and opportunities. Following our remarks, Doug, Jennifer and I will be available to address any questions you may have. I'm excited to announce continued growth in revenues and earnings in the fourth quarter 2023. This achievement is a testament to the hard work of our team as well as the ongoing support of our customers, who continue to recognize the clinical benefit and value of our technology.

Now for the details of our fourth quarter results. Total revenues in Q4, 2023 were $15.1 million, an increase of 9% compared to the fourth quarter of 2022. Our revenues continued to be driven by continued sales of QuantaFlo to existing and new customers to test for peripheral arterial disease or PAD. We believe the promising results that were published in two large independently conducted peer-reviewed study by QuantaFlo customers in 2022 are having an impact. These studies underscore the importance of identifying asymptomatic PAD patients, enabling the implementation of preventative measures. Fixed fee revenues were $8.8 million, a decrease of 2% year-over-year. We saw end of 2023 cleanup of underutilized units by some customers, resulting in the decline.

We see continued interest in our products from the existing customers as well as new customers, such as hospitals, value-based care providers and major pharmaceutical and retailer markets. Variable fee revenues were $5.8 million, an increase of 28% year-over-year. We continue to see strong demand from our home risk assessment customers using QuantaFlo for PAD during in-home examination. Equipment and other revenue were $0.5 million, an increase of 71% year-over-year. Equipment revenues remained strong versus historical levels because the majority of equipment sales are to variable key customers, we believe it is a sign of future potential growth in the fee per test market. In the fourth quarter 2023, our three largest customers, including their related affiliates, comprised 37%, 32% and 11% of quarterly revenue.

Operating expenses in Q4 2023, which includes cost of revenue, were $12.5 million, an increase of 23% year-over-year. Our Q4 2023 results included $2.5 million write-off in cost of revenues in the Insulin Insights prepaid licenses and also a $0.6 million impairment of knowledge investments and other income. While we've continued to market Insulin Insights, because we believe in its clinical benefit for diabetic patients, our marketing efforts over the past three years have not yielded significant results to date. As a percentage of revenue, operating expenses increased to 83% compared to 74% in 2022 due primarily to the write-off. Pre-tax income was $2.8 million compared to $4 million in the prior year. Net income was $4.2 million or $0.62 per basic share and $0.55 per fully diluted share compared to $3.2 million or $0.48 per basic share and $0.41 per fully diluted share in 2022.

We had cash, cash equivalents and short-term investments at December 31, 2023, of $57.3 million. Now, I'd like to turn the call over to Jennifer to provide a more in-depth discussion of our market development and opportunities. Jennifer, are you still there?

Jennifer Oliva Herrington: Sorry. Thank you, Renae. As I look into the future, I'm excited about Semler's potential to support the identification of chronic diseases by our customers, which is a large burden on our health care system. Cardiovascular disease is the number one cause to the healthcare system, as well as the number one cause of death worldwide, which makes early detection of chronic cardiac conditions so critical. In January, we announced we are seeking a new 510k clearance from the FDA to broaden the labeling for QuantaFlo, extending its application to include aid-in in the diagnosis of other cardiovascular diseases. We aim to receive clearance with this expanded label in the second half of 2024. Upon achieving this milestone, our focus will shift towards effectively upselling our existing customer base with this enhanced offering.

In the interim, we remain dedicated to the promotion and sales of QuantaFlo as a valuable aid in the diagnosis of PAD. This proactive approach ensures that we continue providing our customers with a trusted solution, while positioning ourselves for future success in the broader cardiovascular diagnostic market. By supporting early diagnosis of peripheral arterial disease, we are hopeful that health care providers will initiate -- management of chronic cardiovascular disease. We believe that this proactive approach may save lives and also lower health care expenditures. As we set our sights on the future, we envision the health care landscape where our technology plays a pivotal role in shaping healthier outcomes for patients, while delivering substantial economic benefits to our customers.

Our sales and marketing goals are, to further establish QuantaFlo for PAD as a standard of care given the proven clinical benefits of early diagnosis and preventative treatment and to diversify our customer base by adding medical centers, additional value-based care providers, penetrating deeper into the VA system and growing the self-insured employer, pharmaceutical and retail market. And now, Renae will give our concluding remarks. Renae?

Renae Cormier: To achieve this plan, we are reinvesting in emerging growth opportunities with a focus on expanding our customer base for PAD. We believe that these opportunities hold promise and represent an exciting aspect of our company's future. Additionally, our commitment to research and development remains unwavering as we prioritize the enhancement of existing products and data services to stay in the forefront of innovation and consistently deliver cutting-edge solutions to our customers. Our long-term vision includes extending our reach to encompass additional cardiovascular applications, reflecting our dedication to continuous expansion. A key strength of our technology lies in its portability and accessibility, allowing us to actively contribute to addressing health and equity, prevalent and cardiovascular disease.

By providing tools that can be utilized in diverse settings, we play a role in breaking down barriers, ensuring that more individuals have access to early detection and intervention. As part of our growth strategy, we are exploring inorganic growth initiatives to further diversify our product portfolio. Through strategic partnerships and exploring new opportunities, we aim to broaden our impact on the market and expand our offering. We extend our gratitude for your interest in our company and appreciate your continued support as we embark on this journey of innovation. Now, operator, if you could please open the line, Doug, Jen and I will be happy to address your questions.

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