Earnings Call Transcript - PRPO Q3 2022

Operator, Operator

Welcome to the Precipio Shareholder Third Quarter 2022 Shareholder Update Conference Call. All participants will be in listen-only mode. Please note that the conference is being recorded. Statements made during this 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 31, 2021, 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 over the call to Ilan Danieli.

Ilan Danieli, CEO

Thank you, and good afternoon, everyone. Thanks for joining our 2022 third quarter shareholder update call. I appreciate those who submitted questions, and we'll do our best to address them in today's call. As we come to a close in 2022, I'd like to address some of the goals we've set out at the start of the year and did not reach, as well as discuss some of the achievements. Most importantly, I want to highlight the steps we're taking and the changes we're making to ensure the company aggressively pursues and achieves its goals. Earlier in the year, we set out various goals for the company, which included both revenue growth targets and financial goals. While we have made some progress toward our goals, we're not there yet, and this is disappointing. We are by no means content with where we stand. Running a business is a process of continuous learning, particularly in a situation where we are essentially launching a new line of business within the company. There are several internal areas that underperformed, and for those, we will be making changes to ensure that we can do better. Realizing the results of those changes takes time and determination, and this is our focus—ensuring that the impact of those changes is rapid and substantial. It is important for me to convey to you that I, as CEO, take responsibility for the company's situation and hold myself accountable. Our management team also shares this accountability, and we’ve all been working hard to analyze the internal reasons for where we are and create an action plan to ensure that we meet those goals. I also recognize that our stock price has moved in the wrong direction. I'm not going to stand here and make excuses about the global economy, market conditions, or things like that. The company's performance in achieving our goals, coupled with market conditions, has negatively impacted our share price. This is also a disappointing reality we are facing, and myself, management, and each of the company’s employees are aware of this and the responsibility we have towards you, our shareholders. In that context, I'd like to share with you today three of the main lessons we learned, the action plans we've put together, and the resulting changes we have made and will make to ensure we’re on track to meet those goals. First, it's all about the team. Anyone who has been part of our managed business knows that this key ingredient is not the technology, the product, or the market; it’s the team that can take all those components and execute effectively. We have a capable R&D team that has created products the market wants, but our commercial team did not deliver the targeted results, and therefore, sales and revenue growth did not follow as expected. In mid-2022, we evaluated where we stood and decided to try to bring in additional high-caliber, experienced people from outside to strengthen the product's commercial team. This was not an easy decision because it requires investing in hiring talent, while knowing that there would be a certain lag until we see revenue results. But going back to the principle as the management team knows well, we set out to hire a solid commercial team. We’re extremely fortunate to have attracted talent with senior executive experience in molecular product sales such as Sharon Robins, who headed up molecular sales for Qiagen, which is a $10 billion company that focuses specifically on molecular diagnostic products and competes directly with us. We also brought in Keith Meadors, who headed up sales and distribution for a multibillion-dollar healthcare company. One of the things I'm most proud of is that we were able to attract these talented people who left their jobs to come and work for our company. They did that for a few reasons: they knew they would be part of something meaningful and would be key members of a strong team, and they would have a major impact on our business. We believe that this impact is well on its way. With this team in place, we are already noticing a change in how our product and commercial team functions, our level of interaction with our partners and customers, and I have no doubt this will yield the results we all expected. The second area we need to support is marketing. While our technology and products are solid, like any product in a competitive market, they need proper marketing support, which we previously lacked. So we hired Greg, our Director of Marketing, and his presence has already made a significant impact. During this relatively short time, Greg and the team have created essential content required to support the sales of our products. This includes product spec sheets, operating manuals, videos, and other materials that any serious company must have. In addition, we have a new website that is better organized and more reflective of the company's value proposition and our goals. With all this content available online for our customers, we also recently presented our first peer-reviewed poster at the world's most prominent molecular trade show. Having a professional-looking presence with the proper marketing support has already yielded dozens of leads and potential customers from this trade show. We have a system and a plan to manage all these leads, as well as a team to follow up in an organized manner and convert them into customers rapidly. The last factor I want to discuss pertains to our distribution partners. As we stated in the past, our strategy has always been to rely on distribution partners rather than attempting to build our own direct sales force. Issues of cost, return on investment, and customer reach were just some of the key factors that helped us arrive at that decision, and I still believe it’s the right strategy. However, mid-year, we realized that we needed to enhance our distribution efforts. Partnering with a powerhouse such as Thermo Fisher was exactly what we needed. In July, we signed a distribution agreement with them, and within three months, we commenced the launch of our partnership. A second distribution partnership was signed a month later and announced in September with a well-known name, whose name I unfortunately cannot disclose, but it's a name you all know. That partnership was launched soon after. To date, these partnerships have collectively yielded over 50 qualified leads and a potential sales funnel of over $10 million annually. All of this is within the first 60 days of this partnership. We have a few big customers that we hope to close before the end of the year, and when we do, I assure you those will be announced. Each of those customer contracts will significantly reduce our cash burn and bring us closer to breakeven. There is nothing we are doing that is more important than closing those deals. Our team is fully committed to getting them done. So now we look forward to what we can expect. Our goals remain the same: revenue growth for our pathology services division and our product division. Our goal is to reach cash flow breakeven and financial independence so our shareholders can see the growth in the business translate into equity appreciation. I genuinely believe we have taken the necessary steps to move the company toward those goals. While I realize that our financial statements from the last quarter do not yet reflect that, the operations, the team, and the commercial efforts are all heading in the right direction. I'd like to wish you all and your families a happy holiday season. Thank you for listening, and have a nice evening. We'll see you next year.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.