Semler Scientific, Inc. (NASDAQ:SMLR) Q1 2024 Earnings Call Transcript May 7, 2024
Semler Scientific, Inc. misses on earnings expectations. Reported EPS is $0.78 EPS, expectations were $1.03. 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 2024 First Quarter Financial Results Conference Call. [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 and marketing of additional products, including receipt and time of an additional 501(k) clearance for QuantaFlo and 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. Now I would like to introduce Douglas Murphy-Chutorian, CEO of Semler Scientific. Please go ahead.
Doug Murphy-Chutorian : Afternoon, everybody. Thank you for joining us on our first quarter 2024 results call. We achieved year-over-year earnings growth and ended the quarter with the highest cash position in the history of the company. Now I’m pleased to introduce our CFO, Renae Cormier, to provide 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 first quarter 2024 financial results and discussing recent corporate development. Jennifer Oliva Herrington, our COO, 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. As mentioned in today’s earnings release, we had a very strong quarter of cash generation despite the regulatory-driven, year-over-year revenue decline from our PAD product. Even with the decline in year-over-year quarterly revenues, we achieved year-over-year earnings growth in the first quarter 2024 compared to the first quarter of 2023.
This achievement is a testament to the hard work of our team, who adjusted spending accordingly to changes in market conditions. We expect that our revenues will reaccelerate if we are successful in our efforts to obtain a new 510(k) clearance from the FDA that would allow us to market our heart dysfunction product. Now to the details of our first quarter results. Total revenues in Q1 2024 were $15.9 million, a decrease of 13% compared to the first quarter of 2023. Our revenues are driven by continued sales of QuantaFlo to existing and new customers to test for peripheral arterial disease or PAD. Fixed fee revenues were $7.1 million, a decrease of 24% year-over-year. Variable fee revenues were $8 million, a decrease of 6% year-over-year. Equipment and other revenues were $0.8 million, an increase of 140% year-over-year.
Equipment revenues are primarily sales to variable fee customers, and they remain strong versus historical levels. In March 2023, the Centers for Medicare and Medicaid Services, or 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. 2024 marks the first year of the three-year phase-in of the decreased economics to our managed care customers. For the remainder of 2024, we anticipate our revenues could follow a similar cadence that we saw in 2023, with H1 more heavily weighted versus H2. We are encouraged by the continued testing for PAD, given the importance of early diagnosis and treatment that can lead to improved long-term clinical outcomes for patients.
In the first quarter of 2024, our three largest customers, including their related affiliates, comprised 45%, 25% and 11% of quarterly revenue. Operating expenses in Q1 2024, which includes cost of revenues, were $8.9 million, a decrease of 25% year-over-year. As a percentage of revenues, operating expenses decreased to 56% compared to 66% in 2023 due to continued expense control after our strategic corporate streamlining announced in July last year. We have an outstanding group of leaders and employees here at Semler, that remain diligent in ensuring we’re focused on cost discipline without sacrificing the high service our customers have come to expect. We anticipate we could experience a slight uptick in expenses throughout the year as we prepare for the next phase of launching QuantaFlo with expanded use as an aid in the diagnosis of other cardiovascular diseases that is subject to FDA clearance, which we hope to achieve in the second half of 2024.
Pretax net income was $7.8 million compared to $6.6 million in the prior year. 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. We had a record high cash balance at March 31, 2024, of $62.9 million. Now I’d like to turn the call over to Jennifer to provide a more in-depth discussion of our market developments and opportunities.
Jennifer Oliva Herrington : Thank you, Renae. Looking ahead, I’m enthusiastic about Semler’s potential to support the identification of chronic diseases by our customers, which continues to burden our health care system. Cardiovascular disease ranks as a top concern in health care expenditures and global mortality, underscoring the imperative need for early identification of cardiac conditions. Our recent announcement in January marked our intent to pursue an additional 510(k) clearance from the FDA for QuantaFlo, seeking to broaden its utility to encompass a wider array of cardiovascular diseases. We anticipate we may receive clearance for the expanded label in the second half of 2024. Upon achieving this regulatory milestone, our strategic focus will expand to effectively showcase this enhanced offering to our existing customer base.
In the interim, our commitment remains dedicated to the promotion and selling of QuantaFlo as a valuable aid in the diagnosis of PAD. This proactive approach ensures continuity, providing our customers with a trusted solution while positioning us for potential future success in the broader cardiovascular diagnostic market. Through enabling early detection of peripheral arterial disease, we are hopeful that health care providers will continue to initiate preventative management programs in chronic cardiovascular disease. We believe that this approach holds the potential to not only save lives, but also lower health care expenditures. We continue to envision a health care landscape where our technology assumes a central role in delivering healthier outcomes for patients while concurrently delivering substantial economic value to our customers.
Our sales and marketing goals remain focused: on further establishing QuantaFlo as the standard of care for PAD diagnosis; leveraging the demonstrated clinical benefits of early detection and preventative care; and to continue diversifying our customer base by adding new medical centers, expanding our reach within value-based care providers, fortifying our presence in the VA system and growing opportunities within additional markets that will benefit from PAD testing. And now Renae will conclude with remarks.
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 may 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 inequities prevalent in 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 offerings. We extend our appreciation for your interest in our company and for your continued support as we embark on its 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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