Cue Well being Inc. (NASDAQ:HLTH) Q4 2022 Earnings Contact Transcript March 15, 2023

Operator: Fantastic day, and thank you for standing by. Welcome to the Cue Well being Fourth Quarter 2022 Earnings Conference Contact. At this time all participants are in a listen-only mode. . Please be advised, that today’s conference get in touch with is getting recorded. I would like to turn the get in touch with more than to your speaker for currently.

Lorna Williams: Fantastic afternoon, and welcome to Cue’s fourth quarter 2022 earnings conference get in touch with. Joining me currently are Ayub Khattak, Chairman and Chief Executive Officer of Cue Well being and Aasim Javed, Incoming Chief Economic Officer. Prior to we get began, let me commence by reminding you that we perhaps forward-seeking statements, like statements connected to the anticipated overall performance of our organization, future monetary benefits and guidance, method, extended-term development and all round future prospects as properly as the effect of the COVID-19 pandemic. These statements are topic to dangers, uncertainties, assumptions and other components that could trigger actual benefits to differ materially from these described. These dangers and uncertainties incorporate, but are not restricted to, these outlined in today’s get in touch with as properly as other dangers identified from time to time in our public statements and reports filed with the SEC.

Forward-seeking statements that we have produced on this get in touch with are primarily based on assumptions and beliefs as of the date they are produced, and the firm disclaims any obligation to update these statements, except as essential by law. In addition, on today’s get in touch with, non-GAAP monetary measures will be utilised. Reconciliations among GAAP and non-GAAP monetary measures are integrated in our earnings release. Ultimately, I would like to mention to you that the press release and a recording of this get in touch with will be accessible on the Investor Relations web page of our internet site. With that, I would like to turn the get in touch with more than to Ayub.

Ayub Khattak: Thank you, Lorna. And thank you absolutely everyone for joining us currently. The Board and I are pleased to officially welcome Aasim Javed to our Executive Leadership group, as he has not too long ago been appointed as our Chief Economic Officer. Aasim is a seasoned Finance Executive, and has been with Cue for the final two years, as VP of Economic Organizing and Evaluation and Treasurer. Aasim also led monetary arranging going into our IPO. Prior to Cue, Aasim held a assortment of finance roles at Becton Dickinson, Heinz and Basic Motors. Aasim graduated from McGill University with the Finance and Accounting Degree and holds an MBA from Harvard Business enterprise College. With his encounter and demonstrated leadership skills, Aasim was a all-natural option, and we appear forward to his continued contributions as CFO.

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I am pleased to report that Cue’s monetary overall performance for the fourth quarter delivered $146 million of total income, and $54 million, excluding $92 million of deferred income, which exceeded our prior monetary guidance. We ended the year with more than $240 million of money on hand and an uncapped $one hundred million revolving credit facility. When all of this has been accomplished predominantly with our COVID-19 item, we are executing properly on our method of expanding our test menu, along with growing the scope of our integrated care platform to have higher actionability on diagnostic test benefits, and menu expansion of the sorts of tests and therapies that can be delivered swiftly and conveniently via Cue. In 2022, our test menu expansion development drivers centered on diagnostic tests for our Cue Well being monitoring program, which consists of our Cue reader, test cartridges and sample collection wands.

Our close to term concentrate and improvement milestones had been from applications in each the respiratory and sexual wellness categories. I am satisfied to report that we continue to make important progress with the respiratory wellness test. We submitted the Flu A/B standalone, de novo application, the Flu plus COVID multiplex UA and the COVID-19 de novo application. We are pleased with the level of engagement and dialogue among Cue and the FDA and we continue to anticipate that we will be capable to bring to industry a complete respiratory wellness providing by the year finish. To round out our respiratory item providing, we have completed our clinical research for RSV and have begun our clinical research for Strep Throat. RSV is a respiratory situation that can be harmful for infants and young young children and the elderly.

According to the CDC, two million visits to the hospital happen on typical due to RSV annually, with more than 50,000 young children hospitalized and one more one hundred,000 hospitalizations for individuals more than 65. Final year, RSV leapt into public awareness as it impacted several households. Our clinical research are total, displaying higher accuracy for our molecular test. The CUE RSV clinical study began in the third quarter of ’22 as anticipated, and we intend to submit this significant diagnostic tests to the FDA for the duration of the second quarter of ’23 with complete clearance. We started our clinical study for Strep Throat in Q4. Strep Throat is one more frequent and respiratory illness that spreads swiftly and its generally contracted to close get in touch with with individuals who currently have the impact of infection.

We think our Cue Strep Throat molecular test delivers a possibility to detect Strep early and permits for targeted antibiotic use to lower the danger of complications. We began this clinical study in the fourth quarter of ’22 and we anticipate submitting Strep Throat for FDA evaluation in the second half of this year. Moving to the sexual wellness category, exactly where we have an ongoing plan for Chlamydia and Gonorrhea, although the CDC recommends routine testing for all sexually active adults, the present level of testing is not enough, as the quantity of Chlamydia and Gonorrhea infections has improved every single year for the previous six years. Our platform permits healthcare specialists and people to screen far more very easily and if optimistic enables fast delivery of the correct antibiotic.

Cue’s Chlamydia and Gonorrhea clinical study started enrollment for the duration of the 1st quarter of ’22 as planned. We program to submit this test to the FDA for the duration of the second half of this year. In addition to help our objective of possessing a robust test menu, which adds the utility of the Cue Well being monitoring program, we are pleased to report that we have completed clinical research and submitted an EUA for higher sensitivity molecular and pox test, formerly identified as Monkeypox to the FDA element care use. All round, we are proud to have accomplished or exceeded all of our menu expansion milestones we set out to meet in ’22, like 4 FDA submissions, completion of RSV research and commencement of clinical research for Strep Throat and Chlamydia, Gonorrhea. For 2023, we are committed to delivering 4 higher good quality FDA submissions, we program to submit the RSV molecular tests in the second quarter, followed by submissions for Strep Throat and Chlamydia and Gonorrhea molecular test for the duration of the second half of 2023.

We’ve currently submitted our Mpox test in the 1st quarter of 2023. Provided that far more menu on Cue Reader is the quantity one particular requested item from our current shoppers and the most significant element for new consumer adoption. We’re satisfied with the fantastic progress by item R&ampD, clinical and regulatory teams. Now I am going to shift to our digital capabilities development driver, which has been important for the stickiness of our item to-date. And we think it really is basic to the item platform for the future. When we began the firm far more than ten years ago, we understood that every single healthcare journey starts with diagnostics. In truth, roughly 70% of all clinical choices are produced using diagnostic information. Our method was to transform healthcare with a straightforward, quickly, precise remedy centered on the user, irrespective of whether that be a clinician in a doctor’s workplace or an person at household with the objective of enabling shoppers to have trusted facts at the fingertips to make more rapidly and far more informed healthcare choices.

I am pleased to share that with the current launch of Cue Care, a virtual care delivery remedy, the Cue Integrated Care platform is now reality, permitting people to test from household, speak with a clinician straight away and get remedy delivered to their household inside hours. This is a extremely important upgrade on the healthcare delivery encounter and we think a foundational notion for the future of healthcare. In addition, our platform has been integrated two significant EMR systems to enable for seamless interoperability among clinician, their EMR and Cue diagnostic capabilities. We view Cue Care as the developing block capability permits for integrating clinicians into any diagnostic or remedy journey. Quickly following launching, we expanded the Cue Care encounter to enable shoppers to upload benefits from any COVID-19 tests like antigen as properly as third-celebration influenza and urinary tract infection tests to go via the similar virtual care and e-prescription approach.

Final December, the Minnesota Division of Well being was with Cue in a competitive bid to present a statewide telehealth and remedy plan to all residents. Cue Minnesota, can now access Cue Care for on demand virtual consultation with a healthcare skilled and prescription delivery if medically indicated. Final month, this contract was extended to June 2024. By delivering an finish to finish remedy, Cue has a distinctive chance to present certain wellness facts to shoppers when they will need it most. For instance, this month, we announced the partnership with Pfizer to make these educational sources accessible on the Cue Well being app to raise awareness amongst people underlying circumstances about the danger of COVID-19 and the possibilities for remedy.

This is just one particular instance of how we are pursuing our mission to empower individuals to reside their healthiest lives. I’d also like to highlight an significant current item category launch, leveraging our integrated Care platform and a Cue Care developing block, we have additional expanded our testing menu by not too long ago launching 13 at-household test kits. For instance, we have a nine target sexually transmitted infection panel that can be accomplished from anyplace, a test kit for numerous heart wellness markers, a test kit for meals sensitivities, and fertility panels for females. All of these enable for discreet customized care and remedy. By means of our platform, people can order the test kits via the Cue Well being app or on our internet site, receives sample collection kits at household and mail their sample back to a CLIA-certified diagnostic lab.

Immediately after processing by the lab, test benefits are securely and privately delivered back to the consumer in the Cue Well being App. Prospects can also seek advice from with a clinician for customized care and arrange for delivery of any prescribed remedy by way of Cue Care. Cue is the 1st firm to supply a total remedy, diagnostic test at-household and at the point of care, seamless integration with clinicians and their EMRs and remedy delivery. We think that by adding these new at-household test kits to our platform, Cue will have the industry most compelling worth proposition for household and point of care diagnostic desires. In the future, we anticipate to address even far more clinicians as we anticipate continue to execute on our method. As an instance of how the integrated Care platform comes with each other, I’d like to highlight our not too long ago launched partnership with Scripps Analysis Translational Institute.

Scripps is conducting a remote trial using Cue’s test integrated platform like Cue’s diagnostic tests, Cue Care and household medication delivery, aimed at decreasing COVID hospitalization prices for immunocompromised people. We think that early detection of COVID in this vulnerable population combined with simple access to antiviral remedy will lead to far better wellness outcomes. This study is an significant initiative for efforts with payers. As you know, reimbursement currently exists for the test and our menu expansion pipeline in the point of care setting, and we really feel there is a important chance to extend reimbursement models into the household. Fundamentally, we think there is alignment among payers, patient desires and what Cue can supply, in particular for particular populations that are far more vulnerable to respiratory illness and had a higher danger for unfavorable outcomes.

For instance, immunocompromised people can advantage from on-demand testing at household in order to get earlier detection or earlier remedy to stay away from highly-priced hospitalization. We think information from research like the one particular underway at Scripps can play a important function in discussions with payers as they evaluate the worth of coverage went out of household testing, in particular with a public wellness emergency ending, resulting in a loss of coverage of household antigen test. Turning to the expansion of our consumer base. Nowadays, we have a broad and diverse set up base significant players in every single business, like tech, sports leagues, healthcare and finance. We’ve shipped more than a .25 million Cue Readers and sent more than 15 million diagnostic tests straight to customers, providers, public and enterprise shoppers.

I am pleased to share that we have accomplished more than $1 billion in sales in the final two years from the launch of our 1st item. I am proud that we present the quantity one particular most precise COVID test accessible for household use. We anticipate the expansion of the Cue Well being monitoring program test menu on the horizon and the expanded capabilities of our integrated Care platform. We are excited about delivering our shoppers the broader offerings they are seeking for and think this will enable us to return to development in the second half of this year. I’d like to finish by commenting on our price production program. I produced the tricky selection to lessen fees as we adapt to the realities of the present macro atmosphere. We anticipate these actions to outcome in money savings of around $one hundred million on an annualized basis.

We think we have enough liquidity to understand the advantages of our important investments in R&ampD to-date with out getting into the capital markets for the duration of 2023. Hunting forward, we will continue to concentrate on applications that will produce close to term income like completion of our ongoing clinical research for point of care and at household test cartridges and new item launches. We think our conservation of money objective will moderate the pace and additional test menu expansion applications. In summary, I am really proud of the trials the group has produced for the duration of 2022 with 4 regulatory submissions to expand our test menu, the nationwide launch and subsequent expansion of remedy worth Cue Care and new strategic partnerships in help of our mission to allow customized, proactive and informed wellness care that empowers individuals to reside their healthiest lives.

With that, I will turn the get in touch with more than to Aasim.

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Aasim Javed: Thank you, Ayub. And superior afternoon. I am satisfied to be speaking to you for the 1st time as a newly appointed CFO. Now I will stroll via our monetary benefits ahead of sharing our income guidance. Cue’s fourth quarter total income was $146.eight million, like the recognition of $92.four million of deferred income, which was the remaining balance linked with our agreement with the U.S. Division of Defense. Income excluding this deferred income was $54.four million, which was far better than anticipated, as COVID testing demand was greater than anticipated, and we saw powerful reordering from current shoppers. In the quarter, our private sector contributed 96% or $52.four million of sales on an adjusted basis. Public sector revenues, excluding the deferred income was $1.9 million, and total test cartridge sales had been $50.five million.

Moving down to P&ampL. Q4 adjusted item gross profit margin was 18%, when excluding one particular-time impacts of deferred income and inventory adjustments. Reflecting greater unit fees driven by reduce all round production volume in the quarter. Q4 total operating expenditures had been $94.six million. Sequentially, Q4 operating expenditures had been slightly greater than Q3 spent of $86.four million. Sales and advertising and marketing expense was $19.three million in the fourth quarter, and that is comparable to the third quarter commit. R&ampD expense was $56.1 million for Q4 and boost from the prior quarter spent of $42.five million as we ramped commit for the ongoing clinical trials and regulatory submissions. G&ampA expense was $19.two million for the duration of Q4 of this year, a lower from our Q3 commit of $25.six million.

As a outcome, adjusted net revenue was a loss of $74.four million or $.50 per diluted share. Adjusted EBITDA for the fourth quarter was a loss of $54 million. Moving on to complete year 2022. Cue’s total income was $483.five million, or $391.1 million, excluding the recognition of DoD deferred income. Private sector income accounted for 96% or $374.7 million, and public sector income accounted for four% or $16.three million on an adjusted basis. Test cartridge sales had been $358.1 million in 2022. Adjusted item gross profit margin for 2022 was 38%. Adjusted operating expenditures had been $357.1 million for the complete year 2022, like sales and advertising and marketing expense of $88.six million, R&ampD expense of $171.five million, and G&ampA expense of $97.1 million. Adjusted net loss for the complete year 2022 was $191.eight million, or $1.29 per share, and adjusted EBITDA for the year was a loss of $91.five million.

Moving to the balance sheet, we ended 2022 with money of $241.five million. In addition, we have $one hundred million secured revolving credit facility which remains undrawn. As a reminder, Cue operate with no debt obligations. Now, I’d like to move to our guidance. For the 1st quarter, we anticipate revenues of $20 million to $25 million. As you know, forecasting COVID testing demand beyond the close to term is difficult. Thus, we will limit our forecast to quarterly expectations. In summary, the firm continues to report far better than anticipated income overall performance and provide on our development drivers as we continue to execute on our method to build connected and intuitive wellness options. When our balance sheet is powerful, we recognize the challenges of the present macroeconomic atmosphere and took action to lessen expenditures in an work to preserve money.

When we are not providing formal guidance beyond Q1 income currently, I would like to present additional commentary for modeling purposes. We continue to anticipate our COVID-19 molecular test to produce the vast majority of our income in the 1st half of this year. And we anticipate that new merchandise will commence to contribute income in the second half of 2023 in line with our portfolio diversification efforts. As a outcome, broader gross profit margin is anticipated to be slightly unfavorable for the duration of the 1st half of this year. On the other hand, on a money margin basis, which excludes particular non-money things such as depreciation, margins are anticipated to stay optimistic. We anticipate margin improvement in the second half in line with greater anticipated volumes. For money, 1st quarter money burn is anticipated to be comparable to Q4 on an adjusted basis.

Money utilization is planned to lower as we move via the year, benefiting from each reduce fees and added income streams. We anticipate money savings linked with a price reduction program will be around $one hundred million on an annualized basis. We think that the powerful money position of our balance sheet and our capability to handle commit will enable us to stay away from the will need to enter the capital markets in 2023. With that, I would like to thank you for your interest. And I will now turn the get in touch with more than to the operator for concerns.

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