Precipio, Inc. Q2 FY2025 earnings call

• Pathology Services: Continues to deliver consistent revenue and cash, July saw a new record in revenue, margins increasing with scale efficiencies and expected to level off at around 50% gross margins in 2026, and generates samples for Products division.
• Products division: Had revenue fluctuations due to customer operational challenges but issues are behind us; implemented optional send-out continuity program to ensure uninterrupted patient testing and care, offers new customers backup testing site; starting to see increase in pipeline generated by distributors.

Pathology Services business is growing at a healthy clip with an annualized growth rate of about 70%. Products revenue grew by 23% from the previous quarter, representing almost 100% annualized growth rate. Overall company gross margins improved from 39% to 43%. Pathology Services division continued to deliver consistent revenue and generate cash, with July seeing a new record of exceeding $2 million in a single month. Products division had past revenue fluctuations due to customer operational challenges but has since resolved those, and implemented an optional send-out continuity program. Product gross margin had a slight decline but is likely to reverse next quarter.

• Q3 is expected to show continued growth with a strong pipeline of new customers in various onboarding stages.
• Management remains confident in reaching breakeven in 2025 without additional capital.

• Risks and uncertainties that could cause actual results to differ materially from forward-looking statements include matters listed in Risk Factors in annual report on Form 10-K for the year ended December 31, 2024 and other risks detailed in subsequent SEC filings.

Q: Could you explain the warrant conversion?

A: Two years ago, warrants were issued. Due to potential dilution, an agreement was reached where approximately 1/3 of warrants were exercised standardly generating $1.2 million cash for 100,000 shares, and remaining 2/3 exercised cashless with no additional cash to company but fewer shares issued to minimize dilution.

Q: Why did the stock triple in the last quarter?

A: Likely due to company performance with third consecutive quarter of solid revenue growth, improved margins and reduced cash needs putting on path to breakeven and profitability; also began to tell the company's story, moving from stealth mode and starting to engage with investors