Exagen Inc (XGN) Q1 2024 Earnings Call Transcript Highlights: Strong Revenue Growth and Margin ...

• Total Revenue: $14.4 million in Q1 2024, up 28.4% from $11.2 million in Q1 2023.

• Adjusted EBITDA: Negative $2 million in Q1 2024, improved from negative $6.2 million in Q1 2023.

• Net Loss: $3.4 million in Q1 2024, decreased from $7.7 million in Q1 2023.

• Gross Margin: Increased to 59.6% in Q1 2024 from 47.2% in Q1 2023.

• ASP (Average Selling Price): $377 per test, up 35% year-over-year.

• Test Volume: Over 30,000 ADVISE CTD tests in Q1 2024, flat from Q4 2023.

• Cash and Cash Equivalents: $27.3 million as of March 31, 2024.

• Accounts Receivable: Increased to $10.9 million.

• 2024 Revenue Guidance: Raised to at least $55 million from approximately $54 million.

• 2024 Adjusted EBITDA Guidance: Improved to better than negative $18 million from previous guidance of better than negative $20 million.

• Warning! GuruFocus has detected 4 Warning Signs with XGN.

Release Date: May 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Exagen Inc reported a strong start to 2024 with total revenue of $14.4 million for Q1, marking a 28.4% increase compared to Q1 2023.

• The company achieved a significant improvement in adjusted EBITDA, which was a negative $2 million, compared to negative $6.2 million in the same period last year.

• Exagen Inc has made substantial progress in increasing the Average Selling Price (ASP) of ADVISE CTD tests, which is now $377 per test, up nearly $100 from a year ago.

• Gross margin improved significantly to 59.6% in Q1 2024 from 47.2% in Q1 2023, driven by increases in ASP.

• The company is planning to enhance its ADVISE CTD offering by adding new markers for SLE and rheumatoid arthritis, which are expected to increase clinical utility and financial performance.

Negative Points

• Despite improvements, the company still reported a net loss of $3.4 million in Q1 2024.

• Volume for ADVISE CTD tests was flat compared to the previous quarter, indicating a need for further growth in test utilization.

• Adjusted EBITDA, although improved, remained negative at $2 million for the first quarter.

• The company anticipates a slow initial uptake for the new ADVISE CTD enhancements, dependent on the pace of educational progress among clinicians.

• Exagen Inc faces challenges in forecasting and managing collections from prior periods, which adds uncertainty to financial projections.

Q & A Highlights

Q: Can you expand on how the new T-cell markers might expand your market opportunity, particularly in relation to rheumatoid arthritis (RA)? A: (John Aballi - President, CEO) The new T-cell markers for systemic lupus erythematosus (SLE) and RA aim to improve diagnostic sensitivity and are expected to be highly accretive to our financial performance. For RA, the new markers could identify about a third of the traditionally seronegative RA patient population, which is a significant clinical advancement and could substantially increase the utility of our ADVISE CTD, leading to increased product adoption.

Q: Are you expecting any other prior period collections for the rest of this year, and how should we think about the potential opportunities to collect from prior periods? A: (John Aballi - President, CEO) We collected $700,000 in Q1 from prior periods and expect this number to decrease over time. We do not factor these collections into our guidance due to the unpredictability of forecasting such collections.

Q: Can you provide some insights into how the gross margin might look going forward, especially considering the prior period collections? A: (Kamal Adawi - CFO) Our gross margin has improved significantly, reaching nearly 60% this quarter. The increase is primarily due to higher ASPs, not just from prior period collections. We expect to continue seeing healthy gross margins due to ongoing improvements in ASP.

Q: How should we think about the monthly volume trends and ASPs moving forward? A: (John Aballi - President, CEO) We've seen a consistent increase in monthly volumes, and this momentum is expected to continue. ASPs have also been increasing, and while they can be unpredictable, the trend has been positive. We are focused on maintaining this trajectory towards profitability.

Q: Given the FDA's final rule, how do you see this impacting your pipeline and the regulatory landscape for your tests? A: (John Aballi - President, CEO) We are still assessing the full implications of the FDA's final rule. However, we believe it could provide a competitive advantage by raising the barrier to entry for new competitors. Our compliance with New York State certification positions us well to meet these new regulatory requirements.

Q: What are your spending priorities for the year, especially considering the better-than-expected adjusted EBITDA? A: (John Aballi - President, CEO) Our spending priorities include R&D for new markers and maintaining up-to-date lab equipment. We are managing expenses prudently on our path to profitability, with a focus on strategic investments that support long-term growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.