Precipio ((PRPO)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Precipio painted a picture of cautious optimism. The company reported strong year-over-year revenue growth and improved margins, highlighting significant operational efficiency gains. However, these positives were tempered by a quarter-over-quarter revenue decline and delays in product division revenue realization. Initial uncertainties regarding FDA regulations also posed challenges, yet the overall sentiment remains hopeful for continued growth and positive cash flow in the upcoming quarters.
Record Revenue Growth
Precipio’s Q1 2025 revenues reached $4.9 million, marking a remarkable 43% increase compared to the previous year. This growth was primarily driven by sustained demand in the Pathology Services sector, showcasing the company’s ability to capitalize on market opportunities.
Improved Margins and Operational Efficiency
The company reported a significant improvement in its pathology gross margins, which increased from 24% to 42% year-over-year. Additionally, operating expenses as a percentage of revenue dropped from 87% to 61%, reflecting enhanced operational efficiency.
Significant EBITDA Improvement
Precipio’s adjusted EBITDA showed a substantial improvement, with losses reduced to $108,000 in Q1 2025 from $1.4 million in the same period last year, marking a 92% enhancement.
MolDx Approval
The company received MolDx approval for next-generation sequencing testing, which is expected to boost revenue by approximately $250,000 per quarter, signaling a promising avenue for future growth.
Product Division Progress
The Product division saw its gross margins improve from 37% to 51% year-over-year, aided by new customer acquisitions and product launches, contributing positively to the company’s growth trajectory.
Positive Non-Recurring Impacts
Precipio benefited from over $400,000 in COVID relief funds and successfully negotiated a $130,000 write-off with Change Healthcare, both of which positively impacted cash flow.
Quarter-over-Quarter Revenue Decline
Despite the year-over-year growth, the company experienced a 9.5% revenue decline from Q4 2024, attributed to seasonal factors affecting test volumes and collections.
Delayed Product Division Revenue
The Product division’s revenues remained flat from Q4 2024 to Q1 2025, impacted by customer validation timelines, highlighting an area for potential improvement.
Impact of FDA Ruling on Laboratory Tests
Uncertainty surrounding an FDA ruling on laboratory tests led to delays in customer adoption of products. However, the ruling was overturned in March 2025, which is expected to alleviate these challenges moving forward.
Forward-Looking Guidance
Looking ahead, Precipio aims to achieve positive operating cash flow by Q2 or Q3 of 2025. The company expects continued growth in Pathology Services, with a 46% increase in test volume and a 53% revenue growth. The recent MolDx approval and improvements in the Product division’s gross margins are anticipated to drive future growth, especially after the overturning of the FDA ruling on laboratory tests.
In summary, Precipio’s earnings call reflected a cautiously optimistic outlook. Despite some challenges, the company demonstrated strong revenue growth, improved margins, and operational efficiencies. With strategic approvals and market opportunities, Precipio is poised for continued growth and aims to achieve positive cash flow in the near future.