Good afternoon, and welcome to the Semler Scientific Fourth Quarter 2020 Financial Results Conference Call. All participants will be on only listen mode. Should you need assistance please signal conference operator by pressing the star key followed by zero. After this presentation there will be opportunity to ask questions. To ask question you need to press star then one on your telephone keypad. Please note this event is being recorded. Before we begin, Semler Scientific would like to remind you that this conference call may contain forward-looking statements. Such statements can be identified by words such as may, will, expect, anticipate, intend, estimate, or words with similar meaning, and such statements involve a number of risks and uncertainties that could cause Semler Scientific's actual results to differ materially from those discussed here. These risks include continued uncertainty due to the evolving COVID-19 pandemic, risks associated with our recent investments in entities of potential complementary products and other new distribution arrangements, along with other risks associated with Semler Scientific's business. Please note that these forward-looking statements reflect Semler Scientific's opinion only as of the date of this presentation and the undertaking no obligation to revise or publicly release the results of any revision to the forward-looking statements in light of new information or future events. Please refer to Semler Scientific's SEC filings for a more detailed description of the risk factors that may affect Semler Scientific's results and these forward-looking statements. Now, I would like to introduce Doug Murphy-Chutorian, CEO of Semler Scientific. Good afternoon, everyone. Thank you for joining us today for our fourth quarter and year-end results call. I'd like to introduce you to Dennis Rosenberg, our Chief Marketing Officer, who will begin for us today. Dennis? Thanks, Doug. We always like to begin our calls with a reminder about Semler's strategy. Semler is a company that provides technology solutions to improve the clinical effectiveness and efficiency of healthcare providers. Our mission is to develop, manufacture, and market innovative products that assist our customers in evaluating and treating chronic diseases. We believe that our technology and software solutions enable our customers to identify when preventive care options are appropriate and to intervene before events like heart attacks and strokes occur. We're pleased to report that the company's financial performance during the fourth quarter of 2020, based on revenue and pre-tax net income, was the best quarter in our company's history. We also had the best year in terms of revenue and pre-tax net income in our company's history. Comparing results from the fourth quarter of 2020 to the fourth quarter of 2019, the highlights of today's report are as follows. Revenues were higher by 32%, increasing to $12.1 million. Pre-tax net income was higher by 117%, increasing to $6.5 million. Net income was higher by 93%, increasing to $5.4 million, and cash increased to $22.1 million at quarter end. During the quarter, we saw increased orders and usage for our QuantaFlo product from our current insurance company customers and from our Health Risk Assessment customers. We also received orders from new customers. Andrew Weinstein, our Senior Vice President of Finance and Accounting, will describe our financial performance in more detail, including a comparison of our financial performance for the full year 2020. Andy? Thanks, Dennis. Please refer to the financial results described in the press release that was distributed at market close today. For the year of 2020 compared to 2019, annual revenues were $38.6 million, an increase of $5.8 million or 18% compared to $32.8 million. Operating expenses, which includes cost of revenue, were $22.6 million, an increase of $500,000 or 3% compared to $22.1 million. Pre-tax net income was $16.5 million, which was an increase of $5.8 million or 54% compared to $10.7 million. Net income of $14 million or $2.13 per basic share and $1.74 per diluted share, a decrease of $1.1 million or 7% compared to $15.1 million or $2.34 per basic share and $1.88 per diluted share. Please recall that 2019 reflected the full release of a tax valuation. After excluding the $4.4 million income tax benefit included in 2019, net income in 2020 increased by $3.3 million, or 31%, from $10.7 million in 2019. In 2020, earnings per share was calculated using a basic share count of 6,584,441 and a diluted share count of 8,066,561. Analyzing the expense categories and earnings in 2020 as a percentage of annual revenue, cost of revenue was 9% of annual revenue. Engineering and product development expense was 8% of annual revenue. Sales and marketing expense was 26%. General and administrative expense was 17%, and net income was 36% of annual revenue. For the quarter ending December 31st, 2020, compared to the corresponding period of 2019, revenue was $12.1 million, which represents an increase of $2.9 million, or 32%, from $9.2 million. Operating expenses, which includes cost of revenue, was $6.1 million, and that's unchanged from the corresponding period of 2019. Net income was $5.4 million, an increase of $2.6 million, or 93%, from $2.8 million. Net income per share was $0.81 per basic share and $0.66 per diluted share, and that compares to $0.43 per basic share and $0.35 per diluted share during the same period last year. For the quarter ending December 31st, 2020, the basic share count was 6,676,854, and the diluted share count was 8,125,009 shares. Analyzing the expense categories and earnings in the fourth quarter of 2020 as a percentage of quarterly revenue, cost of revenue represented 8% of quarterly revenue. Engineering and product development expense was 5% of quarterly revenue. Sales and marketing expense was 22%. General and administrative expense was 15%, and net income was 45% of quarterly revenue. As of December 31st, 2020, Semler had cash of $22.1 million, which represents an increase of $14.4 million compared to $7.7 million at December 31st, 2019. Our stockholders' equity is $29.8 million as of December 31st, 2020. We expect to file our annual report on Form 10-K on or before March 16th, 2021, which will include our cash flow statement and more discussion of our cash and liquidity. Our two largest customers comprise 37.2% and 22.8% of our annual revenues. In 2020 compared to 2019, revenues from fixed-price software license fee arrangements were approximately $25.7 million, which is an increase of $2.8 million, or 12%. Variable fee software license revenues were approximately $11.6 million, an increase of $2.7 million, or 30%, and our equipment and other sales were $1.3 million, an increase of $300,000 or 30%. In the fourth quarter of 2020 compared to the corresponding period of 2019, fixed-fee software license revenues were approximately $7 million, an increase of $700,000 or 11%. Variable fee software license revenues were approximately $14.5 million, which is an increase of $1.8 million or 67%, and equipment and other sales were $500,000, which is an increase of $400,000 or 400%. We experienced the greatest effects of COVID-19 late in the first quarter of 2020, which continued into the second quarter. As restrictions were lifted and non-emergency medical services resumed around the country, our business returned to or even exceeded pre-COVID-19 levels in the third quarter, which continued through the fourth quarter of the year. Until the threat of the pandemic is over, we cannot quantify its effects on future quarters. To date, staffing, salaries, and inventory have been maintained or are increased from our usual levels. Travel expenses declined in 2020 due to COVID-19, and payroll taxes have decreased in 2020 due to the employee retention payroll credit, which is available under the CARES Act. During the fourth quarter of 2020, we hired several employees Although we do not provide formal guidance, we are intent on continuing annual revenue growth, continuing profitability, and generating cash during 2021. It is the opinion of the management team that the customer interest in our product and services is increasing. I will ask Dennis to continue the discussion and provide concluding remarks. Dennis? At year-end 2020, headcount was 86 employees compared to 77 at the end of the third quarter 2020. We continue to operate as close to normal as possible, notwithstanding the COVID-19 pandemic. We've been a virtual company for more than 10 years, and we're comfortable with communicating and working out of our homes. Also, we have web-based training in place for our customers and are experienced in using it. There is also no plan to raise additional capital at this time. We reserve the right to change our financing plans as opportunity or need arises. During Q4, we continued our investor relations activities by participating in virtual investor conferences hosted by B. Riley FBR, Colliers Securities, H.C. Wainwright & Co., and Lake Street Capital Markets. During 2021, we will continue to participate in virtual conferences and virtual non-deal roadshows. We do not yet have a firm point in time when we plan to uplist to the Nasdaq market. In 2020, we added two new independent members to our board of directors to better meet Nasdaq corporate governance requirements. Our R&D goals are to continue to upgrade the existing product and data services, to commercialize other internally developed services and products, and to in-license new services and products which provide enhanced value to our customers. In our Form 10-Q for the third quarter, filed with the SEC in November 2020, we provided some limited information about our recent arrangements with three private companies. We have nothing further to report at this time except as follows. Our bridge loan to one of the private companies was repaid in equity securities of such company. Our convertible note from a third private company was repaid in equity securities of such company, and we then sold such equity securities, along with the warrants we had obtained in conjunction with the convertible note, to a third party, resulting in a net gain of about $400,000. Management may discuss these agreements and give more information about these companies and products in the future if they become material to our business. Overall, we believe annual revenue will continue to grow in 2021 as a result of increased number of installations of our product, more usage of our product, and recurring revenue from the licensing business. Our goal continues to be to both make new additions to our customer base and to expand orders from existing customers. Operating expenses are expected to increase from quarter to quarter during 2021. It is our intent to expand our infrastructure to accommodate anticipated future growth of the business. During 2020, we continued to add to our assets for lease with purchase of inventory. The amounts of purchases made in the year will be disclosed in the Form 10-K, which we expect to file on or before March 16th. Our goals for 2021 are to grow annual revenue, to continue to be profitable, and to further establish our QuantaFlo product as a standard of care in the industry. We believe that the market for vascular disease testing is larger than our current market penetration. There is room for continued growth. We continue to invest in R&D with the goals of providing new products that enhance value to our customers now and in the future. In conclusion, we believe Semler Scientific is well-positioned because we deliver cost-effective wellness solutions for the care of patients with chronic diseases. We may improve health outcomes for patients by identifying those who benefit from preventive health measures, and we provide economics that work for the providers, the facilities, the insurance plans, the government, and the patients. Notwithstanding COVID-19, 2020 was an achievement record for our company in terms of both financial performance and the number of patients being tested with our products. We are optimistic for the future given our performance in what was an extraordinary year. Thank you for your interest in the company and your continued support. Now, operator, please open the lines. Doug, Andrew, and I will be happy to address your questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question will come from Kyle Bauser with Colliers Securities. Please go ahead. Great. Thanks. Hi, everyone. Another incredible quarter. Thanks for all the updates here. Maybe on the fixed fee side of things, sales to your largest clients stepped up significantly, maybe in part since they paused some of the new installations throughout the year and are fully back online. Was the strength in this bucket from pent-up demand, or could we see other outsized quarters like this? These are both for existing investors and customers and also new customers. We saw good growth in these areas. Andy, could you answer this more? No, I do. I agree with both of you. I think there was some pent-up demand, and we did see increases from our current customers, plus we did add a decent amount of additional new customers. I think that the increase had to do with actually both. Got it. Thank you. On the variable fee side of things, we saw a massive step up. Back-of-the-envelope math, if we look at equipment sales of $500,000 in the quarter, would imply another nearly 1,700 new placements made in the quarter to the HRA channel. The strength doesn't seem to be slowing down any. Am I thinking about this correctly, and have you seen any new seasonality in this part of the business? I think. Yeah. Yes, go ahead, Andy. You go, please. Yeah. I would agree with you, and it is a little cyclical when the hardware sales come in based on how many new installations our customers have. When we do see a lot of installations in the fourth quarter, that's good news to us, meaning that there are going to be new installations with our customers. Back-of-the-envelope thinking, that does make some sense. Yeah. We don't specify the numbers, but you have your own. You have the strength of the pipe. Yep. Right. Yep. I'm just assuming kind of $300 for the QuantaFlo to the HRA clients. Got it. Lastly, if I may, I know you've said in the past that you expect other companies to come into the PAD diagnostic space, given how massive this market is and underdeveloped it is. Have you seen any new entrants into the PAD diagnostic space pop onto your radar? Kyle, as you point out, and as we've indicated in the past, that predominantly PAD testing is traditionally done with blood pressure cuffs, Doppler machines, done in a vascular lab, and there are many companies that market this type of product. We are seeing new entrants into the market with digital devices that seek to provide fast results that may be used outside of a specialized vascular lab. To date, we believe these companies have had minor effects on our market. Also, as you point out, given the potential size of the PAD market, we do expect competitors to enter this space. Okay, understood. Thanks for all the updates, and congratulations on a great year. Thanks, Kyle. Thanks, Kyle. The next question will be from Brooks O'Neil with Lake Street Capital Markets. Please go ahead. Yeah. Good afternoon, guys. I just want to follow up on one of Kyle's questions. Obviously, the variable fee business growth rate was elevated this quarter. I'm curious if you can help us to think about how much of a COVID impact there was, i.e., pent-up demand from Q2, Q3 that got unlocked in Q4, or whether you think the $4.5 million revenue run rate from Q4 in that business is the new kind of baseline revenue run rate for that business. What can you tell us? Okay. Dennis, can you comment on what the biggest hang on? Sure. Hi, Brooks, how are you? Fine, thank you. As we know, 2020 was an extraordinary year as far as COVID. In relation to our business, the flexibility that the HRA approach gives our large insurance companies was very beneficial for 2020, in that their ability to move quickly in testing either patients that where their tests had been postponed, where offices were closed down for a period of time, et cetera. We are seeing good growth in this market. We expect to see continued growth in the market. As far as what the rate is, we're just going to have to see how much of an effect COVID really was in 2020 compared to 2021. Absolutely. I get that. You continue to deliver extraordinary results on the cost of revenue line, and I'm curious when we should expect that line to go to zero. Never. It's kind of nice to see these numbers. Absolutely. It's fantastic. It's incredible. I'm curious, I know you don't want to talk a lot about the new business, should we assume since you converted the note, the convertible note from one of your new relationships and sold the equity security, that you're no longer interested in that company's product opportunity? Or is that just a financing situation and sort of a cash? Yeah. Use? Okay. I think the comment is that we converted the notes and to for shares, and we sold the proportion shares and the we retained about a certain amount of the investment that we made otherwise. We still have an interest. That was a matter of clearing the way to the Investment Company Act of 1940 to be able to do some more things. This gets into technical details, we sold it to a interested third party who has a big shareholder in Semler. We made a little bit of money, it is still basically in a shareholder who's aligned with our interests. Okay, that makes sense. I totally understand that. When you think about the $1.2 million of the inventory you have for the other new products, can you give us any sense for how quickly you might be able to turn that into revenue? Any details on any of the three new products, are they diabetes-related? Anything you could tell us would be great. Dennis, can you comment, please? Sure. Yeah, we are moving ahead with our planning in relation to these products and very specifically in terms of the one product that we have purchased the inventory and have the distribution agreement with. As we've indicated before, we're looking carefully at which market segments we want to enter with this. We're looking at all of the related strategies in terms of pricing, in terms of reimbursement, et cetera. That, we don't feel a pressure to move super quickly on that. We want to make sure the ducks are in a row and that we do it the right way. That continues to be our thinking in relation to that product. Yeah. Okay. Let me just ask one or two more. I'm curious if you feel the $7 million from the fixed-price software business, it's kind of a good base to think of for growth for 2021. Exactly. We think that the business is contributing and we have old clients and new clients who are coming to use our products. We're really quite interested. Andy, can you say anything about it? No, I agree with you there totally. I mean, our existing clients are growing and we're adding on new clients every month. I agree. There's not much to add to that. Okay, great. Just lastly, obviously the cash continues to build and I know you're investing in new products and growing your employment base, et cetera, are you thinking we're going to turn Semler into a bank or what are you going to do with the money? The point is we're spending the money on products and projects that are enhancing our future growth. We intend to do the same thing in the future, maybe increase the expenses, for example, R&D, you can assume they're going to be increased. If we think about it, we would like to retrieve about 8%-10% R&D budget, but we've been going so fast, we can't able to do it. We would like to get this up in future because we want to do more things. We don't want to lose focus on the main product. The main product has got a lot of legs to it. We, of course, then we do what we have to do to support the main product and to make improvements in the main product. Makes sense. Doug, thank you very much for those comments, and congratulations on terrific results. Thank you. Thanks. You're welcome. Once again, if you have a question, please press star then one. The next question will be from Aman Gulani with B. Riley. Please go ahead. Hey, guys. Thanks for taking my question and congratulations on another great quarter here. I mean, it appears that a lot of the large Medicare Advantage providers are really pushing for in-home care with either new investments or expanding their existing HRA business. Given the material push on the HRA end, do you think that could mute some of the seasonality that you typically do see in the first quarter of the year? It's possible. We are two months into the first of the year, we can't comment without telling you the things we don't want to disclose yet. We'll find out in April, what you think about when we do the next call. Okay, thanks. What is your growth expectation for the fixed fee business, given the ramp in the HRA side of the business? Dennis, We had the last quarter, we reported about 40% of the businesses was licenses that are variable price. Now, comment about what you think is going to be in the future, please, Dennis. Well, I think that, again, we refer back to 2020 as an extraordinary year in terms of the flexibility that the insurance companies needed in getting the patients tested. It's hard to look at the numbers in 2020 and read too much into that in terms of what the future holds for the mix between these two types of licenses. For us, we're happy with either type of business, they're both very high margin businesses for us and we just want to get as many people who fall into the criteria to be tested as possible, whether that's home or whether that's fixed fee. The combination, I think, gives us a lot of leverage in the market to be getting everyone tested who needs to get tested. We just have to see what COVID brings for this year and what the trends are, looking back at 2020 to see what the real indicators were. Got it. Okay. Outside of your recent investments, can you comment on any internally developed initiatives that you're working on that could complement QuantaFlo? Any comments on time to market for some of those internally developed products? We've been very quiet about that because we don't feel in a rush to do it, but we've been making moves and you have seen some of the things that were reported, not by us, they were reported by private that it's been made. I basically have to say to you that we like what we're doing, but it's not completed yet and when it's done, material will be the first to know and I think we have a good feeling about it, but I don't want to say more than that. Dennis, can you comment or no? No, it's the same approach that we're taking with the outside products in that we want to make sure everything is done right. We are in a fortunate position of having a stellar main product with a lot of growth left to go. We don't feel pressure on these products. We don't want to drag our feet, obviously, but we want to make sure that all the ducks are in a row and that we do it right. Got it. Okay. Last question from me. Can you talk about your recent hiring activity? What are some of the new hires focused on? Will they be mostly on your new products or largely focused on expanding QuantaFlo? All of the above. We made several hires supporting the new products, but most of the hires support QuantaFlo. We made some R&D hires as well as operation hires as well as expanded the sales team. We'll continue to do this and the reason we do it is that management is entirely confident about the next year to be a bigger one. We want to get the infrastructure in place to be prepared for the growth that we're going to see in 2020. Great. Thank you. Congratulations on the quarter, guys. I'll pass it on. Thank you. Thank you. The next question will come from Madison Woodward with Avalon Advisors. Please go ahead. Hi, thanks for taking my call. I was just wondering if you could elaborate a little bit on the sale of the preferred securities to the related party and just clarify that a little bit and what's going on there? Okay. It's going to be disclosed in the 10-K that is soon to be released. I don't think it's appropriate to get into the details, but the thinking is that we sold it to someone who's also a shareholder of the main company. He got a certain line of interest to do it, and they didn't sell it to him at what we bought it for. We sold it for a little bit more. It was a thing. The thinking is, if you refer to the Investment Company Act of 1940, we have limits to what we can invest in any company. It's a minority investment. We want to make many other little bets, and we want to take on more distribution to the products that we have invested in. That is why we need to make the investment. We don't want to get into anything that hurts our earnings. That being said, if these companies are successful, we'll maybe think to buy them eventually. This is the thinking that we have. First of all, we want to take small steps and to get some more distribution rights and to get a better product mix than we had before. Dennis, can you say anything about this? Yeah, I think that the key point of what Doug is saying there is the idea of placing small bets on things that look good to us that we can expand in the future as their performance or potential increases in our eyes. That's really what this is all about, is expanding on our relationships with our customers, our leveraged distribution model, and which future products are going to fit into that the best. Thank you. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Dennis Rosenberg for any concluding remarks. Thank you for joining us today, and we look forward to updating you soon on our continued progress. That ends our call today. Thank you. Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.