Q4 2023 Exagen Inc Earnings Call
Participants
John Aballi; President, Chief Executive Officer, Director; Exagen Inc
Daniel Gregory Brennan; Analyst; TD Cowen
Ross Everett Osborn; Analyst; Cantor Fitzgerald & Co.
Andrew Brackmann; Analyst; William Blair & Company
Presentation
Operator
Greetings. Welcome to Exagen Inc's fourth-quarter 2023 earnings call. (Operator Instructions) Please note that this conference is being recorded. At this time, I'll hand the conference over to Ryan Douglas from Investor Relations. Mr. Douglas, you may now begin presentation.
Good morning, and thank you for joining us. Earlier today Exagen Inc released financial results for the quarter and full year ended December 31, 2023. The release is currently available on the company's website at www.Exagen.com. John Aballi, President and Chief Executive Officer; and Kamal Adawi, Chief Financial Officer, will host this morning's call.
Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe-Harbor provisions for the Private Securities Litigation Reform Act of 1995. These statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statement.
All forward-looking statements, including without limitation, statements regarding our business strategy and future financial and operating performance, including guidance for the quarter. Potential profitability or current future product offerings and reimbursement and coverage are based upon current estimates various assumptions.
These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. And accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please see the filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2023 and any subsequent filings.
In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted EBITDA that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP. These non-GAAP items should be used in addition to and not substituted for any GAAP results.
We believe these metrics provide useful supplemental information in assessing our revenue and operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the Investor Relations page of the company's website.
The information provided in this conference call speaks only to the live broadcast today, March 18, 2024. Exagen disclaims any intention or obligation except as required by law to update or revise any information, financial projections or other forward-looking statements, whether because of new information, future events or otherwise.
I will now turn the call over to John Aballi, President and CEO of Exagen.
John Aballi
Thanks, Ryan, and thank you to everyone joining the call. Today, I'll review our fourth-quarter and full year 2023 results, progress on our strategy to achieve profitability and touch on how 2024 starting out. I'll then hand it over to Kamal, our CFO, for further details regarding our financial performance.
2023 was a year where we implemented significant change across the organization in executing on our strategy and it's exciting and to be honest, a lot of fun to see the results we are able to generate in a relatively short period of time by focusing on our core product advice CTD. I have to start by genuinely thanking all the team members at Exagen for putting in the hard work and effort this past year to really change the trajectory of our company.
We've continued to serve patients in the rheumatology space with the best testing available, but are now doing so with a healthier organization, which is much closer to operating profitably. Throughout the year my confidence has grown knowing that many of the strategic shifts we've needed to make are behind us and that as we continue to execute our goals are truly within reach.
Looking at our performance this past year, we are extremely proud that our full year revenue was a record $52.5 million with $13.8 million coming in the fourth quarter. Full year revenue increased 15% over 2022, while simultaneously reducing the cash needed to run the business. This resulted in a $22 million or 57% improvement in adjusted EBITDA year over year. We also improved our gross margin to 56% for the full year 2023 and to over 59% in the fourth quarter. This is fantastic progress over our 2022 performance, and we are steadily moving towards our cash flow positive target of 60% gross margins.
In achieving our 2023 performance. One of the key areas we focused on was improving the average selling price of advice CTD in many respects we've laid the groundwork for continued progress this past year, but also shown that we can simultaneously generate momentum in improving the realized price of our core testing.
At the end of 2022, our trailing 12 month ASP was $285 for advice CTD testing. And by the end of 2023, we were able to increase this 18% to $336. The increase in ASP relative to 2022 becomes even more impressive when factoring in the CMS repricing of our PLA code as we transition to the clinical laboratory fee schedule at the start of the year.
We are very proud to deliver a change of that magnitude without sacrificing progress in growing the business. For 2023, we delivered a record 137,000 advised CTD tests, of which approximately 30,000 were completed in the fourth quarter from inception to date, we have now delivered over 900,000 by CTD. tests, and we look forward to surpassing the 1 million test Mark later this year.
In 2023, we worked hard to focus on advise CTD specifically to improve the ASP of our offering as we implemented changes to accomplish this goal. As expected, we did experience a decline in device CTD testing in the second half of the year. As we progressed into the first quarter, we are seeing encouraging progress in building back our business from a volume standpoint and continue to expect growth in 2024 to be driven by improvements in ASP and increasing test volumes.
When I joined Exagen in late 2022. Our work to drive focus on advice, CTD. testing and subsequently look for ways to improve every aspect of how we offer our tests, one area we've recognized as an opportunity and leveraging some of the unique biomarkers we already had license to in order to enhance the sensitivity of advice CTD. On this note, we anticipate launching new proprietary T-cell markers within the AdVise CTD. platform in the fourth quarter of this year.
We expect these novel markers will improve the sensitivity of our test in identifying patients with lupus. Ultimately, we anticipate being able to identify up to 50% of SLE patients who would test negative by standard of care testing or alternatives. In November of 2023, we presented an abstract at the American College of Rheumatology Annual Meeting, highlighting the gain and diagnostic sensitivity T cell markers provide, and we are working to have them clinically available to better aid clinicians and patients in identifying disease.
From our research, these markers are some of the most specific for SLE that have been discovered and will therefore be a true value add for clinicians and patients.
Additionally, from a competitive advantage standpoint, we have patent protection in offering these markers through 2035, which reinforces our commitment to innovating in this space and further highlights Exagen as a company that can continually bring novel biomarkers to the rheumatology community.
The addition of these markers to advise CTD is also expected to be accretive to our financial performance by the end of this year.
Finally, before I hand the call over to Kamal, the goalposts are as clear as ever. And I very much believe we will achieve cash flow breakeven with gross margins around 60% and revenue of approximately $75 million with our current cash balance. Execution of our strategy is demonstrating results moving us closer to these goals, and I'm excited about the progress we expect this year.
With that, I'll now turn the call over to Kamal to provide details on the fourth quarter and full year 2023. Kamal?
Thank you, John, and good morning, everyone. As John mentioned, total revenues for the full year of 2023 were $52.5 million, an increase of 15.3% over 2022. Total revenues in Q4 were $13.8 million, which was an increase of 7.2% over fourth quarter 2022.
Total revenues for the full year were driven by a combination of record volume from a strong first half of the year and ASPs from our flagship product of ICTD increasing 18% for the year. Testing volumes from a buying CTD were 137,650 tests for the full year and 30,438 tests. For the fourth quarter, we had 2,383 ordering health care providers in Q4 2023 compared with 2,419 for Q4 2022.
The slight drop in health care providers is also a direct result of provider facing changes. We made that impacted volumes. Again, this decrease was expected and necessary as we look to build a profitable business.
The breakout of $52.5 million in full year total revenue is $46.3 million of CTD revenue, with other testing revenue at $6.2 million. For the fourth quarter, total revenue of $13.8 million of CTD. testing revenue was $12.1 million and other testing revenue was $1.7 million.
The changes made to the Revenue Cycle Management Department and the start of the year is continuing to yield results. In the fourth quarter for tests that were older than 12 months and were not in accounts receivable. We collected and recognized 1.4 million of which the majority came from a commercial payer. We continue to make improvements to the billing processes and strive to collect the maximum amount per test.
For the full year 2023 cost of revenue were $23.1 million with a gross margin of 56.1% compared to $24.2 million and gross margin of 46.9% for the full year 2022. The increase in gross margin was due to the increase in ASP we saw throughout the year.
Cost of revenue were $5.6 million in Q4 2023, resulting in a gross margin of 59.2% compared to 50.9% in Q4 2022. Again, the increase in gross margin percentage was driven by an increase in ASP. Operating expenses, excluding COGS, for the full year 2023 were $52.3 million compared with $67.4 million in 2022. Year-over-year decreases were primarily due to the decreases in employee related expenses due to decreases in headcount and reduced R&D expenses.
Operating expenses, excluding costs in Q4 2023 were $13.3 million compared with $21 million in Q4 2022. The $13.3 million included a $1.6 million write-off of leasehold improvements from a lease we were able to exit. We are very happy to exit this lease in a very difficult commercial real estate market, resulting in significant cash savings into 2027.
As a reminder, operating expenses in the fourth quarter of 2022 include a onetime impairment in the amount of $5.5 million from goodwill associated with the purchase of medical diagnostics division of Cypress Bioscience in 2010.
Net loss in Q4 2023 was $5.6 million compared with $14.4 million in Q4 2022. For the full year 2023, the net loss was $23.7 million compared to $47.4 million in 2022. Adjusted EBITDA was negative $3.9 million for the fourth quarter 2023 compared to negative $13.4 million for Q4 2022. For the full year, adjusted EBITDA was negative $17.1 million for 2023 compared to negative $39.8 million during the full year of 2022.
As a reminder, adjusted EBITDA excludes stock comp expense. Since it is a large non-cash expense for the organization. Please refer to our earnings release issued earlier today for a reconciliation of adjusted EBITDA to net loss. Looking to our balance sheet, I'm very happy with how we ended the year in regard to cash management, cash and cash equivalents as of December 31, 2023 were approximately $36.5 million, up from $28.4 million at the end of September. Our accounts receivable balance at the end of 2023 was $6.5 million.
As we continue to improve revenue cycle management, we plan to hold claims in the first half of the year, which will result in an increase in accounts receivable and an accelerated decrease in our cash, both returning to normal levels by year's end. We anticipate a similar cadence in 2024 with our cash balance and AR as we did in 2023.
I'm pleased with the continued improvements made to the organization and the progress we've seen on our financial statements. As John stated, we continue to target cash flow breakeven at revenues of $75 million and gross margins of 60%.
As I previously shared, our gross margins were just shrived of 60% this past quarter on strength of improving ASP. For full year 2024 revenue, we're providing guidance of approximately $54 million. For first quarter 2024 revenue, we're providing a guidance range of $13 million to $13.5 million for full year 2024. We believe our adjusted EBITDA will be better than negative $20 million, given our continued improved performance. We believe our existing cash and cash equivalents are adequate to meet our anticipated cash requirements into 2026.
We will now open the call for questions.
Question and Answer Session
Operator
Thank you for that conducting a question and answer session. (Operator Instructions)
Mark Massaro, BTIG
Thanks for taking the question. You guys talked about the change in the clinical lab fee schedule. I believe. Can you just walk us through what the change was to come to your Medicare rate. I believe it went from 1,085 to 840, but I think you have an opportunity to get paid another $200 for additional markers. Is that correct?
And then can you just give us a sense for whether or not you expect a similar payment and when you move to the new novel markers?
John Aballi
Things are a question mark from.
Yes, those rates are correct. It did move from 1,085 to 8340. When you look at Medicare as a of the impact it has on ASP. That is a $26 impact on our ASP. So with the increase we've seen year-over-year with driving our trailing 12 months a fee to three $0.3. A lot of that came on the back of commercial payers and just address the other point, yes, it will be stable.
Morning, you also asked the question around impact relative to the new markers that we're launching here later this year, I believe. And so those the methodology for those new markers is flow cytometry based, which, as you know, we are highly proficient in offering those complex tests and it will be three markers. We haven't broken out financially how it's going to contribute to the organization because we're still honing in on that launch date. It's not currently factored into the guidance either.
And the gross margins of 59% in the quarter came in well above our expectations. Kamal how should we think about gross margin trajectory in 2024, recognizing that you are awfully close to your 60% gross margin target and Sure.
John Aballi
So one thing to always keep in mind with our gross margins is we have had seasonality with them that has been seen year after year. And while I'm very happy with our 59% gross margin in Q4. What we usually see going into the next year is a lower gross margin in Q1. And then we increase our gross margin in each quarter.
Now this year, we're doing something very similar to what we did in 2023, which is holding claims. By holding claims that will reduce some of the fluctuations you see going from Q1 to Q2, we should see more stability in our gross margin between quarters because that fluctuation from the deductible resetting won't have as great of an impact on the business, and we are very near, we are very close to our near-term goal of 60% gross margins. So I'm very pleased with the progress we're making there.
And then last question for me. The 2024 revenue guidance of $54 million is about 3% above 2023 levels. Can you maybe parse out what the mix will look like between volumes and ASP, I would expect ASP to be the focus, but do you also think you can grow volumes in 2024.
Hey, Mark. I'll start off here. And from our perspective, 2024 is really an execution year. We've set everything up in 2023 or at least made that a lot of the heavy lifting in 2023 to make the strategic shifts that we needed to. And what that results in from our perspective is the most sensitive lever being ASP improvement. So our growth will be ASP. driven, but we do expect building back our volume over the course of the year. And we're kind of looking at it as you had the back half of 2023, you had a run rate for volume. You've seen now consecutive quarters kind of in the low 30,000 level in terms of CTD units. And so we're building back from that level. We're encouraged by what we've seen here in Q1, where we sit today in the quarter by ASp is going to be the driver of growth there.
Operator
Kyle Mikson, Canaccord Genuity.
Hey, things. Congrats on the year. So just on that last point there on John, when you think about the below 30,000 level here building back from that. I mean, how on how well above that can we get to over the course of 2024? Can we get to like close to 40,000 tests per quarter, possibly I just had a lot of this is like kind of ASP versus volume, right? So just trying to parse it out it's important. So we'd love to hear your additional commentary if possible.
Yes, morning, Carl. Thanks for joining the call and appreciate the question from our perspective. If you were to model 40,000 tests per year on a quarterly basis or 40,000 tests on a quarterly basis, you would have to model a significant decline in the ASP, and that is not consistent with what we're achieving our progress. So from our perspective, we expect the ASP., the trailing 12 month ASP mind you to continue to increase throughout the year. That's an inherently difficult metric to forecast progress on.
So understanding when you're going to have specific payer traction and when that cash actually hits the door is somewhat challenging. And so we took look at a 12 month trailing 12 month number smooths out some of that accounting variability. And we expect a growth rate there, which will lead you into that $54 million overall revenue number. That's a number we feel comfortable with right now, knowing how we're progressing. And so that's about the level of detail that we're able to provide at this point. But I would not model decline in ASP. That's not consistent with our strategic approach.
That was helpful. And then Tamar online cash burn and cash collections first time like prior period claims. I know you had some of that in 2023. Is there any way you could kind of parse that out and help us understand the apples-to-apples comparison with the guidance here. As Joe has alluded before, the growth year-over-year is not like robust. I guess even though underlying strengths, like it's clear that to be helpful. And then with cash, it just it sounds like the cadence is similar to 2023 as like it will be similar to 2023 and 2024 does that mean that the first half of your cash burn is going to be in line with the full year burn kind of dynamics that just let me just kind of parse these things out for us?
John Aballi
Thanks for the question, Kyle. So let me address the prior period collections. First, on full year 2023, our prior period collections were around $5 million. We're very pleased with the progress we made there. The revenue cycle management team made great strides and improving the processes, and it was a big driver for our accomplishments in 2023.
So very happy with that. Now trying to forecast prior period collections or ASP. in general is very challenging. But what I can tell you with how prior period collections should be thought about for 2024 is while we made great strides and improving processes of one of the things we're going to see there is improved time to collect on some of these older tests that were in an AR or that were older than 12 months from.
So we believe we've made good progress there, and we'll see we expect to see some additional prior-period collections at the first half of the year. But by the back half of the year, I don't think it's going to be material or be a discussion point because I think revenue cycle management will be caught up by that point.
Now to address your second point on cash income we ended the year with $36.5 million. And I'm very pleased with the progress we've made in terms of reducing our burn and being very focused on our cash. And we will see, what we saw in 2023 with cash and AR offsetting during the year. So by holding claims, we will see our cash balance drop and our AR increase and then offset towards the end of the year.
I think what you saw in Q4 of this year is exactly what we tried to signal all year in terms of this should offset by end of year. So we'd expect to see that same cadence in 2024 with ARR and cash balance.
And final one for John. On the on the new the three new T cell markers launch in 4Q of this year, that's unexciting. I'm just wondering where those came from the companies had partnerships with health systems and academic labs and even like biopharma companies over time. So just was wondering if the markers came from them, were that was internally developed.
John Aballi
That's a good question, Kyle. And if you'll permit just a little bit of extra detail on the first of all, these markers are going to be a huge benefit to patients and the clinicians who manage these patients. If you leverage the advice test and with our test, we anticipate identifying up to 50% of patients with SLE who would otherwise test negative by traditional biomarker testing. I think that's a metric that it should really resonate with clinicians, certainly with patients who have had long journeys in their diagnostic odyssey, a dramatic improvement.
We're very proud to bring these to market. We know that much earlier diagnosis of these conditions can impact patient outcome. And so we're excited to contribute to improved care in this way in terms of financial performance for our company. As I said, these are not included in our guidance as we lock down a launch date, but it's going to be materially impactful to our organization.
These markers, we had license two out of our gaining. We have a long-standing relationship and collaboration with that organization has been very fruitful with the physician researchers there. We have quite a bit of ongoing research that occurs, but we've had license to them for a couple of years now. And we have worked on an abstract over the last it 12 to 18 months, have that published at the most recent ACR meeting and are just very excited about the results and the prospect of being bringing these markers to patients.
So hopefully that gives you a little sense of where they were. They've been licensed to the organization for a couple of years, but we had a heightened focus on advice, CTD, and it really brought some of these opportunities to life over the last year.
Yes, that was great algorithms and extensive Just actually a follow-up. There are kind of compatible the CAD/CAM technology or is it like you are incremental to that?
So there are three individual analytes. One of them is cell bound complement as it pertains to T cells right now, RICTD. offering measures cellphone complement on the retro sites along with B cells. This would be adding the T cell component. But then additionally, it's looking at cell bound IgG and IGM antibodies. And that's a unique aspect of this disease as well, specifically a solely. So you're right in talking about so about complement, but two additional markers are specific antibodies.
Operator
Dan Brennan, TD Cowen.
Daniel Gregory Brennan
Thank you and congrats on the quarter on. Maybe could you just walk through we haven't pulled all the numbers in yet, but just when we think about the burn for the year. We walked through the assumptions you've laid out so far. Could you just give us a sense kind of what's implied for the cash burn for the year
So we provided the adjusted EBITDA number for 2024. We believe it will be better than negative $20 million from the sum of some of the things to think about is some of where we came in at in 2023 with adjusted EBITDA of negative $17.1 million. While we're continuing to make improvements on ASP., I do want to recall, the $5 million in prior period collections that we had in 2023, they were fantastic to the business. And when it's prior period collections, that's 100% of both flows down to the bottom line from, I don't anticipate to see the same levels prior period collections in 2024.
And any commentary that you've got $75 million in revs and 60% gross margin, which is the target to turn free cash flow positive. I know you said I believe you said cash on the balance sheet at [$37.5 million] gets you into 2026. So is the implication do you think that [$37 million] or do you think the current cash balance will actually get you to that or excuse me, $36.5 million, would that get you to free cash flow positivity?
John Aballi
Good question, Dan. We haven't connected the two externally in a public forum. What we've work to do is as the business performance has improved and we've seen the runway extend, we've worked to communicate that consistently. So previously, we had said we had cash well into 2025. Now we've extended that projection into 2026.
We haven't connected the two were highly dependent on improvements in ASPI. and the slope of our progress for ASP. gains will really govern them our pace at which we achieve cash flow positivity. So that's the connection there likely need to get to an ASP. around the mid to high 400s in order for that to materialize. We're making meaningful progress. You saw it over this year. We pointed to a trailing 12 month number, but the quarterly progress is very positive as well. So that's how we look at it.
Daniel Gregory Brennan
And then a final one, just on sales headcount. Can you just remind us kind of where are we today? Is that number stable? And just give us a sense of where you are with like culling accounts to focus on profitable accounts versus beginning to be at the point where I know you talked about like most of the year, this year is still ASP accretion for the guy, but just where are you like in the field towards seeing maybe on that restrictive nature of focusing on profitable accounts, flip towards being able to grow volumes to win it?
John Aballi
If you take a look at when it really comes down to it were over 2023. We really changed our business. And I think at the core of it, the way we think about it is the insurer is a customer of ours and there are some things that they require, which can be burdensome for the ordering physician and therefore impact their desire to partner with us and patient care.
So the superior performance of advise CTD. test is still seen by around 2,400 clinicians at our year end ordering physician count, we just need to work with them to satisfy the insurance needs and in a way, which doesn't overly complicated burden their clinical practice, that's our goal.
That's what our field-based team is working on if it were no different as health care costs are increasing, those of us with fixed pricing are getting squeezed. And the practicing clinician is seeing the exact same scenario, what we're asking of them, additional medical records, more information on the requisition, some better documentation of the clinical utility of the test and how it's being used in patient care.
They don't get reimbursed for any of that. And so it's increasing their operating costs and with rising wages, this is not an insignificant ask, but the way we see it. It's a requirement of doing business in this space. It's a requirement of offering proprietary testing. We just need to get good at it as a business and in developing processes with each of our customers to satisfy insurer requests.
That's what we mean by building back over time. We saw ordering trends stabilize in Q4 within our physician base. We've seen us building back here in Q1. And so from our standpoint, we still have 40 territories spread throughout the continental US, and that's likely to not change here in the near term as.
We continue to monitor on a per territory basis, which territories are at least covering the cost per sales rep breaking even and those which are materially higher that we should split. We've done at least one analysis this past year. We look at it as kind of a biannual thing where we review each of our territories from a profitability standpoint, take a look at six month trends and then we'll adjust. But for now, 40 territories is the right footprint for us and will be likely for a portion of this year.
Operator
Ross Osborn, Cantor Fitzgerald.
Ross Everett Osborn
The guys, congrats on progress.
Bob, maybe just one for me at this point.
It sounds like ASPE. is going to be the biggest driver to achieving EBITDA breakeven. But would be curious to hear your thoughts on the OpEx cadence for this year? Is there any chance we should, but leverage on the SG&A line?
John Aballi
So Ross, the way that I'm looking at OpEx is there's no major commercial expansion, as you know, similar to the increases we've had in the past. I wouldn't anticipate anything like that right now. It's just us managing against inflationary increases on the SG&A line.
Operator
Andrew Brackmann, William Blair.
Andrew Brackmann
Yes, guys, good morning. Thanks for taking the questions.
Maybe on the new markers here. Can you maybe just talk about some of the specific steps that are needed to actually include that in the test here in the back half of the year and I guess, how should we be thinking about investment in further studies to really highlight that benefit that these might be able to provide to patients?
John Aballi
Andrew, good morning. Great question. Appreciate the opportunity to expand. So these are lab-developed tests, meaning there's not IBD FDA-approved kits available where validating these analytically as well as clinically in our lab and running those experiments. We've already performed in initial clinical validation. We have the assay up and running in our research laboratory. We're moving it and getting it clear ready.
And so some of those aspects require really getting it to a point where it operates at scale. So better processes around controls, we manufacture our own controls, for example, better processes around batching workflow. There are some IT and software changes, which really need to be made to handle it at the at the demand level. We expect here later this year.
And so it's mostly operational at this point as opposed to technical feasibility. We're well past that stage, which is a big reason why we're talking about it externally. And from a clinical validation standpoint, we have an abstract out and we're working on a formal publication likely to come later this year as well. So the initial steps have been taken. We're very confident with the performance of these markers. We have the appropriate supplier agreements and everything in place so that we do ultimately go live. We're in good shape.
Another key component to this when you bring novel biomarkers, two clinical practice, there is a huge educational burden required. And so our commercial teams have been preparing actually for the last several months in this regard, a lot of planning in terms of what materials will be needed quite a bit of voice a customer. How do we actually present the results in a manner which is easy to digest? Clinicians are busy, but also which allows them to act quickly.
So most of that has been completed. It's executing on it. So a lot of the planning phase is done on. There's still no caveats to that, but quite a bit is that that is done and then we just need to execute. So we'll have to actually complete our formal clear validations on the analytical side we'll get our publication out. We'll refine our training of our entire field-based team and then we hope to launch sometime late into Q4.
So that's really what's left in like I said from a risk standpoint, the way we view it is a technical risk of the assay working or on panning out from a clinical standpoint. We're past that in our in our expectations.
Andrew Brackmann
Perfect. And then maybe just switching gears, going back to some of the commercial activities, John, that you mentioned around sort of hurdles or requirements to really do business in this arena. Can you maybe just sort of talk about some of the specific tactics that your team might be able to deploy to either incentivize that behavior from physicians to allow them to gather that data or sort of reduce that burden for them?
John Aballi
Yes, it all comes down to reducing barriers. Obviously, you have to understand your practices at a very deep level to understand where the pain points are. And I think a big part of change management is really explaining the why behind those changes.
And to be honest with you a lot of clinicians don't really understand the revenue cycle side, what's being asked by insurers when you're dealing with proprietary markers and having to prove clinical utility of a lot of tests or tools. And so explaining that to them takes time, some people want to listen, some people don't we tried very hard not to make our problems our customers' problems pretty basic business Tennant.
But from our perspective, when you're able to explain the why a lot more downstream goes smoothly, right, You get the buy-in. So we worked hard to set ourselves up in that regard. We're very transparent with our internal team and that leads to transparency externally.
And so as we work through some of that explanation, then it comes down to execution. And what I mean by that is each practice is different. Some have some in some cases the phlebotomist handles most of the test processing within a clinician's office in some cases is front office staff and others, it's nurses and in some it's the actual condition. So you can't have a one-size fits all approach to this. You have to tailor it and to each additional into each practice.
And so there's some customization of processes there, but that makes it easier on the actual clinician. And also when we're explaining why some of this is training on what insurers are actually looking for. Insurers are really looking for was this test was the presentation of the patient which justified ordering the test and then how's the test used and how did patient management change after the test was ordered and results received. So it all comes down to documentation. And unfortunately, that's and yes, that can be a bottleneck for some practices.
And so explaining that and talking through exactly some of the feedback we get from insurers is has proven helpful. But a lot of this takes time right. And it's an it's a cyclical feedback loop, meaning we work with different clinicians, we set expectations. We help them understand the why? And then when we put it in practice, that's version one. And we have ultimately have to get us to a successful version was made and involve them getting online and partnering with us and some of the appeals process we had that happen. And that's ultimately part of our goal where clinicians clinician voices there and a perspective on the utility of the test in their practice.
So and that's really what it comes down to quite a bit of change in the office. It's a different experience. It's more akin to, I guess what some of the oncology testing is doing. But on clinicians. When they see the clinical value of the test, they're very willing to do. This is just can you make it easier? My staff I can't afford and to spend an hour of their day, completing test requisitions are pulling rep medical records or this type of thing. And so utilization tactic by the insurer. And but we're working to satisfy as I said we view them as a customer.
Operator
We've reached the end of our question-and-answer session. And I'll turn the floor over to you, John Abal for closing remarks.
John Aballi
Great. Thanks. 2023 has gone by quick was an exciting year, and I'm very proud of the progress we've made. We're working towards a more profitable business and we're well on our way. I believe we have the right strategy, the right efforts and the appropriate resources to transform our organization. Thanks for your interest in Exagen and for joining the call today.
