Q2 2022 Lucira Health Inc Earnings Call

August 15, 2022

The.

[music].

Good afternoon, ladies and gentlemen.

And welcome to necessary Health second quarter earnings Conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.

As a reminder, this conference is being recorded.

I'd now like to turn the conference over to Lisa Smith from the Gilmartin Group. Please go ahead.

Thank you Olivia and good afternoon, everyone.

Earlier today, we see our house released financial results for the second quarter ended June 30 F. 2022 a.

A copy of the press release is available on the company's website.

Joining me on todays call are Eric Angleton, President and Chief Executive Officer, and Dan George Chief Financial Officer.

Before we begin I'd like to remind you that during this conference call. The company will make forward looking statements regarding future events.

We encourage you to review the company's past and future filings with the SEC, including without limitation the risk factors section in the company's most recently filed annual report on Form 10-K, and subsequently filed quarterly reports on Form 10-Q, which identify the specific factors.

That may cause actual results or events to differ materially from those described in these forward looking statements.

These factors may include without limitation statements regarding product development and manufacturing product potential the regulatory environment sales and marketing strategies capital resources or operating performance.

With that I'll now turn the call over to Eric.

Thank you Luisa and good afternoon, everyone and thank you for joining us and welcome to the second quarter 2022 earnings Conference call.

<unk> had a solid second quarter in which sales continued to be driven by demand for accurate and eastern views molecular COVID-19 test.

Second quarter revenues were approximately $26 1 million or 110% increase over sales in the same period last year.

Second quarter, 2022, ending cash and cash equivalents was $75 million and inventory was bolstered in advance of anticipated shipments in the fall and winter timeframe.

The anticipated dip from Q1 revenue performance is consistent with our previously stated expectations that the calendar year will be bookended based on the prevalence of influenza like illness infections in the northern hemisphere during fall and winter months.

Despite the seasonality that we experienced this quarter. We are pleased with our financial performance delivered in a quarter known to be a light performer for respiratory disease testing in general.

Throughout the second quarter, we exercised our manufacturing flexibility made.

Made global regulatory strides grew.

Grew our online selling and targeting capabilities and progressed the product portfolio.

As it relates char existing COVID-19 product, we received approvals from the FDA and health Canada.

Extend shelf life to 18 months.

As a result, we believe we are well positioned to respond to anticipated COVID-19 test demand during the upcoming upcoming winter respiratory season in the northern hemisphere with on hand inventory.

In addition, we submitted a de Novo five 10-K application to the FDA for clearance of our COVID-19 product anticipating future day, when the EUA may be rescinded.

In early July we announced that the COVID-19 test received a full exemption in New Zealand for immediate commercial use.

As the case in most countries, where we have received approval new.

New Zealand performed its own clinical evaluation prior to granting the full exemption.

I am pleased to share that <unk> products have consistently performed very well during these independent evaluations.

We are readying, the COVID-19 and flu product launch in key global markets upon additional regulatory approvals.

As previously announced the EUA for this product has been submitted to the FDA.

The early spike in influenza like illness prevalence reported from Australia during their recent winter.

The ties us to the demand that we may see in the northern Hemisphere, This fall and winter.

Response, we plan to focus our flexible manufacturing capacity, mostly on the Covid and flu type.

Test excuse me.

We are delighted with last week's announcement of the commercial rollout of the Covid and flu products in Canada with Sierra received regulatory approval from health, Canada for the sale of the Covid and flu test with a self test at home indication.

In preparation for this announcement, we built an initial launch quantity of the combo test and we plan to ship product in Canada, starting this month.

The approval in Canada enables patients and health care providers to accurately diagnose flu a flu b and COVID-19 on the spot in 30 minutes or less with lab quality results.

<unk> digital result capture transmission and integration software has been upgraded so that it now works with the combo product the ability to have an accurate and immediate differential diagnosis for these diseases enables near real time prescription initiations.

Treatment.

This was accomplished without exposing healthcare professionals to potential infection as a result of an at home testing.

We believe that we have sufficient capacity to support anticipated demand, including the manufacturer of the Covid and flu product.

As I alluded to previously regarding the upcoming Canadian launch.

Speed with which the Sara was able to create the COVID-19 and flu product speaks to the flexibility of the core <unk> technology as well as to the skill and agility of our team because.

Costly Sarah has been refining the core technology and developing assays for nearly 10 years, we benefited from past work going forward, we anticipate leveraging work already accomplished on other assays, such as <unk> and gonorrhea for example.

Longer term.

We believe that the flexibility of <unk> technology <unk>.

Paired with our commercial performance over the last several quarters demonstrates the strong financial performance.

Can be achieved with modest volumes.

In addition, substantial progress was made in the evolution of Lucy connect.

Our digital reporting and integration platform for example, operational speed and several other convenience features were recently improved we have exciting initiatives in the works that will help close the loop between test results in treatment for example, upon receiving a positive test result.

Lucy connect we will link a patient to high quality low cost providers at the patients convenience.

This in turn will result in rapid consultation prescription and drug delivery as appropriate.

Not only will this provide ease and convenience to patients at home, but it will be a value added with Sarah Service chart Telehealth partners. We are investing in Lucy connect both to improve the patient experience and also because it will be good for business.

This is only the beginning we have big plans and development to expand the functionality of Lucy connect in the near term and look forward to sharing more about this in coming quarters.

We believe the technology applied to the needs of our customers is at the core of our mission and that long term growth with a digital emphasis opens the door to diverse partnership capabilities and telehealth applications.

<unk> abuse, COVID-19 testing as a proxy for the company's capabilities in the emerging category of highly convenient testing.

Additionally, we consider ourselves as both the molecular test manufacturer as well as a digital health care company.

Bain <unk> company recently announced data on the transition and the way that primary care is delivered they reported that during the pandemic, 18% of primary care visits for virtual increasing from 1% in 2018.

The share of virtual primary care settled at around 12% at the end of 2021, much higher than pre pandemic levels and virtual health could climb to 20% of market penetration by 2030.

We believe that <unk> will play an increasingly important role.

In this paradigm shift and the control of infection and early treatment of respiratory diseases Stis and in women's health.

Accurate instrument free molecular tests.

Paired with our flexible digital platform that integrates into partner systems.

Enables convenience and ease of use.

We believe that when we look at loose Sara we are seeing stepping stones, along a path into the future.

More new products.

Expansion of the digital platform greater market awareness of the service offerings, Greater DTC penetration international expansion and decreased cost of goods are our growth drivers.

Appropriate stewardship of capital is always front of mind, we're doing very exciting things that lease era, and we've just gotten started.

As always we recognize and thank the employees.

<unk> and contractors, who execute with Sarah's mission with their hard work and enthusiasm.

What you have just heard about just not come easily despite our team's ability to make it appear so.

I will now turn the call over to Dan George our CFO for a detailed discussion of financials.

Thanks, Eric.

Please refer to our press release issued earlier today.

Many of our financial results for the second quarter of 2020.

And a discussion on and reconciliation of our non-GAAP financial measures.

Net sales for the second quarter of 2022 or.

Were $26 1 million.

A 110.

Second quarter of 2021.

Our net revenue was primarily driven by sales directly to consumers.

Businesses and distributors healthcare providers and international customers.

Gross profit and gross margin for the second quarter of 2020, 248 million and 31% respectively.

Paired to a gross loss and negative gross margin for the second quarter of 2021 of approximately $100 and 1% respectively.

The increase in gross profit and gross margin was driven primarily by increased sales and operational efficiencies gained through increased manufacturing output and scale.

R&D expenses were $10 8 million in the second quarter of 2022 compared to $10 1 million in the same period in 2021.

New product development clinical activities and validation and manufacturing activities.

Primarily drove the increase.

Selling general and administration expenses were $18 6 million in the second quarter of 2022 compared to approximately $6 1 million for the same period in 2021.

The increase was primarily related to increasing personnel related costs and third party services to facilitate commercial activities and public company compliance.

GAAP net loss was $21 7 million in the second quarter of 2022 compared to $16 2 million in the same period in 2021.

non-GAAP net loss was approximately $18 1 million in the second quarter of 2020, Q compared to $14 7 million in the same period in 2021.

The increase in net loss was primarily result of our increased operating income.

We ended the quarter with $75 million in cash and cash equivalents compared to cash and cash equivalents of $106 million at the end of 2029.

The decrease in cash was primarily related to investments made in inventory, partially offset by the closing of the first tranche of our debt financing agreement with $30 million.

As a reminder, most of our investments in our in our contracted manufacturing facility facility in the Dominican Republic had been completed allowing us now to manufacture at scale. These.

These investments include automation of certain critical manufacturing steps.

We are also investing in our lease facility in San Diego County, which will house commercial operations and other functions.

We believe we have the cash necessary to fund long term business strategy.

I'll turn the call back over to Olivia for Q&A.

Thank you, ladies and gentlemen to ask a question at this time you will need to press the star one one on you touched on.

Again Star one one please.

Please standby, while we compile the Q&A roster.

And our first question coming from the line of Brian Weinstein from William Blair. Your line is open.

Hey, guys. Good afternoon. This is griffin on for Brian Thanks for the questions.

Maybe just to start on.

On outlook.

And that Youre, not giving any formal guidance here, but maybe can you just talk about how youre thinking about the second half, but we're about halfway through the third quarter here.

We got the respiratory season coming into fourth quarter. So just any color on the second half would be helpful.

Sure.

To your point, we're not giving guidance, but I think you can look at our third quarter sequential growth.

Top line sequential growth over over Q2.

And as Eric mentioned in the prepared remarks, we're looking for a strong Q4, and Q1 that coincides with the fall and winter months.

Okay.

Hate that.

And then on the health, Canada over the counter combo approval last week, you guys already have a CE mark there just first any color on where asps or the combo test or coming in internationally and then second just bigger picture on these markets.

More nice markets to have or do you think the real drivers in terms of revenue going forward.

Hi, Griffin Eric here.

The asps.

In Canada our.

Or similar to the Asps in the U S. Just.

Converted into Canadian currency so.

About $98 Canadian for the combo.

And $84 Canadian for the Covid test.

We see.

Canada is an important part of our business going forward. So we're very pleased.

To have this approval.

And in fact health, Canada approval marks the first time in at home self test for Covid and flu has been approved by a major regulatory body. So this this was partially pulled.

<unk>, Canada.

Partially facilitated by Sarah So we're very pleased with us.

Have expectations that this will will be important to Sarah.

Okay.

And then on the pipeline.

Specifically, giving CTG leveraging past work there as an example, maybe could you just give us an update on maybe not formal timelines, but where you are in that process I think last quarter that you're undergoing some feasibility evaluation. So just any update on the on the pipeline beyond respiratory would be helpful.

Yeah, absolutely so so just as.

The COVID-19 and flu product.

Is here today in Canada, hopefully will be soon in the U S and elsewhere next the next thing to focus on is our digital offering that's going to be we believe very important to our business because it's going to enable a connection between a positive test result, and.

<unk> and treatment and making that seamless and easy to use and a <unk>.

Digital world without the need for any.

Any other instrumentation readers, etc.

We will make it extremely convenient to to users. So I would focus on that as the next step in the pipeline and we're very excited about that.

We have been continuing to work on chlamydia gonorrhea.

In other tests in the background and we'll have more color to share on those in the coming quarters.

So I don't want to get out too far ahead of ourselves here.

Perfect.

The resources into the digital effort and.

I would focus on that as the next delivery.

Alright.

And then maybe just to wrap up bigger picture bigger picture question.

Would love to just get some updated thoughts.

The future of diagnostics testing at home some lessons that you've learned over the past couple of years that are informing some of these thoughts in and why you think it was here is well positioned going forward.

All it took was this little pandemic to help create this transition.

I mean not just.

Not so facetiously.

This would've been a slower transition had it not been for Covid.

Pandemic.

But just as I mentioned that the Bain <unk> company research pointed out.

This transition is happening now.

Opening in the U S and it's happening in other markets.

Sure.

One of our <unk>.

One of our talented team members internally likes to point out that.

Back in the day, you used to have to go to blockbuster to rent a video.

And now that that's hard to even imagine when you can stream at home. That's the exact same kind of transition and diagnostic testing leading to leading to treatment.

And particularly in the case of infectious disease.

You don't want people in circulation.

And you want to be able to treat test and treat as early as possible and oftentimes that means that your feverish.

So you don't even have the energy.

To go out and be tested at that point and I have specific examples of myself and other family members who have suffered through this.

I was absolutely positive after returning on an international flight.

In July that I had flu because it felt everything like flu. It wasn't flu was COVID-19 and I knew that because that could test immediately on this era.

And then I was able to get treatment following I think thats the future.

So I think the time is now and with share is right at the right point to be able to contribute to this transition.

And to build a very strong business around us.

Alright, thanks for the questions.

Thank you.

Thank you and our next question coming from the lineup Derik de Bruin from Bank of America. Your line is open.

Hi, James This is John on for Derek.

So I wanted to ask about the cash obviously you guys are building out their inventory and that contributed to a significant burn in the quarter.

How should we think about the runway or how much runway.

How much runway do you have.

With with all of these projects coming online with the all the approvals.

Im happening internationally and domestically.

Sure so.

As I mentioned, we do believe that we have significant enough cash.

Capital to see us through our our strategic forecast and we do plan on utilizing in the back half of the year. The inventory that we've already invested in to facilitate COVID-19 sales, yes, I would just add and Jim.

Underscore that the the extension to 18 month shelf life.

Okay.

It's very helpful in that regard.

Removing risk around that inventory so.

So we're very pleased about that.

And also complements to our team on the ability to develop and execute.

Our new product on.

Minimal operating expense, so really well done internally.

Okay.

Then.

Going forward, how how are you thinking about COVID-19 versus a combo of Maxim.

Contributions to sales.

In the back half.

Yes.

Yes. So the good news is that our manufacturing is flexible enough and these products lend themselves to this flexibility. So that we can we can move back and forth fairly readily and.

And so we will plan to do so now that we have the inventory that we have of Covid product, we will prioritize building of the combo product.

And so that just gives us a lot of flexibility.

And resistance to any forecasting.

Errors.

To be able to supply the market so.

Look we're going to have to see how this rolls out it's hard to imagine that if you can test for both COVID-19 and flu that youre not going to do so because both diseases have similar presenting.

And you just don't know.

So if your if youre going to test why not test with a combo.

It's hard to imagine not there are some circumstances, where one would want to just use a COVID-19 test and so we will have product available for that.

Got you that makes sense.

Then in the quarter as well as going forward.

If youre able to give us any thoughts on what the split was between the three procedural screening and <unk> consumer.

I was curious to know that.

Yes.

You'll see in our 10-Q, I would say close to 50% of our quarterly revenue came from direct to consumer.

And then that was followed by that was followed by our.

International B to B, and then health care segments.

Got it thank you.

Thank you.

Thank you and our next question coming from the line of <unk>.

From lifestyle capital your line is open.

Hey, guys.

Just one from me more of a housekeeping question.

How are you thinking about gross margin I know you guys are kind of you said you mentioned that youre shifting manufacturing towards the combo test I guess Directionally can you comment on how we should think about gross margin moving forward and what impact if any.

Early manufacturing Alimta combo test.

We have.

I think youre going to see a really similar impact on gross margin that we've seen in the past.

Our gross margin.

And upon volumes at.

It impacts.

From overhead absorption.

Your labor rates with our contract manufacturers.

I think when you think about the business.

We're looking at being that gross margins north.

AD volume.

I think Q1 is a pretty good proxy for what it look what our business looks like from both a gross margin perspective, two two of net margin perspective, when we achieve.

Even modest volumes.

Got it I appreciate that and actually one more if I can squeeze it in just thinking about the.

The combo test.

And I appreciate it gave us the breakdown of revenues across different channels given that the combo test.

Okay.

Payable in Canada, and presumably will be available in the U S for if.

If not the majority of the season.

Are you expecting to see an increase in <unk> contracts with.

The entry of the combo test or do you still expect those sales primarily it would be driven through the DTC channel.

So.

It will be distributed among our four main channels.

What you've named and.

Whereas in Canada heavier.

Heavier.

Health care Slash government.

And then DTC.

Channels so.

I think from a modeling point of view I think you can look across the four channels in the U S. And then a more focused government healthcare DTC in Canada.

Got it okay that makes sense I appreciate it thank you guys.

Thank you.

And I'm showing no further questions at this time I would now like to turn the call back over to Mr. <unk> for any closing remarks.

Thank you Olivia. Thank you all for your time. This afternoon for your interest in this era of health. We are building on significant achievements and greatly appreciate you. Our investors we are delivering the first and only fully disposable molecular flu a flu b and COVID-19 multiplex test to market.

In Canada now and.

And hope to do the same in the U S if and when approved.

We look forward to leveraging our incredible technology to help drive a change in the future of health care and in so doing to build value for our shareholders. Thank you and have a great evening.

Yes.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

The conference will begin shortly.

As Johan during Q&A, you can dial one one.

[music].

Okay.

[music].

Yes.

Okay.

[music].

Okay.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Okay.

[music].

Yes.

[music].

So.

Okay.

Yes.

[music].

Thanks.

Hum.

Yes.

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

Yes.

Okay.

Yes.

[music].

Okay.

[music].

Yes.

[music].

Okay.

[music].

Okay.

[music].

Okay.

[music].

Yes.

Great.

Okay.

[music].

Okay.

Yes.

Okay.

Sure.

Okay.

Yes.

Okay.

Yes.

[music].

Okay.

Thank you.

Okay.

[music].

Okay.

[music].

Okay.

Yes.

[music].

Right.

Okay.

<unk>.

Yes.

Okay.

Yes.

Okay.

Sure.

Okay.

Sure.

Okay.

Sure.

Okay.

[music].

Okay.

[music].

Yes.

Okay.

Yes.

[music].

Thanks.

Great.

Sure.

Okay.

Sure.

Okay.

Yes.

Okay.

Thank you.

Okay.

Yes.

Okay.

Yes.

Thank you.

Okay.

Thank you.

Okay.

Thanks.

Great.

Okay.

Yes.

Okay.

Thanks.

Okay.

Sure.

Okay.

Yes.

Sure.

Okay.

Yeah.

Yes.

Okay.

Yes.

Okay.

Thanks.

[music].

Okay.

Yes.

Thank you.

Okay.

Yes.

Okay.

Thank you.

Yes.

Okay.

Thank you.

Okay.

Yes.

Okay.

No.

[music].

Okay.

Yes.

Right.

Okay.

Thanks.

Okay.

[music].

Okay.

Yes.

Okay.

Great.

Sure.

Yes.

[music].

Yes.

Okay.

Yes.

Okay.

Yes.

Good afternoon, ladies and gentlemen, and.

And welcome to necessary Health second quarter earnings Conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.

As a reminder, this conference is being recorded.

I'd now like to turn the conference over to Lisa Smith from the Gilmartin Group. Please go ahead.

Thank you Olivia and good afternoon, everyone earlier today <unk> released financial results for the second quarter ended June 32022 the.

A copy of the press release is available on the company's website joining.

Joining me on todays call are Eric Engelson, President and Chief Executive Officer, and Dan George Chief Financial Officer.

Before we begin I'd like to remind you that during this conference call. The company will make forward looking statements regarding future events.

That may cause actual results or events to differ materially from those described in these forward looking statements.

With that I'll now turn the call over to Eric.

Thank you Luisa and good afternoon, everyone and thank you for joining us and welcome to the second quarter 2022 earnings Conference call.

Sarah had a solid second quarter in which sales continued to be driven by demand for accurate and ease of use molecular COVID-19 test.

Second quarter revenues were approximately $26 1 million or 110% increase over sales in the same period last year.

Second quarter, 2022, ending cash and cash equivalents was $75 million and inventory was bolstered in advance of anticipated shipments in the fall and winter timeframe.

The anticipated dip from Q1 revenue performance is consistent with our previously stated expectations.

Calendar year will be Bookended based on the prevalence of influenza like illness infections in the northern hemisphere during fall and winter months.

<unk> the seasonality that we experienced this quarter.

We're pleased with our financial performance delivered in a quarter known to be a light performer for respiratory disease testing in general.

Throughout the second quarter, we exercised our manufacturing flexibility.

Global regulatory strides grew.

Grew our online selling and targeting capabilities and progress the product portfolio.

As it relates to our existing COVID-19 product, we received approvals from the FDA and health Canada.

Extend shelf life to 18 months.

As a result, we believe we are well positioned to respond to anticipated COVID-19 test demand during the upcoming upcoming winter respiratory season in the northern hemisphere with on hand inventory.

In addition, we submitted a de Novo five 10-K application to the FDA for clearance of our COVID-19 product anticipating a future day when the EUA may be rescinded.

In early July we announced that the COVID-19 test received a full exemption in New Zealand for immediate commercial use.

As is the case in most countries, where we have received approval.

New Zealand performed its own clinical evaluation prior to granting the full exemption.

I am pleased to share that <unk> products have consistently performed very well during these independent evaluations.

We are readying, the COVID-19 and flu product launch in key global markets upon additional regulatory approvals.

As previously announced the EUA for this product has been submitted to the FDA.

The early spike in influenza like illness prevalence reported from Australia during their recent winter.

The ties us to the demand that we may see in the northern Hemisphere, This fall and winter.

Response, we plan to focus our flexible manufacturing capacity, mostly on the Covid and flu type.

Test excuse me.

We are delighted with last week's announcement of the commercial rollout of the Covid and flu product in Canada <unk> received regulatory approval from health, Canada for the sale of the Covid and flu test with a self test at home indication.

In preparation for this announcement, we built an initial launch quantity of the combo test and we plan to ship product in Canada, starting this month.

The approval in Canada enables patients and health care providers to accurately diagnose flu a flu b and COVID-19 on the spot in 30 minutes or less with lab quality results.

Treatment.

This was accomplished without exposing healthcare professionals to potential infection as a result of an at home testing.

We believe that we have sufficient capacity to support anticipated demand, including the manufacturer of the Covid and flu product.

As I alluded to previously regarding the upcoming Canadian launch.

Speed with which the Sara was able to create the COVID-19 and flu product speaks to the flexibility of the core <unk> technology as well as to the skill and agility of our team.

Longer term we.

We believe that the flexibility of <unk> technology compared with our commercial performance over the last several quarters demonstrates that strong financial performance can be achieved with modest volumes.

In addition, substantial progress was made in the evolution of Lucy connect our digital reporting and integration platform. For example, operational speed and several other convenience features were recently improved we have exciting initiatives in the works that will help close the loop between.

<unk> test results in treatment for example, upon receiving a positive test result, Lucy connect we will link a patient to high quality low cost providers at the patients convenience.

This in turn will result in rapid consultation prescription and drug delivery as appropriate.

This is only the beginning we have big plans and development to expand the functionality of Lucy connect in the near term and look forward to sharing more about this in coming quarters.

Lucia abuse, COVID-19 testing as a proxy for the company's capabilities in the emerging category of highly convenient testing.

Additionally, we consider ourselves as both the molecular test manufacturer as well as a digital healthcare company.

Bain <unk> company recently announced data on the transition and the way. The primary care is delivered they reported that during the pandemic, 18% of primary care business for virtual increasing from 1% in 2018.

The share of virtual primary care settled at around 12% at the end of 2021, much higher than pre pandemic levels and virtual health could climb to 20% of market penetration by 2030.

We believe that <unk> will play an increasingly important role.

In this paradigm shift and the control of infection and early treatment of respiratory diseases Stis and in women's health.

Accurate instrument free molecular tests.

With our flexible digital platform that integrates into partner systems.

Enables convenience and ease of use.

We believe that when we look at loose Sara we are seeing stepping stones, along a path into the future.

More new products expansion of the digital platform greater market awareness of <unk> offerings, Greater DTC penetration international expansion and decreased cost of goods are our growth drivers appropriate stewardship of capital is.

All of these fronts of mines, we are doing very exciting things that Lee Sarah and we've just gotten started.

As always we recognize and thank the employees partners and contractors, who execute with Sarah's mission with their hard work and enthusiasm.

What you have just heard about does not come easily despite our team's ability to make it appear so.

I will now turn the call over to Dan George our CFO for a detailed discussion of financials.

Thanks, Eric.

Please refer to our press release issued earlier today.

Summary of our financial results for the second quarter of 2020.

And the discussion on and reconciliation of our non-GAAP financial measures.

Net sales for the second quarter of 2020.

Were $26 1 million.

A 110.

Second quarter of 2021.

Our net revenue was primarily driven by sales directly to consumers.

Businesses and distributors healthcare providers and international customers.

Gross profit and gross margin for the second quarter of 2020, 248 million and 31% respectively.

Paired to a gross loss and negative gross margin for the second quarter of 2021 of approximately $100 and 1% respectively.

Our increase in gross profit and gross margin was driven primarily by increased sales and operational efficiencies gained through increased manufacturing output and scale.

R&D expenses were $10 8 million in the second quarter of 2022 compared to 10, 1% in the same period in 2021.

New product development clinical activities and validation manufacturing activity.

Primarily drove the increase.

Selling general and administration expenses were $18 6 million in the second quarter of 2022 compared to approximately $6 1 million for the same period in 2021.

The increase was primarily related to increasing personnel related costs and third party services to facilitate commercial activities and public company compliance.

GAAP net loss was $21 7 million in the second quarter of 2022 compared to $16 2 million in the same period in 2021.

non-GAAP net loss was approximately $18 1 million in the second quarter of 2022 compared to $14 7 million in the same period in 2021.

The increase in net loss was primarily results of our increased operating expense.

We ended the quarter with $75 million in cash and cash equivalents compared to cash and cash equivalents of $106 million at the end of 2029.

The decrease in cash was primarily related to investments made in inventory, partially offset by the closing of the first tranche of our debt financing agreement with $30 million.

As a reminder, most of our investments in our comps and our contracted manufacturing facility facility in the Dominican Republic had been completed allowing us now to manufacture at scale. These.

These investments include automation of certain critical manufacturing steps.

We are also investing in our lease facility in San Diego County, which will house commercial operations and other functions.

We believe we have the cash necessary to fund our long term business strategy.

I'll turn the call back over to Olivia for Q&A.

Thank you, ladies and gentlemen to ask a question at this time, you will need to press the star one one on your Touchstone.

Again Star one one please.

Please standby, while we compile the Q&A roster.

And our first question coming from the line of Brian Weinstein from William Blair. Your line is open.

Hey, guys. Good afternoon. This is griffin on for Brian Thanks for the questions.

Maybe just to start on outlook I.

I appreciate that youre, not giving any formal guidance here, but maybe can you just talk about how youre thinking about the second half, but we're about halfway through the third quarter here and we've got the respiratory season coming in the fourth quarter. So just any color on the second half would be helpful.

Sure.

To your point, we're not giving guidance, but I think you can look at our third quarter of sequential growth.

Top line sequential growth over over Q2.

And as Eric mentioned in the prepared remarks, we're looking for a strong Q4, and Q1 that coincides with the fall and winter months.

Okay, Yeah I appreciate that.

Then on the health, Canada over the counter combo approval last week and you guys already have a CE mark there just first any color on where asps or the combo investor coming in internationally.

And then second just bigger picture on these markets. These.

More nice markets to have or do you think the real drivers in terms of revenue going forward.

Hi, Griffin Eric here.

The asps.

In Canada our.

Or similar to the Asps in the U S. Just.

Converted into Canadian currency so.

About $98 Canadian for the combo.

And $84 Canadian for the Covid test.

We see.

Canada is an important part of our business going forward. So we're very pleased.

To have this approval.

And in fact health, Canada approval marks the first time in at home self test for Covid and flu has been approved by a major regulatory body. So this this was partially pulled.

By Canada.

Partially facilitated by this era. So we're very pleased with us.

Have expectations.

This will be important to Sarah.

Okay.

And then on the pipeline.

Yes, absolutely so so just as.

The COVID-19 and flu product.

Is here today in Canada, hopefully will be soon in the U S and elsewhere next the next thing to focus on is our digital offering that's going to be we believe very important chart.

So our business because it's going to enable a connection between a positive test result, and prescription in treatment and making that seamless and easy to use and a.

Digital.

World without the need for.

Any other instrumentation readers, etc.

We will make it extremely convenient to to users.

I would focus on that as the next step in the pipeline and we're very excited about that.

We have been continuing to work on chlamydia gonorrhea.

And other tests in the background.

And we'll have more color to share on those.

Coming quarters so.

So I don't want to get too far ahead of ourselves here.

Perfect.

The resources into the digital effort and.

I would focus on that as the next delivery.

Alright.

And then maybe just to wrap up bigger picture bigger picture question.

Would love to just get some updated thoughts.

All it took was this little pandemic to help create this transition.

I mean not just.

Not so facetiously.

This would've been a slower transition had it not been for the Covid pandemic.

But just as I mentioned that the Bain <unk> company research pointed out.

This transition is happening now tap.

Is happening in the U S and it's happening in other markets.

One of our.

One of our talented team members internally likes to point out that.

Back in the day, you used to have to go to blockbuster to rent a video.

And now that that's hard to even imagine when you can stream at home. That's the exact same kind of transition and diagnostic testing leading to leading to treatment.

And particularly in the case of infectious disease.

You don't want people in circulation and you want to be able to treat test and treat as early as possible and oftentimes that means that youre feverish.

So you don't even have the energy.

To go out and be tested at that point and I have specific examples of myself and other family members who have suffered through this.

I was absolutely positive after returning on an international flight.

In July that I had flu because it felt everything like flu. It wasn't flu was COVID-19 and I knew that because that could test immediately on mircera.

I was able to get treatment following I think thats the future.

So I think the time is now and with <unk> right at the right point to be able to contribute to this transition.

And to build a very strong business around us.

Alright, thanks for the questions.

Thank you.

Thank you and our next question coming from the lineup Derik de Bruin from Bank of America. Your line is open.

Hi, James This is John on for Derek.

So I wanted to ask about the cash.

You guys are building out their inventory and that contributes a significant burn in the quarter.

How should we think about the runway or how much runway.

How much run rate do you have.

With with all of these products coming online with the all the approvals.

Im happening internationally and domestically.

Sure so.

As I mentioned, we do believe that we have significant enough cash.

Okay.

It was very helpful in that regard.

Removing risk around that inventory so.

So we're very pleased about that.

And also complements to our team on the ability to develop and execute.

Our new product on.

Minimal operating expense, so really well done internally.

Okay.

Then.

Going forward, how how are you thinking about COVID-19 versus a combo next in terms of the contribution to sales.

In the back half.

Yes.

Yes. So the good news is that our manufacturing is flexible enough and these products lend themselves to this flexibility. So that we can we can move back and forth fairly readily.

And.

And so we will plan to do so now that we have the inventory that we have of Covid product, we will prioritize building of the combo product.

And so that just gives us a lot of flexibility.

And resistance to any forecasting.

Errors.

To be able to supply the market so.

Look we're going to have to see how this rolls out it's hard to imagine that if you can test for both COVID-19 and flu that youre not going to do so because both diseases have similar presenting symptoms and you just don't know.

So if your if youre going to test why not test with a combo.

It's hard to imagine not there are some circumstances, where one would want to just use a COVID-19 test and so we will have product available for that.

Got you.

Makes sense.

Then in the quarter as well as going forward.

If you are able to give us any thoughts on what the split was between the three procedural screening and <unk> and consumer.

I was curious to know that.

Yes.

And you'll see in our 10-Q, I would say close to 50% of our quarterly revenue came from direct to consumer.

And then that was followed by that was followed by our.

International B to B, and then health care segments.

Got it thank you.

Thank you.

Thank you and our next question coming from the line of.

From lifestyle capital your line is open.

Hey, guys.

Just one from me more of a housekeeping question.

How are you thinking about gross margin I know you guys are kind of you said you mentioned that you're shifting manufacturing towards the combo test I guess Directionally can you comment on how we should think about gross margin moving forward and what impact if any.

Early manufacturing of the combo test.

We have.

I think youre going to see a really similar impact on gross margin that we've seen in the past.

Our gross margin.

And upon volumes at.

It impacts.

From overhead absorption.

Your labor rates with our contract manufacturers so.

I think when you think about the business.

We're looking at being that gross margins north.

At volume.

And I think Q1 is a pretty good proxy for what it look what our business looks like.

From both a gross margin perspective, two two of net margin perspective, when we achieve.

EBIT modest volumes.

Got it I appreciate that and actually one more if I can squeeze it in just thinking about.

On the testing.

You kind of and I appreciate it gave us the breakdown of revenues across different channels given that the combo test.

Available in Canada, and presumably will be available in the U S for if not the majority.

Surety of the season.

Are you expecting to see an increase in <unk> contracts with.

The entry of the combo test or do you still expect those sales primarily it would be driven through the DTC channel.

So.

It will be distributed among our four main channels.

<unk> NAND and.

Whereas in Canada heavier.

Heavier.

Health care slash governments.

And then DTC.

Channels so.

I think from from a modeling point of view I think you can look across the four channels in the U S. And then a more focused government healthcare DTC in Canada.

Got it okay that makes sense I appreciate it thank you guys.

Thank you.

And I'm showing no further questions at this time I would now like to turn the call back over to Mr. <unk> for any closing remarks.

In Canada now and.

And hope to do the same in the U S if and when approved.

We look forward to leveraging our incredible technology to help drive a change in the future of health care and in so doing to build value for our shareholders. Thank you and have a great evening.

Yes.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Q2 2022 Lucira Health Inc Earnings Call

Request a DemoDemo

LHDX

Lucira Health

Earnings