Q3 2022 iSpecimen Inc Earnings Call

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Good day, everyone and welcome to the icebreaker mid third quarter 2022 conference call. At this time all participants are in a listen only mode. A question and answer session will follow management's remarks. This conference call is being recorded.

A replay of today's call will be available on the Investor Relations section of ice specimens website and will be and will remain there for the next 30 days.

I'll now hand, the call every Allison.

Better relations for introductions and the reading of the Safe Harbor statement. Please go ahead.

Thank you operator, good morning, everyone and welcome to ice Askmen third quarter 2022 adult conference call.

With us on today's call is Tracy currently interim Chief Executive Officer, and Chief Financial Officer before we begin I would like to remind you that today's call contains certain forward looking statements for my management made within the meaning of section 27, a of the Securities Act of 1933 as amended and.

21 E of the Securities and Exchange Act of 1934 as amended concerning future events.

Words, such as May should project expects intends plans believes anticipates hopes estimates and variations of such words and similar expressions are intended to identify forward looking statements. These statements are subject to numerous conditions many of which are beyond the control of the company.

<unk> those set forth in the risk factors section of the company's Form 10-K for the year ended December 31st 2020 was filed with the SEC copies of these documents are available on the SEC's website at Www Dot SEC Dot Gov.

Actual results may differ materially from those expressed or implied by such forward looking statements. The company undertakes no obligation to update these statements.

Patients are changes after the date of this call except as required by law.

Now it is my pleasure to introduce Tracy clearly interim Chief Executive Officer, and Chief Financial Officer Tracy. Please go ahead.

Good morning, everyone and thank you for joining us today on our third quarter 2022 earnings Conference call.

Today I will begin by addressing some recent changes in the C suite volatile or do of our operational and financial performance for the three and nine months ended September 32022.

We then open the call for questions.

As reported in September and effective on October 25th well.

Christopher <unk>, former CEO , and Jim Moylan, former CLO and no longer with the company I would like to personally thank Chris and Joe for the important contributions they made in constructing and building our proprietary marketplace platform that connects life science researchers with.

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Confident that their vision will continue.

The board and I understood that the simultaneous departures of the CEO and CFO , coupled with mainly me interim CEO represented one of the most important changes to the company.

Especially in a public context.

Against that backdrop.

I'm pleased to report that the entire organization successfully mobilized to ensure continuity, both internally and externally and to make certain that we continue to provide superior customer service and successfully facilitate transactions across our platform.

Core business remains strong and we haven't missed a beat.

The same time I would be remiss, if I didn't express my deep gratitude to the entire asbestos team for their continued strong work and dedication to our collective vision and success.

Understanding and willingness to move forward and are confident productive and collaborative manner has been invaluable to me.

Well it has been a little over six weeks since my transition I think Kris Mike efforts to manage my expanding responsibilities as interim CEO , while continuing as the CFO .

Since my appointment I have increased cross functional team communications to help improve our execution I haven't reviewed the technology roadmap with our CIO and VP of product development.

And have green lighted projects to accelerate development timelines.

I am also held numerous one on one and group meetings with all of our employees to discuss the vision for the business and to address any concerns they may have.

These meetings have allowed me to gain valuable insights into the business and how we can improve operations.

I'm excited and encouraged by both our near and long term prospects.

We're actively pursuing several new multi million dollar business initiatives at the same time, we are reviewing the companys structure processes and resources to evaluate and identify areas for improvement.

We are laser focused on creating a runway for growth and scale.

As the marketplace, ensuring a high match rate between our research customers and our considerable network of suppliers is fundamental to our business.

My ongoing assessment and identifying opportunities for us to more effectively match specimen request to the inventory and capabilities of our supplier network. We've begun addressing these opportunities and believe that the end result will be a dramatic increase in utilization of our supplier network, which today is heavily skewed.

Towards the top 10% to 15% of our suppliers.

We began an initiative designed to dramatically reduce or eliminate supplier concentration altogether.

I expect a leveling of our network will result in higher match rate market cap and improved time to match.

Additionally, we recently initiated the marketplace onsite program to offer additional support to our bio assessment provider partners.

The job of the marketplace onsite coordinator is appealed all request and submit proposals on behalf of the provider streamlined sample related management and reducing strain on existing staff and product pipeline.

By unlocking the full value of our bio specimens supplier network.

Be able to more effectively support our research customers need.

Our sourcing critical path assessments for medical research Harken back to comments made on previous quarterly calls the supply bio specimens derived from health care providers, including Biofuels solid tissue and stem cells is what fueled medical research and investing in this effort will help drive.

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The inability of our business model and position <unk> as the Premier bio specimens procurement platform.

To reiterate our goal is to reduce supplier concentration and increase utilization by tapping into the full potential of all our suppliers. The more suppliers, we utilized less constrained our supply chain becomes which will result in more researcher with quest being fulfilled.

This year, we launched a significant initiative to reorganize our sales approach.

Taking a renewed focus on our sales funnel and positioning it to scale in a post COVID-19 environment.

To further this initiative, we have retained and revenue consultant to evaluate our existing commercial and operational structure as well as processes to determine existing shortfalls might need to shore up and improve in order to strengthen our organization.

Specifically, we are conducting a top down analysis of our commercial organization and this flows into our fulfillment pipeline. This initiatives going to evaluate all the touch points and inputs to better understand the drivers required for successful purchase order fulfillment.

We will also be developing more survey capabilities at various steps across the sales funnel to improve results.

Critical customer decision points on the top of the funnel has grown and conversion rates have improved due to the recent structural changes we discussed last quarter I'm confident that the knowledge, we gain from our customers will result in further improvements to our close rates as well as the overall customer experience.

The company remains committed to enhancing the ice specimen marketplace platform. We recently launched the open feasibility dashboard on ice specimens marketplace, which allows the player partners to review potential future research projects at anytime and initiate their interests by submitting a proposal.

The dashboard also enables precision beckman matchmaking flows seamlessly from providers directly to researchers through the ice specimen marketplace, enabling partners to engage more productively and beneficially with new and existing research projects and request.

These recent initiatives, we are aiming to provide a best in class platform for researchers and suppliers to connect seamlessly and to improve the Bios assessment procurement process to that end, we have several additional internally developed software project in the pipeline to support our efforts.

First we are improving our electronic medical records.

Typically with our first patient data integration to bring the same level of competence when locating assessment to locating patients and donors.

This project, which will accelerate the prospective collections process and reduce cost is expected to be completed in the first half of 2023.

Second.

Our technology team is currently performing an overhaul of the marketplace search capability.

We are consistently reevaluating our marketplace search functionality.

Because when a user wants to procure a bio assessment it all starts with using the search button.

We aim to establish more modern user interface standards new levels of automation.

She will help scale and major enhancements to our matchmaking algorithm to ensure the best possible matches between researchers and a considerable supplier network.

This overhaul will help to ensure the best results between researchers and life science providers.

We also expect to complete this project in the first half of 2023.

Third we are not stopping at the front end development. We are also updating our back end infrastructure to support growth and scale enhanced security and prepare for our data as a service the pilot the.

The bathroom updates and data as a service pilot are expected to be completed in the second half of 2023.

The successful completion of the data as a service pilot will allow us to validate the first mini comfortable additional revenue stream for the company.

Finally, we are using the insights provided by our supplier and researcher interaction to continue evolving our matchmaking algorithm.

As expected to result in better faster matches and streamlining the procurement process for our researchers and reducing supplier efforts.

As I mentioned previously and I'll start with the search function and we want to make certain we have best in class functionality.

Turning to our top line results.

<unk> achieved a significant record all time high milestone in the third quarter of 2023, posting to $2 6 million and non Covid revenue were 88% of total revenue.

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Fifth quarter in a row of increasing non COVID-19 revenue.

This exemplifies the durability of our core business model.

And the investments we've made to date and we'll continue to make to expand our supplier network capabilities and enhanced our marketplace platform.

Focusing on the macroeconomic environment, which remains impacted by the lingering COVID-19 pandemic.

Seems to be uncertainty about the strength of the global Asia Pacific U K and the U S economy high interest rates and a potential recession remain a concern for all market participants.

And we are closely monitoring the pace of investment transactions.

I believe that our business can be resilient through a continued economic downturn or recession.

As well as any impact from inflation.

Now, we'll move on to discuss our <unk>.

Financial results for the three and nine months period ended September 32022, compared to the same period in 2021.

We reported revenue of two 6 million for the third quarter of 2022 compared to $2 $7 million for the third quarter of 2021, the decreases in revenue for the three months period in 2022 were primarily attributable to the continued decline in sales occurred.

19 assessments when compared to the same period in the prior year.

The discussion during the three months ended December 30, <unk> 2022.

<unk> by 560 assessments of 11% to 4750 specimens compared to 5300 specimens of sessions. During the three months ended September 32021, the change in specialty mix resulted in an increase in the average selling price for assessment.

The question was $32 or 6% compared to the same prior years period.

For the three months ended September 32022, and 2021 revenue derived from non COVID-19 related investments accounted for approximately $2 3 million and $1 8 million.

88% and.

And 56% respectively.

Of our total revenue.

And 26% decrease in non COVID-19 revenue compared to the same prior year period, and an all time record breaking high of non COVID-19 revenue for the company.

For the three months ended September 32022, and 2021 revenue July assessments related to Covid, 19 accounted for approximately $322000 and $923000 or 12% and 34% respectively.

Of our total revenue.

During the nine month period ended September 30 of 2022, we reported revenue of approximately $7 $4 million compared to approximately $8 $6 million. During the same period last year the decreases in revenue for the nine months period in 2022.

Were primarily attributable to the impact of Russia, and Ukraine more.

Which shut down our supply sites in those regions and impact our ability to fulfill orders.

The start of the war and on supply side in Ukraine have mostly reopened they are operating at a limited capacity.

We also continue to experience reductions in sales in 2019 specimens when compared to the same period in the prior year.

Participant that are COVID-19 revenues will continue to decline.

And to be unpredictable, but do not have specific guidance.

Some of the session. During the first nine months of 2020 to decrease by approximately 482 assessments or 3% to approximately 16668 assessments.

<unk> to approximately 17100 and.

50 specimens, especially during the first nine months of 2021.

The change in customer mix resulted in a decrease in average selling price per specimen.

And $54 or 11% compared to the same prior year's period.

For the nine months ended September 30.

2022, and 2021 revenue derived from non COVID-19 related investments accounted for approximately.

$6 5 million.

$6 $1 million.

87% and 71% respectively of our total revenue.

7% increase in non COVID-19 revenue compared to the same prior year period.

For the nine months ended September 32022, and 2021.

Our revenue derived investments related to COVID-19 accounted for approximately $971000.

Two $5 million or 13% and 29% respectively of our total revenue.

Cost of revenue increased by 29% from approximately $914000 for the third quarter of 2021 to approximately $1 2 million for the third quarter of 2020 to cost of revenue for the nine month period ended September 30th.

2022 with approximately three points.

$3 million.

Compared to approximately.

$4 million for the same period in 2021, a decrease of 17%.

Quarter of 2022 increase was attributable to a 45% increase in the average cost per specimen impacted by the assessment of mix.

Is that somewhat.

By an 11% decrease in the number of specimens per session for the current period compared to the same prior year period.

The nine month period ended September 32022.

Decrease was attributable to a 14% decline in the average cost per specimen impacted by the specimen mix along with a 3% decrease in the number of specimens discussion during the nine months ended September 32022 over the same prior year period.

For the third quarter of 2022, we increased our cash spend for technology to approximately $1 $2 million from $592000 for the same prior year period for the nine months period ended September 32022, we increased our cash spend for.

Due to approximately $2 million on $1 3 million for the same prior year period.

The increase in spend for the three and nine months periods ended September 32022, compared to the same prior year's periods as it related to our commitment to invest in our technology as evidenced by our multiple successful technology launches thus far this year.

For the third quarter of 2022. This cash outlay was comprised of approximately $772000 of capitalized internally developed software and approximately $460000 in technology expenses that we were not able to capitalized and therefore with classified of.

Knowledge expense the remainder of the technology expense for the third quarter of 2022 was comprised of approximately $293000 of noncash amortization related to internally developed software total technology expense for the third quarter of 2022 was approximately $753000.

Compared to $544000 the same prior year period.

For the nine months period ended September 32022. This cash outlay was comprised of approximately one $5 million of capitalized internally developed software and approximately $1 $1 million of technology expenses that we were not able to capitalize and therefore.

Were classified as technology expense.

The remainder of the technology expense for the nine month period ended September 32022 was comprised of approximately $826000 of noncash amortization related to the internally developed software total technology expense for the nine months period ended September 32000.

22 was approximately $1 $9 million compared to $1 3 million.

Same prior year's period.

Sales and marketing expenses were approximately $833000 for the third quarter of 2022 compared to approximately $513000 for the third quarter of 2021 for the nine month period ended September 32022 sales and marketing expenses were approximately $2 5 million.

Compared to approximately $1 7 million during the same prior year's period. The increase was attributable to increases in payroll and related expenses external marketing efforts and general operating expenses.

<unk> and administrative expenses were approximately $2 2 million for the third quarter of 2022 compared to approximately $1 6 million for the third quarter.

2021.

For the nine months period ended September 32022, general and administrative expenses was approximately $5 $6 million.

Compared to approximately $4 $1 million during that same prior year's period. The increases were primarily related to an increase in costs related to compensation severance costs stock compensation directors and officers insurance and operating and maintenance expenses.

At September 32022, our cash balance was approximately $27 million compared to approximately $27 7 million as of December 31 2021.

This concludes our prepared remarks, now I would like to open the call for questions.

Please go ahead.

Thank you.

We will now begin the question and answer session.

You asked a question you May press Star then one of your telephone keypad.

Please note that you may need to 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 the world.

They will go.

<unk> with Craig Hallum capital.

Good morning, Jason Thanks for providing the update and all the detail maybe the first one for me there's been a lot of questions.

Comments, the past quarter or two regarding the health of the biotech and pharma markets you've touched on it briefly but I'm. Just curious what are you seeing and hearing from your customers both on the supply and the procurement side.

As far as the health of that market I know, it's primarily the small biotech and pharma customers, but are you seeing some of that impact or what could you tell us there.

So on the customer side, we are seeing that.

We're still getting projects, but they're smaller in value.

Hum, possibly more smoking rooms, with a volume of small cells.

In our opinion there.

Preserving cash they're continuing to do research, but theyre trying to preserve cash at the moment.

Got it and then I think one of the things that Jim mentioned earlier is that your 0.1 of the.

Enhancements that you are going to be making is to the search.

Capabilities and I'm, just curious as you work through something like that from a functionality standpoint.

What steps or what do you put in place to ensure that you don't have any disruption to the ongoing business.

Well, we're doing that in parallel and we're doing a lot of.

Testing, if you will in Q and.

And environmental doesn't impact so.

We don't go live until we're sure that the product is ready to go.

So there's no disruption.

Got it alright, and maybe one last one I'll hop back in the queue. I think you laid out a few different enhancements that youre going to be working on a couple of for the first half one for the second half of the year of those three what do you view as being the biggest potential driver to accelerated growth and profitability. Thank you.

Thanks, Matt for me.

The revenue stream associated with the bottle, which is something that we talked about pre IPO debt.

The proceeds that we raised in the IPO, we're going to be used to.

Develop our technology first.

Further and one of the things we discussed was our ability to tap into our debt. So we can monetize that so to me that's a really exciting thing that by the middle of next year, we're going to be doing a pilot.

Data as a revenue stream.

Yeah.

Yeah.

That's great. Thank you very much.

Thank you.

This will conclude our question and answer session I would like to turn the call back over to Mr. Curley interim.

For any closing remarks.

Yeah.

I would like to thank everyone again for joining us today.

And for your continued interest and investment.

We look forward to having follow up conversations with many of them and to seeing many of you at upcoming events and with that I think you have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect Your awards in Victoria.

Yeah.

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