Q2 2023 Olink Holding AB (publ) Earnings Call
Okay.
Okay.
Good day, and thank you for standing by welcome to the pro.
Oh mix Q2, 2023 earnings conference call at this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising you had just raised to withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your speaker today John Medina.
V P of Investor Relations and capital markets. Please go ahead.
Thanks, Judy and good morning, everyone. Thank you all for participating in today's conference call.
On the modeling we have John Hymer, Chief Executive Officer, Paul Raymond President and Oscar Yung Chief Financial Officer.
Earlier today <unk> released financial results for the second quarter ended June 30th 2023, a copy of the press release and an updated corporate presentation are available on the company's website.
Before we begin I would like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the U S. Federal Securities laws, which are made pursuant to the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1095.
Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.
Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors.
For a list and description of the risks and uncertainties associated with <unk> business. Please refer to the risk factors section in 'twenty or 'twenty F Commission final number 001 Dash zero to 707 filed with the U S Securities and Exchange Commission on March 27, 2023, and in our other filings with the SEC.
Urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.
Also in our remarks or responses to questions management made mentioned some non <unk> financial measures.
Conciliations of adjusted gross profit and EBITDA constant currency revenue growth and certain other non <unk> financial measures to the most directly comparable <unk> measures are available in the recent press earnings press release available on the company's website.
This conference call contains time sensitive information and is accurate only as of the live broadcast today August nine 2023, only disclaims any intention or obligation to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise, except as required by law and with that I'll turn the call.
To John John .
Thank you John and good morning, everyone and thank you for joining <unk> second quarter 2023 earnings call.
I will begin with highlights of the quarter and recent progress, including our launch of explore Ht and other innovation with OLED panel.
I'll turn the call over to Karl to provide more details on our commercial results explore HD and outlook. Following that are scheduled to discuss our financials.
All in so continued success some business momentum in the second quarter from high Plex to low plex, our reach within customer labs around the world continue to expand driven by storm storm externalization with both explore and signature.
We navigated through a challenging external operating environment, which in combination with our new product launch pushed our revenue seasonality to be more back half weighted as indicated earlier the year.
Overall, we continued to make expected and solid progress on all major strategic objectives.
As we entered the second half of the year all in its commitment to transformative innovation entered a new chapter with the launch of explore HD.
Explore 15 36 next door 30, 72 were both incredible innovations that helped launch the next generation proteomics market. While also laying the foundation for all links needed chip leadership in July we launched explore Ht to usher in a new era of proteomics, increasing our ambition, while doing so and <unk>.
Proving up on every major signing feature of <unk> 72.
We increased the breadth and depth of the library to 5300, plus validated protein outpace the majority which belong to <unk> yields.
Yielding an 80% increase in unique assays.
H D. Also has seven fold higher data throughput and a fourfold sample throughput that is scalable from tens to millions of samples.
A six fold reduction in components with a 10 fold reduction in boxes and 90% reduction in plastics.
Significantly reduced cost per data point, including lower sequencing and labor costs.
A simplified workflow.
All while maintaining our industry leading data quality.
The power and capability of explore Ht seemed almost unthinkable just a handful of years ago, and we are very proud to offer a product with this level of performance to empower new discoveries in healthcare.
Carl will discuss explore HD, it's launched in greater detail. So.
So I will say that it's been eagerly anticipated by customers and we believe the initial launch period is going remarkably well.
We expected explore H T will help further cement our market leading position by demonstrating our commitment to high quality product innovation.
In software and our data ecosystem. We also made strong progress with Olympic insight by significantly expanded its normal ranges resource with data from two large cohorts.
This includes data from more than 52000, UK biobank samples and that subset of data from the China <unk> Bank one of the world's largest prospective cohort studies with more than half a million participants.
No proceeds can help individuals is a critical biological problem. The question what does normal look like is a fundamental one victor remains largely unanswered and answer some needed across a myriad of disease states to learn what is not nor.
Yeah.
When one considers variables in human populations that says ethnicity age and sex and the diversity of the data pool, the quality of the data measurement and the competence of the data analysis become critical.
Oh like insight enables all of these.
In the process of driving multiple new use cases across customer R&D.
As a complete unique dataset, we believe all link insights normal ranges resource represent the most extensive collection of proteomics data of its kind and this is only the beginning.
Oh link insights user space and data pooled both expand over time it is value will increase dramatically for customers within the <unk> ecosystem.
And can be further enhanced through advanced data techniques like machine learning and algorithmic approaches.
Our mind share within the scientific community continued to grow during the second quarter as well late last year, we reached a milestone of 1000 peer reviewed publication, citing the use of pega technology our feet more than five years in the making.
Today less than a year from that impressive achievement, we've exceeded 1300 and expect to see the rate of strong scientific productivity to continue only.
Oh Lincoln <unk> have a growing presence at major medical meetings as well, including the European Society of Human Genetics Conference and the Alzheimer's Association International Conference in June and July respectively.
We believe <unk> culture of Ceaseless innovation has led the industry's broadest and most well positioned product portfolio today across high to low plex and with end to end workflow solutions. The engine are all linked success is stronger than ever and we look to the future with even greater optimism.
I'll now turn the call over to Karl to provide more details details on our commercial efforts in the second quarter. The explore HD launch and what we're seeing in the market currently.
Thank you John revenue of $29 4 million. During Q2 was comprised of $10 5 million in kits revenue $15 5 million and analysis services revenue and $3 4 million in other total revenue on a reported basis grew 7% year over year with both explore and target.
Contributing to kits growth that was near 50% second quarter kit mix was 36% of total revenue versus 26% a year ago and down sequentially from Q1 2023. This sequential trend was expected and we remain on track with our goal of achieving 50% kit mix for 2023.
Explore revenue totaled $18 2 million, representing 62% of our total revenue in Q2 and 68% on a trailing 12 month basis.
Was another strong quarter for explorer externalization with 11, new sites and the total reaching 74 at the end of June . These sites in aggregate represented nearly $1 3 million in annual sample volume potential and even greater potential when considering the ability of customers to upgrade to explore Ht a process that is now underway.
For many customers. We also achieved approximately 700000 and average customer pull through during the 12 months ended June 32023. This pull through remains healthy and the sequential quarterly decline was driven in part by the expected lower kit mix in Q2 versus Q1 of this year.
On instruments, we delivered 15, new signature Q1, hundreds to customers during the quarter, reaching an installed base of 132 geographic highlights included very strong performance from APAC led by China, and Japan with APAC revenue nearly doubling year over year. In addition, while reported revenue growth in EMEA was negative and.
Q2, once again due largely to the high Plex biopharma market trends in the base business improved from the first quarter also when adjusting for UK BB revenue in the second quarter of last year EMEA grew more than 15% year over year in Q2 of 2023.
Customer activity more notably with Biopharma customers continued to be impacted by the macroeconomic environment, which we previously cited.
The result has been an increase in deal friction that has lengthened our sales cycle and impacted timing of customer purchases, which has been compounded by customer anticipation of the recently launched explore H T. The aggregate result on our revenue was that several late quarter orders that were pushed into the second half of the year, particularly in.
The Americas, where year over year growth in the region is expected to rebound strongly in Q3.
Our academic customer market continues to perform more strongly than the biopharma market and grew close to 30% year over year setting temporary factors aside more recent customer conversations have been constructive and appetite for our products on a global basis continues to be robust with investing in next generation proteomics a priority.
As usual execution from our commercial team remains very strong and we are confident in our pipeline for the rest of the year, we have seen essentially no change in our high win rates and reconsider the recent launch of explore Ht, we anticipate our commercial motor will expand over time.
While we considered explorer three K to already be the best product in its class explore Ht improves upon every major product feature of the customers have been asking for significantly increased flex much higher sample throughput and data throughput that enables true population scale proteomics smaller <unk>.
Our mental footprint reduced sample size requirements lower cost per data point and less labor all while maintaining our industry, leading data quality that is available plug and play for nearly all existing explore users.
Let me provide more detail on our early commercial efforts with explore H T. There was tremendous anticipation for the launch in the first few weeks of its introduction give us even more optimism yesterday, we announced that the Baylor College of medicine Human genome sequencing center is adopting explore Ht and theyre among today's initial H.
Adopters. In addition, there is already a substantial and growing explore ht pipeline across all our major regions with numerous requests for explore upgrading and de Novo Ht installed all from customers and prospects across Biopharma, and academia and government, providing significant momentum as we head.
The second half of the year the spirit of innovation that all linked remains incredibly strong and explore H T is just the latest in a series of new product launches since our IPO, which has included explore three K signature Q1 hundred all link insight in OLED Flex, we continue to strengthen our human capital as well ending the second quarter with <unk>.
667 employees, including 224 full time employees on the commercial team to expand upon our strong internal R&D capabilities, we're actively monitoring external opportunities, including tuck in M&A that could augment our antibody antigen development and supply chain capabilities.
Now to our outlook, we are reiterating our 2023 revenue guidance range of 192 million to $200 million representing growth of approximately 37% to 43% on a reported basis, which incorporates a view of our overall sales pipeline and our strong opportunity with explorer Ht, which is balance.
By the ongoing macroeconomic headwinds and deal friction OLED also expects its revenues will progress along with seasonal pattern weighted more towards the second half of 2023 than in recent years and the fourth quarter, specifically, but with fundamentals that continue to be positive overall I will now turn the call over to Oscar to provide additional.
Financial details.
Thanks, Paul and Hello, everyone.
As a quick reminder, that tomorrow.
Participating in the Canaccord Genuity annual growth conference in Boston.
Chuck will be hosted at 11, a M eastern and we hope to see some of you there.
Second quarter revenue growth was 7% on a reported basis on a constant currency basis.
So when adjusting for UK biobank revenue in the year ago quarter.
Q3 total revenue in EMEA revenue growth.
Revenue, both grew more than 50% year over year.
In addition, we reported adjusted EBITDA of negative $11 6 million versus negative $7 9 million in second quarter of 2022.
As Todd discussed there was another robust quarter for externalization.
Average customer pull through for explorer kit customers over the past 12 months remains strong.
We continue to expect variability quarter to quarter through which could be further impacted by our customer spending seasonality, though we anticipate continued growth over time.
Contributions from explore and targets second quarter TTS revenue grew 47% to $10 5 million as compared to $7 1 million in the second quarter of 2022.
Service revenue for the second quarter was $15 5 million versus $17 9 million for the second quarter of 2022. This brought the second quarter product mix.
Product mix had a 6% kits and 53% services shifting more towards services from Q1, as we expected and looking into the remainder of the year. We continue to expect mix to be 50% for 2023.
Other revenue was $3 4 million compared to $2 5 million for the second quarter last year.
By geography revenue during the second quarter was $12 nine in North America, 11, 9% EMEA at $4 $7 million in China and rest of the world.
Consolidated adjusted gross profit margin was 62% during.
Q2, as compared to 6% to 5% for the second quarter of 2022.
Adjusted gross profit margins for kits plus 81% for the second quarter of 2023 as compared to 91% for the second quarter of 2022, the decrease by <unk> <unk> due to increased supplier cost and logistic expenses, but additional impact in the second quarter from components scrapping that we expect will be transitory.
In Q3, and Q4, we expect kits margin improved sequentially.
And it is over the long term, we continue to see strong opportunity gross margins to improve as we increase our own content on the platform.
Adjusted gross profit margin for novices services was 56% as compared to 58% in the second quarter of 2022 with improved efficiencies offset by increased component scrapping there will be expect to be transitory.
We can say that Q3 and Q4, we expect service margins will improve on a sequential basis adjusted gross profit margin for others was 20, 27% in Q2 2023 as compared to 45% for Q2 2022.
Total operating expenses for the second quarter were $36 3 million as compared to $31 7 million for the second quarter of 2022.
The increase was largely due to expansion and investment into the overall OLED organization.
Operating expenses are broken out as follows.
<unk> expenses were $12 6 million versus $10 6 million for Q2 2022 administrative expenses were $15 8 million for Q2 2023 versus $14 million for Q2, 2022, and R&D totaled $8 1 million versus $7 3 million for Q2 2022.
Net loss for the second quarter was $8 3 million as compared to a net loss of $4 8 million for the second quarter outside of 'twenty two.
Net loss per share was <unk> <unk>.
Net loss per share of <unk> for the second quarter 2022.
In the second quarter with $150 million in cash as we consider our options to further accelerate investments into strategic internal initiatives and the evaluation of external opportunities. We will remain disciplined with the use of our balance sheet and expect to operate.
Within our previously issued profitability guidance.
In addition to reiterating our 2023 revenue guidance <unk> believes it will return to profitability. This year as measured by adjusted EBITDA. Looking further ahead as we completed a strong launch of exploits.
A very strong competitive position and our early days of penetrating the next generation proteomics market with the exception of room for growth.
At this point, we will open up the call for questions operator.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster one moment.
And our first question comes from Kyle Nixon of Canaccord Genuity. Please go ahead.
Hey, guys. Thanks for taking the questions.
I guess on the reiteration of the 23 guidance good to see that it does obviously imply pretty pretty significant our healthy step up in the second half of the year I'm just kind of curious what you are assuming they are baking in in terms of delays in our friction in biopharma.
I guess internationally, China is not an issue, but are you confident in EMEA kind of having strength going forward and then finally, maybe for <unk> on the gross margin I mean, how high above historical trend rate could that get to given this soft quarter that you just had.
Hey, good morning, Kyle.
<unk>.
Thanks for your question. So, yes, so as we sort of alluded to.
Bode well in the form of script and in our earlier conversations right. So.
Yes, we.
Yes.
Our extremely excited as you can hear all the launch of explore HD.
We had.
Quite a significant number of customer discussions that we value very highly.
So we pushed some of the business from the first half of the year into the second half of the year. So these discussions have been ongoing for quite some time right and that is why we feel.
Good where we're at or very optimistic and despite the softer quarter.
So this is really from our side like.
In our planning Randy is that okay.
We're launching explore HD here very very early in the first half of the.
In the beginning of <unk>.
July .
So.
Taking all of that into account the pipeline that we already see growing or the customer interaction and discussions we have we feel very good where we're at and then obviously maintaining our guide.
So I don't know Carl Oscar if you want to add to that.
Yes. Thanks.
Good morning, Kyle it's Carl.
I think as John noted, we sort of considered all of these factors, including the health of the pipeline.
Early and very very positive reception of explorer HCM and we launched just July 12th in already.
<unk> had been <unk>.
Tremendous to say the least.
So yes, so we feel good about that and we've considered of course as noted in the commentary.
Some of those macro headwinds that exist out there.
While there is pockets of friction I think it's also important to note Theres also.
Pockets of strength and optimism as well.
In the marketplace and we're seeing that.
That positivity.
Carry through we believe in the second half and we see that reflected in our pipeline that are in our view in the second half.
Okay that was great. Thanks, so much guys and then Oscar quick one for you I just want to confirm I think you had mentioned this at the end of your prepared remarks, but.
Again, given the margins here.
Our path to adjusted EBITDA positivity at cash breakeven I mean, all of those targets remain in place right. There is no risk of those at this point correct.
No so I think.
Previously discussed and that's sort of John mentioned, I think sort of largely sort of the year as sort of unfolding as expected I think we pointed earlier through the year.
Sort of back in gear in terms of revenue seasonality and with that sort of come towards the seasonality.
Profitability profile, both on the gross margin side on the sort of EBITDA side. So as we look to the full year.
<unk> sort of kicked margins into sort of.
Mid eighties and service margin.
What sort of a six handle on them and then sort of a total sort of corporate gross profit margins that are close to or above sort of 70%.
And reiterating the adjusted EBITDA profitability for the full year, so that's sort of very much intact.
Okay Awesome I forgot to ask.
Before I hop off.
Unexplored Ht congrats on the launch there sounds good great ramp.
The ramp so far any thoughts on where pull through could get to how high above 700, 800, K you can get to overtime, and then which customers are getting what customers are interested in and thats relative to.
The three K basically explore and could we possibly see an acceleration in external relations given how robust this new kind of kidding platform is.
Yes, all good questions and that the average pull through number is something we often discussed the write them. There it's very difficult to predict obviously explore a key piece.
A significant improved improvement in throughput Thats as I stated in my script. So obviously that opens up for even higher and you'll pull throughs, but.
And I don't want to speculate on those numbers. So the only thing we can very clearly state is that the.
Throughput of HD, it's fourfold, what the current export <unk>. So, it's obviously sets up a meaningful.
The possibility.
Possibility of increasing that so, but what we'll see how that will play out.
And then in terms of adoption I mean, most of our customers, where I would actually say all converted from explore a 15, 36% to three K and so we're expecting most in all of our customers also to convert over to the HD and we know that if they are rounding longitudinal project sort of studies.
They don't want to change platform in the middle of a programs though.
And obviously <unk> will be around for some time.
But overall, we really think most customers.
On to the HD platform.
<unk>.
With this extreme innovation that's done again in the simplification of both the product itself and its workflow, it's really really dramatic so already now early mortgage peer we already have customers that sort of declined to three K platform.
Now.
On boarded on the HD platform due to it.
Simplified workflow so yeah, no great great product and a fantastic start and it's going to be very meaningful to us as we look ahead.
Great. Thanks, John It sounds promising thanks, guys.
Scott.
Thank you one moment for our next question.
And our next question comes from Puneet <unk> of <unk>.
<unk> partners. Please go ahead.
Yes, hi, guys.
John Oscar Carl Thanks for taking the question so.
The first one is really on the HD launch.
It seems like you're.
You're clearly excited about the launch here.
The product.
Appears very powerful.
Would love to understand how much of the shift if I may say from <unk> into the second half so to speak where the revenue is because of the market sort of pausing or freezing ahead of the HD launch and adoption.
I would like to know if it was sort of what percent of explorer customers are waiting or holding their orders <unk> orders in order to place a five three K H T order.
<unk>.
This is a phenomenon that frequently happens with your analytical backend instrumentation.
Aluminum <unk>.
But this is not something we have seen are familiar with.
On the OLED side, so maybe just walk us through that help us understand sort of what's happening as far as the customer orders and the behavior there.
Explore HD launch.
Good morning, Puneet, thanks for good questions.
Yes, so I mean, how.
We operate with.
Our customers right.
Obviously this is a very close relationship that you have and when in particular across both academia Biopharma, if we call. It the population health segments of our market.
And they're not around them instead of running project. This is a process that goes underway.
Overall planning overtime, so obviously I mean, we.
We put a lot of effort into building those relationships for a very long time and hence.
Some of those.
Programs that that Jeff referred to were happening in the first half of this year, where we then.
You had some information of what's coming so this is careful planning and we're not going to share with you exact percentage or dollar amounts or whatnot, but.
Heard on the script right.
Obviously, there were some orders that.
It will be pushed into the second half of the year.
Because that was the better decision for the customer.
And then.
And with those discussions that we had before and now after the launch I mean, we are as you heard again right very very excited about the customer end markets reaction to the HD product and that's why we're reiterating our guidance, so maybe I'm not sort of specific.
Asking asking your question in terms of.
Actual dollar amounts of order sizes or percentages, but.
But I hopefully you can hear from sort of.
The narrative here.
<unk>.
And this was sort of expected from us and that we believe we are sitting in a very good place.
And yes, that's why we are reiterating our guidance for the rest of the year.
Yes.
I can just play Scott go ahead.
Now, let me just sort of adding to that and I think sort of in terms of looking at.
I think we have a very sort of clear sort of early in the year, that's sort of our seasonality this year, but sort of be more similar to 2021% to 2022.
2021 with it in a year when we sort of launched explore three key late in the year.
I think sort of looking sort of seasonality profile and sort of comparing that to sort of the implied profile for this year.
I think those are very similar to us to try and sort of understand sort of the build up for the rest of the year.
Got it makes sense.
John just maybe a follow up for you and maybe for Carl too I mean.
What are what can five three.
We're exploring HD do for you that.
The <unk> product.
And maybe what I'm asking along the lines of are there customers, who are waiting to do a larger studies here.
Four four H T or they can utilize each day and leverage and do those studies that they couldnt do before potentially.
Our experiments they couldn't do before and then just one small one that I'll just wrap it up in this question.
Could you.
We grew their tools companies haven't grown throughout the quarters.
This quarter, China has been a pinpoint so you seem to be doing well Derrick if you could elaborate a little bit on that too. Thanks. So much.
Sure Puneet.
Yes, so I mean, we've completely reengineered and redesigned Ht over three K. So if we would have sort of continued with the old three K designed into.
Well above 5000 assets, we would be looking at like 128.
Pro tubes or volumes in product and here.
Brian that we had increased multiplexing down to 16 tubes.
So just imagine.
That.
How much simplified.
The product itself.
And with that simplification and higher multiplexing, you will only need to run the sample one instead of several several pipe. So it would have continued.
<unk> explore design, we would basically run every sample 16 times now youre going to run at one.
So and keep in mind, it's the exact same automation and setup.
For any explore lab.
So it's very very easy to move into HD promise both repaid so that is sort of the numbers that we're referring to with the product design itself with keeps us at a four fold increase in throughput if you take into account almost doubling the number of assays eight six times the throughput so.
This has been obviously very thoughtfully designed.
From our perspective based on close discussions with the market, we see appetite across academia Biopharma and if we call. The population health studies significant cords and so being able we know this product is really open.
Being up if you want to run as we said the full UK biobank or projects of that scheme, you cannot run that basically within the year at the back end of that we invested significant in the date that QC and.
In software development. So we also have designed the full product not only sort of the physical parts, but also software support.
<unk> got two.
To be able to run and execute.
Those significant scale and size that population health programs and whatnot. So hopefully that will help you sort of get a better perspective of the.
The dramatic.
Improvements that we've done from <unk> HD.
On the question on China, Yes, I mean, obviously, we when you compare us to many out there is likely I mean, we obviously start from smaller.
Starting points in terms of dollar revenues right. So we are extremely impressed about our Chinese team and their success in the market and we are now that they've been executing extremely well so.
But that we're starting off from small numbers. So we're not.
Facing maybe what other companies that already have a significant business there, but nevertheless.
They've done fantastic. So I don't know Carlos if you also want to add something on China or HD.
Yes, I'll just I'll just reiterate what you said, John I think I'm exploring T. You captured it well I think it's much more than the content.
It's sort of what the platform enables with all of those innovations.
That are significant and we've only touched on a few.
Improved all facets, including software the way we do QC.
So the list goes on and on which just enable the.
The market to adopt the technology, even that much more easily.
And the content is certainly important and people want more high quality assays, which is what we deliver so we were very precise in.
And the effort to deliver a lot more high quality content for our customers and I think thats.
I think that will be certainly a catalyst for free.
Or even more interest there is no question there and then China you captured it well I would only add that.
We benefited from a little bit.
Still in Q2 from the instruments stimulus program.
That had been in China that have since discontinued, but otherwise I mean, just fundamentally yes, we have a fantastic team that's executing very well I think it's really the.
Statements.
And so yes, so we benefited greatly from it and I think that also just sort of reflects the global trend of next generation proteomics really.
Being significant thats not.
Our regional or market specific opportunity.
Quite broad across the globe.
Yes.
Okay. Thanks for highlighting that Karl I skipped over the validation part, which is obviously crucial and so we're taking it so much for granted but it's really worth mentioning right. So we are doing.
Identical.
Validation on each and every assay puneet that we've done across any target product or explore 15, 36% to 30 72, so each and every of the 5300 plus assets haven't gone through a single plex validation. So yes.
To ensure the highest data quality.
Possible.
Very very impressive.
That's great Thanks, guys and congrats on the HD launch.
Thank you.
Thank you one moment for our next question.
And our next question comes from sung <unk> Nam of Scotiabank. Please go ahead.
Hi, Thanks for taking the questions.
On the Baylor College of medicine adoption congratulations on that.
Curious if you guys have a sense of whether all of that project.
It's implementing more protein proteomic profiling routinely.
And if you could kind of talk about what's going on in terms of your pipeline for other population scale.
Project that might be ongoing that might incorporate proteomics profiling as well.
Great Tim Carl you can take both of these rate, yes, absolutely as Sanjay good morning.
Good morning, Yes Baylor.
Taylor. Thank you yeah, I think thats yet another one of the top genome centers in the in the U S and the world.
Adopting the platform. So we're super excited about that.
I'm not going to comment on any particular projects that we haven't made.
Public yet.
But I think similar to prior comments.
Nothing has changed there I think the appetite for many of these population scale studies is very strong.
For proteomics and those conversations continue to.
Continue to evolve and expand and obviously explore Ht is.
As John was talking about because the innovation as well beyond just adding more proteins.
Is yet again changing the conversation.
Being able to contemplate now.
A study on the scale of.
500000, a million samples with the kind of throughput that we can do now is.
It is incredible to consider in how short period of time that can now be executed which is I think a very exciting.
Proposition for the market. So we're very excited and those conversations again, we launched less than a month ago really but all of those conversations have now been and are being re engaged in light of a very.
<unk>.
Significant product introduction here.
Great. Thank you.
Then just one other one on the signature placement and revenue pulse you will see.
Seeing a sequential step down in terms of placements, but a significant step up in terms of the revenue pull through based on my calculations.
Just wondering kind of if you could talk more about the <unk>.
Dynamic there. If this is kind of more at the normalized that placement rate and then kind of it.
Revenue pull through at this level would be sustainable going forward.
Just a question about the second tier and mid Plex or were you asking about the <unk>.
Hi, Plex as well.
Just the net flat yes.
Yes, yes no.
Very happy with the placements in.
In Q2 met expectations for the first half.
Really tremendous and know that we've talked about this obviously is explore it gets it gets a lot of airtime, but again strategically very important for us. So we're really happy with that we have a very strong pipeline.
Going forward and that revenue pull through is.
<unk> to be continued to be good there.
We had good kit growth again as noted in in Q2, so we're continuing to see positive effects the growing that installed base of signature instruments.
So we remain.
Really positive on the outlook for the mid Plex business as well.
And yes, those placements is continued to be.
<unk> robust and we expect that to continue in the future.
Sounds great. Thank you.
Thank you.
One moment for our next question.
And our next question comes from Matt <unk> with Goldman Sachs. Please go ahead.
Hey, good morning, Thanks for taking my questions.
Just a question on sort of the back half growth and then I have a follow up on longer term margins, but just kind of two elements.
In terms of giving you confidence for that back half growth I know that when you launched Ht you had mentioned that that launch is already baked into the current guide, which you've maintained but just given sort of the positive dynamics that you've seen in the launch in and sort of some of the color that you've given us.
Some of the confidence in the back half that the HD launch I realize it's only been about a month, but that Ht launches going far better than your initial expectations and therefore that actually gives you confidence in the back half and then.
The second element to this question is.
Understanding the orders get pushed into the second half, but as we get into Q4 is there an element that <unk> seen historically in terms of budget flush in the need for your customers to spend there.
It puts orders last at a risk of pushing from Q4 to Q1 relative to say Q2 to Q3.
Yeah, Hey, Matt Good morning, Carl.
Some of that yes.
As noted in that in that second half.
Outlook in our sort of full year guide, yes, we've sort of the optimism for our explorer HCM and we knew it was going to be a big hit so we contemplated that when we thought about our year.
And Thats certainly measured with we knew we were entering.
Some stronger economic.
Economic headwinds coming into the year as well. So so it's all in balance I guess is the way we're looking at it right now.
So that that doesn't change again as noted our guide for the full year, but we certainly expected it to have a very part.
Yes year end flush I mean for sure like every year, we're relying on a certain amount of that sort of typical yearend spend.
Yes.
The degree of that is yet to be seen of course, but again I think we sort of contemplated in risk adjusted and we look at our.
At our pipeline and so on and we think that.
We're in we're in good shape for the second half of the year.
And yes, I think due to that fact I think when.
When budget needs to be spent within.
In a year calendar year or fiscal year that does tend to mitigate some some slippage.
So yes, we hope that will be of course, a positive factor as well.
Once we come to come to Q4, so again overall, we feel very positive and Ht is most definitely a part of.
That optimism, especially sort of the early signals that we're getting just in that.
In this past month.
Thanks for that and then just as a follow up after you mentioned in your prepared comments that.
In regards to the kit margins that over the long term you kind of continue to see strong opportunity for those margins, but on the back of that you are looking to improve.
Those margins by increasing your own content on the platform could you just kind of flush that out a little bit more in terms of the <unk>.
<unk> and sort of development of margin expansion due to the increase of content on the platform and what that could mean.
Yes, so I think as we sort of previously discussed and so I think sort of the sort of short to midterm, rather than we're thinking about that sort of sort of mid eighties.
So this year is sort of.
Largely progressing sort of along the lines of sort of those expectations, but then over the long term, but this is sort of.
Several years out as we look to sort of increase the on content off the platform.
That will sort of push push the margins back perhaps to sort of a territory, where we saw where we've sort of been historically and if you compare it to sort of.
22% in 2021 and sort of prior to that.
But again that is sort of a multi year perspective on that sort of development.
Proceeding according to plan.
Got it thanks very much.
Thanks Scott.
Thank you one moment for our next question.
And our next question comes from Josh <unk> of Morgan Stanley . Please go ahead.
Hi, This is Hugo on the call for Tejas.
Starting with.
First question on Ht, how are you pricing HD versus explorer three K and somewhat related to that are there any differences in margin for HD product versus <unk> that we should be thinking about and then also well.
While it's still pretty early would you speak on what Youre seeing in terms of elasticity of demand for those who started to use HD.
Hey, Good morning. This is Carl I'll take the first part of that.
That question so.
Yes, HC pricing I mean, it's roughly.
About a 20% premium.
Over explorer 30 72.
That said part of the innovation, which is important is actually the operating cost, meaning labor and ancillary reagents and so on it is actually a reduction in.
And cost per sample so.
The incremental cost of an experiment.
Is it significantly greater for our customers when you consider cost of experiments, so thats a big positive.
In this product.
I'll let.
Oscar comment on on the margins, but as far as the elasticity.
It's.
We've been launched less than a month, but I think more of the comment there is the.
As we expect actually just <unk>.
Great demand there so far.
Again in the context of what I stated in terms of pricing and then total cost per experiment Amit the product is being received extremely well I mean the value we're deriving from.
From all of the benefits of the product as we highlighted.
No.
It's a significant step up overall and I think that's being recognized by our customers.
Which is a really positive statements in terms of again customer reception and then Mark maybe you want to comment on the margin bit.
Thanks Ralph.
Yes, so on the margin I mean, the biggest sort of impact on sort of improvement, we sort of see sort of the potential on the service side.
If you contemplate the.
The increasing throughput and sort of the overall cost reduction into workflow and efficiency.
So bill.
Very excited about that and sort of how that will sort of improve the margins on the service side as we consider sort of the second half of the year and in particular sort of.
2024 and beyond.
Great. Thank you for that color.
Then.
On the.
It seems like from your opening comments the academic end market clearly is holding up and the challenging macro compared to the Biopharma customer segment. How are you thinking about that budget flush dynamics at yearend, particularly by the customer segment between academic and Biopharma.
Yes.
Year end budget flush tends to be more of a.
Pharma dynamic biopharma dynamic.
And again, it's hard to know.
Sort of.
And Ah predict into the future, but as typical I mean I've been in this industry almost my entire life.
I think even during some challenging times. This is a dynamic that that tends to exist.
And some groups need to.
Need to expand their budget for the full year so.
Again, and as I noted.
The the headwinds even sort of you have heard in our peer groups talk about in the Biopharma segment. There is pockets of headwinds is maybe a good way to describe it because.
You can't paint all accounts with the same brush.
So again, we remain positive as we look at the second half of the year and we're paying close attention to customer conversations.
And Theyre planning, but the.
Listening to the tone of those conversations and the building of the pipeline and the.
Expansion, we're hearing in terms of ambition levels to adopt next generation proteomics.
<unk>.
Again quite optimistic for.
We'll we'll see in the second half here.
Thank you for taking our questions.
Thank you.
Thank you.
Thank you I would now like to turn the conference back to John <unk> for closing remarks.
Thank you for joining us today and for your interest in our link we're excited about the future about what the future holds and we look forward to keeping you all updated on our progress.
Great day, everyone and thanks again.
This concludes today's conference call. Thank you for participating and you may now disconnect.
[music].
Okay.
Yes.
Okay.
Okay.
[music].
Sure.
[music].
Yeah.
Yes.
[music].
Yes.
Yes.
[music].