Q2 2023 iSpecimen Inc Earnings Call
[music].
Hi, everyone and welcome to I specimens second quarter, 20th 23 results Conference call.
At this time participants are in a listen only about.
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 remain posted for the next 30 days.
Oh, well I'll have to call over to fell Carson Carlson of casting essay for introductions and the reading of the Safe Harbor statement. Please go ahead.
Thank you operator, good morning, everyone, you're welcome, especially in the second quarter of 2023 results Conference call.
Today's call, it's Tracy Curly Chief Executive Officer, and Chief Financial Officer.
Benjamin B like Chief Information Officer.
Eric Landlords Chiefs revenue officer in Irvine, Cox C T and head of product management.
We begin I would like to remind you that today's call contain certain forward looking statements within the meaning of section 27 eight of the Securities Act of 1933 as amended infection 20th E of the Securities Exchange Act of 1934 as amended concerning future events.
Words, such as May should project expects intends plans believes in two states hopes estimates 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 the company.
Including those set forth in the risk factors section of the company's amendment number one to the annual report on Form 10-K for the year ended December 31st 2022 filed with the S. E. C N March 30th 2023.
Risk factors set forth in part to item one a of our quarterly report on Form 10-Q for the quarterly period ended June 30th 2023 be filed with the S. E C. Shortly after this call.
Copies of the company's filings.
Available on the SEC's website at Www Dot S C C dot Gov.
Actual results may differ materially from those express or implied by such forward looking statements.
The company undertakes no obligation to update these statements for revisions are changes after the date of this call except as required by law.
My pleasure to introduce Tracy currently Chief Executive Officer, and Chief Financial Officer, I expression Tracy. Please go ahead.
Thank you sound.
Good morning, everyone and thank you for joining a call today, how will begin with an overview of the second quarter, including a brief update on the impact of the current economic environment corner business and the progress of operational initiatives.
Then turn the call over to Eric <unk> are cheaper at any level.
Who will provide additional details on the <unk>.
Patient ramp up of our new revenue enhancing project, and then <unk>, Vice President and head of product management.
The technology advances Nathan reached the overall functionality and efficiency.
I can definitely marketplace.
Wrap up a call with a discussion of our financial performance instead of three and six months ended June 30th 2023 and opened the call for questions.
And the second quarter of this year, we continue treatment several key operation.
Full potential.
Project some more.
<unk> can I, please searches with suppliers.
Great New technology.
Recently have had initial success and expanding our capabilities.
Learning processes to increase supply and utilization expediting specimens copay on it.
Second quarter results came in the low expectations.
An R. Two one is called the X that's concerned about what we perceive as a general economic uncertainty in our industry and an overall downturn in business.
Concerns were realized that visits with no difficulty impacting too too. Despite the fact that you recognized breakfast levels of opportunity can quote we experienced swelling unexpected conversion.
The purchase orders in Q1, which in turn left us with a much lower back Bob a purchase orders at the container ruling portion of two two compared to prior quarters.
He also noted in our queue on earnings call that you are experiencing slower than normal receivable payments from our customers in two months.
Is that early recognition of these operational challenges enabled us to expedite a bunch of several new initiatives in two to date have resulted in an increase to purchase order ratio.
The second corner I'm also pleased to report that I have to collection.
Two very successful mmm thirsty download receivable pain that trend that you're experiencing chuan.
Thus far in two three despite a continuing industry wide slow down our business has greatly improved as evidenced by <unk> and <unk> <unk>.
Which have returned to more historical level, we believe that a result in revenue for the second quarter of 2023 represents a temporary downturn and that we had taken the required actions to address these issues which will.
Will allow us to choose better result cause the third quarter of 2023 and beyond.
Operation will be have completed William.
Nine minutes from <unk> to a line of business structure to improve our ability to execute.
We are continuing to focus on F X one more quickly converting close to purchase orders 222 initiatives previously.
Previously mentioned for which we had some positive results.
Alright, we'll discuss further we have begun making project utilizing a revenue Nancy projects <unk> <unk> and then the project, which he believes will allow us to begin 1919, <unk> and the second half of this year.
And does the third quarter, we expect author Mark still close.
Which will.
Will be innovative customers and suppliers will have a positive impact on a quarterly results.
You should be back on Friday to achieve expected revenue results from our core business and you begin seeing a meaningful contribution of <unk> Ah redfin enhancing projects in the second half of the year.
We believe will contribute to I might be coming cash neutral by the end of the 20th 23.
Then cash flow positive in 2024.
We continue to be invested in our technology.
Very excited about a recent and upcoming launches which.
Adam will discuss in more detail and remain steadfast in our mission to support researchers by providing.
Search and access to patient file.
Side effects and data to our global network of health care provider and confident that our continuous improvement to consistently support our customers require me to one of the most comprehensive platforms and a bias specimen industry, leading to a stronger I best friend Margaret place and I believe will resolve <unk> and.
Bottom line growth.
You have a lot going on a nice person and this is truly an exciting time correct I look forward to updating you with our perfect in the third quarter now.
Now, let me turn the call over to Eric Lindblom cheap seven one officer to discuss our near term adjacent revenue opportunities.
<unk>.
Thank you Tracy.
For the for revenue enhancement projects that we have for the year secret thing. It remains one of the most important revenue enhancement projects as we are seeing increased demand by researchers for donor formalin fixed paraffin embedded ffbe blocks.
Direct access to highly sought donor tumor tissue samples.
I specimen is collaborating with supply and sequencer partners to identify very specific donor FFT tissue from high value cancer patients that more likely than not possess specific mutations of increased interest to researchers and further sequence the tissue to derived data.
The genetic signatures of cancer tissues provide important information necessary to develop new treatments and diagnostics.
Access to large inventories.
These high quality valuable screen blocks has typically been difficult to obtain are not always available with high quality and can be costly.
However, with our extensive supplier network and a compelling partnering business model.
Believe I specimen has made significant strides in it.
Overcoming these obstacles.
We're investing inactive repetitive sequencing to create a virtual inventory available for our research customers in these areas of high value.
Providing profiles for highly sought donor tumor tissue samples to supply sites will be an ongoing activity as the company seeks to source unnecessary tissue for this project.
New program offers the potential for a measurable on demand virtual access and the new opportunity to customize future F. At the tissue requests all of which we believe can drastically change the entire cancer research paradigm.
The power of the eye, especially in network can make ambitious initiatives like this possible and when paired with the search functionality over proprietary I suppose from the marketplace will provide we believe a simple solution.
We have successfully launched her first sequencing pilot with approximately 300 samples and anticipate a modest level of revenue from the initial batch.
Starting at the end of Q3 2023.
This is the first of several rods anticipate performing throughout the remainder of the year and beyond for this project.
[noise] embedded coordinators is another one of our revenue enhancing projects.
Onsite specimen embedded coordinators also perfect dressing very well.
The attention of this project Sprite resources to what we believe our best and most potentially impactful sites and enable them to generate additional revenue even faster.
It's Tracy is highlighted on previous earnings calls.
Many project orders convert slower than expected or a closed out by a customer prior to being fully fulfilled are completed which has negatively impacted our revenues.
Simply put many of these clinical sites like the bandwidth simultaneously manage the day to day operations and fulfill the request vice specimens customers.
More often than not a specimen in its customers or deprioritized.
[noise], especially men spent the first half of this year evaluating the past current and future prevent potential capabilities for sites to generate revenue.
Specific sites have been identified to receive dedicated I specimen employees or reimbursed when their existing employee dedicate hours tour I specimen projects.
We expect this program to enhance I specimens ability to accelerate accelerate revenue growth both in terms of speed and completeness.
Each site's resources are being matched specifically to the type of assistance, they need such that picking and shipping remnants samples organizing and packaging inventory orders assisting and they're doing a recruitment and execution of perspective collections or reviewing charts and cataloging samples into a format that allows I specimen of feature specimens on her I, especially on marketplace.
We believe that this commitment to our sites will help all of our supply partners involved and enable I specimen to maximize their ability to fulfill orders and allow us to advance key initiatives that can increase sales such as our next day quotes.
We have numerous sites that are in various stages of contract negotiations and deployment within about a coordinator in place at one site and 11 more hirings in the works we.
We will continue to add more sites with a business opportunities are substantial.
We expect to increase revenue related to this program starting in the second half of this year.
[noise] remnants were also advancing a remnant revenue enhancement projects, which is focused on improving internal operational processes and creating a lot of business structure through significant integration with supplier sites.
Remnants of the leftover bio specimens from a sample collected for clinical diagnostic purposes.
Our efforts to streamline at work flow for remnant request appear to be already positioning I specimen for sales growth and margin expansion for this line of business.
We're still adjusting to some of the workflows and approaches to find new ways to bring in even more revenue in the second half of the year and we are pleased to have already begun seeing the results of these efforts.
One exciting technology development as an improved build out in our technology for flagging clinical run and type sampled requests and orders to appear on supplier dashboards to further help expand our capabilities within our preexisting supplier network as.
As we build out the technology to advance a remnant business, we expect to see even greater impact on our quarterly financial results.
Next day quotes.
Finally operations and sales have been working together to create new workflows for our lines of business in order to bypass the feasibility process wherever possible.
Streamline workflow allow us to move straight to providing our customers with next day quotes for opportunities.
Our suppliers are extremely excited about our move in this direction and we believe that providing next day quotes could be a market differentiator for us.
I would now like to turn the call over to him and Cox R V P and had a product management.
To discuss how new technology advancements being made a two hour special and marketplace platform or technology development and and investments are extremely timely now that we offer are able to offer an even wider array of bias specimens that have historically been difficult to source Evan. Please go ahead.
Thank you, our our product and technology efforts to improve our expressman marketplace platform and 2020th rake include updating search functionality, improving the user interface, increasing automation and enhancing matchmaking I'm pleased to report that we continue to make significant progress on these initiatives, which remained our highest priority technical investments in 2023.
We are improving integrations with our provider partner, specifically with our first electronic medical record integration, where we're working to achieve the same level of competence. We have been looking specimens to locating patients and the donors. This project has already been used to complete multiple customer request and we expect it to continue to accelerate the prospective collection process.
And reduce costs.
Our technology team is currently performing a major upgrades to the ice pressman marketplace searching requests capability. We are consistently reevaluating our I expressed my marketplace search functionality I. This is our public face the researchers and the entry 0.4 request.
These enhancements are keenly focused on upgrading to more modern user interface standards, new levels of automation, which will help us scale and major enhancements to our matchmaking algorithm to ensure the best possible matches between researchers and our bathroom supply network. We're.
We're happy to report that these changes have gone lie for internal to the company's stakeholders and would expect them to be available to external users before the end of the year.
Further we're updating our backend architecture to support growth at scale enhancing security and preparing for our data as a service pilot slated to take place in 2024. These back and updates are expected to be completed in the second half of the year. The successful completion of our data as a service pilot, we believe will allow us to validate.
One of many possible additional revenue streams for I Express ma'am.
Finally, we are using our deep insights provided by nearly 10 years of historical data and experience with customer request and supplier fulfillment to continue evolving our matchmaking algorithm, which is expected to result in better faster matches and a streamlined procurement process for our researchers and reduce supplier efforts as expected.
We've already made significant progress on this initiative and are on track to complete it in the second half of the year with that I'll turn the call back the Tracy who will provide more detailed discussion of our financial results for the second quarter of 2023 compared to the same period in 2022.
Thank you and then.
The second corner of 2023, you report in approximately $1.6 million in revenue.
Compared to approximately $2.3 million during the same period last year.
Decrease in revenue was described earlier and was attributable to a decrease at 2322 seconds or 33 per cent investment account from 7004, Sacramento and the three months ended June 30th 2022, 4682 cents and the three months <unk>.
30th 2023.
Decreases that's been account with Austin 19 <unk>.
<unk> and an increase in the average selling price.
Okay $113 four per cent compared to the same period in the prior year.
Six month period M. D June 30th 2023, we reported revenue.
Perhaps my $4.6 million compared to approximately $4.9 million during the same period last year decrease in revenue for the six month period.
June 30th 2023, that's attributable to a decrease in average selling price per Stefan and $64 [laughter], 16% <unk>.
<unk> $407 and the six months ended June 30th 2022 to $343 and a six month June 30th 2023 decrease in <unk> increase of 1383 cents or 12%.
An account from 11928 <unk> and the six months ended June 30th 2022 213311, Stephanie.
Six months to.
June 30th 2023.
I need to decrease my approximately $146000 15 per cent from approximately $1 million in the second quarter of 2022, two approximately $854000 for the second quarter of 2023.
Three month period decrease was attributable to 833 per cent decrease in the number of specimens obsession with a current period compared to the same period in the prior year all set by a 28 per cent increase in the average cost per second.
Cost of revenue and a six month period ended June 30th 2023, with approximately $2 million compared to approximately $2.2 million for the same period in 2022.
Decrease in eight per cent.
Six month period decrease was attributable to a 17 per cent decrease in the average cost per Stephanie impacted by the specimen next upset by 12 per cent increase in the number.
Session. During the six months ended June 30th 2023 over the same period in the prior year.
The second quarter of 2023, Mmm increased a cast and protect not only take two of <unk> $1.5 million from approximately $807000.
Same period into patterns here and a six month period ended June 30th 2023, we increased our cash spent for technology to a practice.
$3.4 million from approximately $1.4 million for the same period in a pattern here can increase in spend for the three and six month period ended June 30th 2023 compared to the same proud of your security is directly related to the record level of technology investment plan for 22.
One three which will need to be equal in April the continued advancement of our online marketplace integrated in our industry.
Second quarter 2023. This cash outlay was comprised of approximately $1.2 million are capitalized.
<unk> developed software and approximately $306000 a technology that we are not able to Catholic and therefore classified as technology.
The remainder of the technology.
Second corner of 2023 this comprised of approximately $510000 in non-cash amortization related to internally developed software and approximately $35000 related to stock compensation expense.
Total technology for the second quarter of 2023.
<unk> $843000 compared to <unk>.
$636000 for the same period in the prior year.
[laughter] period ended June 30th 2023, the cash outlay with comprise approximately $2.7 million of capitalizing channel.
And approximately $600000 of technology.
You are not able to capitalize and therefore classify this technology.
The remainder of the technology.
Six month period, and the June 30th 23 was comprised of approximately $935000 non-cash amortization related to internally developed software and approximately $72000 related to stock compensation expense.
The technology instead of a six month period ended June 30th 2023, with approximately $1.7 million compared to $1.2 million.
<unk> period in the prior year.
Sales and marketing expenses, where approximately $978000 for the second quarter of 2023.
Three per cent from approximately $951000 in the second quarter of 2022.
Six month period ended June 30th 2023 sales and marketing expenses, where approximately $2 million.
17.6% tell me approximately $1.7 million.
The same period in the prior year.
And administrative expenses for the three month June 30th 2023 increase by approximately $183000 to approximately $1.8 million 12 per cent compared to approximately $1.6 million the same period in the prior year.
That's six month period ended June 30th 2023 general and administrative expenses increased by approximately $100000 to approximately $3.5 million or three per cent compared to approximately $3.4 million during the same period and the <unk>.
A quarter ended June 30th 2023, I had approximately $2 million with cash in cash or credit lines and approximately $6.2 million available for sale security with maturity ranging from one to six months.
The combination of cash and cash equivalents and available for sale Securities total approximately $8.2 million as in June 30th 2023, compared to our cash balance of approximately $15.3 million as of December 31st 2022 cause the first half of 22.
33, the company had a cash sign up approximately $7.1 million. This is higher than a hysterical cash burn as it includes increase planned investments for technology in the first half of 2023.
$2.7 million and lower than expected that any results for Q2.
This concludes our prepared remarks, now I would like to open a cough a question.
<unk>. Please go ahead.
We will now begin the question and answer session.
To ask a question you May press star one on your telephone keypad.
If you're using a speaker phone please pick up your handset before pressing the keys.
To withdraw your question please press star them too.
At this time, we will pause momentarily I'm trying to save all the roster.
And our first question will come from that Hewitt of Craig Hallum. Please.
Go ahead.
Good morning. This is Jacqueline from Matt. Thank you for the update and for taking my questions. My first one is more of a broader one what impact you've seen from your customers relating to the decline in funding for small farm about the companies and are you experiencing any impact from its decline.
Thanks, Jack glad you're on the call today I'm going to to the Answer's, Yes, we are seen an impact and there are lots of things that we're working on internally to overcome that I'll turn it over to Eric <unk> are cheap revenue officer to talk about.
And marketing changes that we made to to to.
<unk> has been driving through this downturn that we're seeing her.
Yep. Thank you Tracy and thank you for the the question I you know I think there's some of the the earnings you know it's dated that we we really recognize kind of the the changing landscape by the end of Q1. So we're kind of bracing for some of that we found that a lot of customers were putting in.
A lot of requests, but really slow rolling a lot of different things both on the purchase order conversion side, but also on the payment of past projects fun. So it seemed like everyone was just going into a very conservative based physician. So that's taking stated.
Be implemented a number of different changes, we've really changed around our marketing pushes and what we're pushing and how we're pushing it and the content and who it's going out to we also re addressed all of our margins for quotations that need to really create an impact just because we were able to.
Pain, you know more P. O's towards the end of Q2 and into Q3, then we had in the prior a couple of months uhm, so that seemed to have almost an immediate impact.
But we also move to another system, where we're doing a more structured cadenced follow up to our quotations so that our <unk>. Our salespeople, you'll really you know doing a specific schedule a follow up on very specific days, making sure that we get feedback.
And we also were engaged in customers just to get information and see back and talk to.
You know some other people throughout the industry to make sure that they were seeing and experiencing.
Spearing, saying the same things that we were so that you'll be prepared to address it and submit additional ways. So like I said thankfully a lot of these things I've already bear fruit, we've seen some results from it October and rates have gone up relatively about 50 per cent. So you know I think that we're on the right track here and I think we as an industry where where come.
[noise] out of it a bit but I think you know this is just me speaking here from the the data I've seen I think.
The funding things that you mentioned are really impacting kind of the the middle the middle of the lifetime market and I think you know farm I still always okay, but they are being more conservative and I think the funding that we are seeing is going into a relatively new companies with with new technologies and new entrants into the market. So I think it's it's the middle part that that kind of.
<unk> squeezed, but I think like I said, the things that we've done is really kind of <unk> and I think you know what will help us serve the rest of the year.
And I also think that this highlighted correct.
That we need to focus.
Slightly differently on our customer base and Eric mentioned were sorted in a middle market. You know early stage <unk> companies and and the funding is still coming through for companies are going through say a three day. There there is that going on.
And big Pharma still has money and so part of another strategy that need according to to his new customer acquisition.
Campaigns in those areas for us to tap into these lessons companies it actually still do half half half cash and you're still spending on on our handy.
Okay. That's helpful. I appreciate the color and then and your <unk> prepared remarks, you said that you're able to pivot to several new initiatives what were those and will you be able to replicate the success going forward into any other areas.
Yeah. So we actually looked at four different growth drivers <unk> and <unk> talk to a bit of them competitive pricing new customer acquisition.
Our middle son will conversion drivers and then as I mentioned thanks.
Banks broken and some of the things we did for competitive pricing as we did look at our we competitive in itself that we can be more competitive we went back to those clubs and and became more competitive sharpen your pencil for new customer acquisition I, just talk a little bit about that uhm about newly campaigns really does.
That sounds serious day, and big pharma I'm also I'm doing some very nearly product pushing.
So much any effort and then for our conversion driver is especially from quote to P O, which is where it really.
Really impacted us or you know.
The next day quote effort was already underway with accelerated that and we've created is going well in Tom Tom Green Light Court right product pushes uhm I'm quoting room, no based upon really understanding our supply of capability that those.
Western opportunities can be fulfilled and again, we will be fully operational within next day coding and to send a link or we're starting to see benefits from that and then for limits Bank broke is because we can.
Convert and social faster and the lemonade and banks area has a perfect perspective, which is R. T spoke area, we really focus on sales and marketing fully immersed in magenta bank Uhm <unk> credit pushes.
To make sure that we're on occasions or two times, a week and again, just making sure that we understand are so claire capabilities in inventory.
The diet does opportunity just approach and then composed P O.
Eric is there anything else you want to add to that.
No no not really yeah, I mean, I think you you <unk> addressed all the drivers that we looked at the options that were taken and and you know it's just you know a comforting to know that they they all provided some immediate results and and we've seen the trends in the data analytics that that show that but yeah I was high.
<unk>, what you said the next day quoting pieces is the big thing I think.
<unk> <unk>.
Really kind of dealt with now for a number of years is that a lot of these custom bespoke collection.
They take a lot of operational lift to check out the feasibility process can be very long. It can be you know 15 to as many as 60 days just to evaluate a project and you know if all of your opportunities are concentrated in those costume collection, you know that that can be.
Very very difficult so going back with the next day quote project an initiative.
You know really lining up sites going to them and saying Hey, you know we want to market specific types of collections specific standards, we want to be able to have you know a locked in go to market pricing arrangements. So that you know when we can go out and highlight those types of projects. We can actually so I'm more of a bundle with those.
Things that are pre loaded in in some of those collections will still take a long time to execute depending on the criteria on the specificity of what the customers looking for but at least we'll be able to get to the purchase order and contracting portion of it within a couple of days instead of a couple of weeks and that allows us to reach a lot.
Better revenue conversion velocity, because we're starting a project a lot sooner we're doing the training the tip buildings and in the donor recruitment phase of those projects a lot sooner. So I think having you know a number of sites take part in that initiative understand what we're trying to do the very excited about the possibility that they no longer so.
Certain things they no longer ever happen to engage in a feasibility process. You know the customers are the ones that will end up benefiting the most from that I mean, clearly we were on the site well, but you know we're really trying to do something to it to address you know a bit of a time crunch there for our customers.
Thank you for taking my questions.
Thank you.
Once again, if you would like to ask a question.
471.
I should have no further questions on the account. So at this time I'd like to turn the call over two minutes Tracy currently C. E O M C F L for closing remark.
Thank you.
I'd like to thank everyone again for joining us on today's call and for your continued interest in <unk>, we look forward to having conversations with many of the U N to see minutes at the upcoming events.
That we will be attending this quarter. So again, thank you very much have a great day.
This concludes today's conference call. Thank you for participating and you may now disconnect have a good day.
[music].