Q2 2023 Burning Rock Biotech Limited Earnings Call
Okay.
Speaker 1: Good morning, ladies and gentlemen. Thank you for sending by. Welcome to Burning Rock's 2023 Second Quarter earnings conference call. All participants on a listen only mode. After this presentation, there'll be a question and answer session. As a question during the session, you will need to press star 11 on your touch on phone. You will then hand automatic message advising your hand is raised. Please note that today's conference is being recorded.
Good morning, ladies and gentlemen, thank you for standing by welcome to burning box 2023 second quarter earnings Conference call. All participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a.
A question during the session you will need to westar.
One one on you touched on the phone you will downie and automatic message advising yohan. It's raised please note that today's conference is being recorded before we begin I'd like to remind you that this conference call contains forward looking statements within the meaning of section 21 E.
Speaker 1: Before we begin, I'd like to remind you that this conference call contains support-looking statements within the meeting of Section 21-E of the Security's Exchange Act of 1934 as amended and as defined in the U.S. Private Security Security's Education Reform Act of 1995.
The Securities Exchange Act of 1934, as amended and as defined in the U S. Private Securities Litigation Reform Act of 1995.
Speaker 1: This border-looking statements can be identified by terminology such as will, expect, anticipate, future, intense, plans, police, estimates, target, confident and similar statements.
Forward looking statements can be identified by terminology such as will expects anticipates future intends plans believes estimates target confident and similar statements.
Speaker 1: Statements are not historical facts including statements about burning rocks beliefs and expectations
It's been a nice vehicle facts, including statements about burning walks beliefs and expectation.
Speaker 1: are forward-looking statements, such statements are based upon management's current expectations and current market and operating conditions and relate to events to involve known or unknown risk uncertainties and other factors, all of which are difficult to predict and many of which are beyond burning rocks control or looking statements involve risk uncertainties and other factors that could cause actual results to differ materially from those contained in any such statement.
All forward looking statements such statements are based upon management's current expectations and try and market and operating conditions and relate to events involve known and unknown risks uncertainties and other factors all of which are difficult to predict and many of which are beyond burning walks control.
Forward looking statements involve risks uncertainties and other factors that could cause actual results to differ materially from those containing any such statements.
Speaker 1: Burning Rock does not undertake any obligation to update any forward-looking statement as a result of new information, feature events or otherwise, except as required unnoticable law.
Burning rock does not undertake any obligation to update any forward looking statement as a result of new information future events or otherwise, except as required under applicable law.
Speaker 1: I will now hand the conference over to the company CEO . It's a Ushing Hunt, so he may begin.
I'll now hand, the conference over to the company's CEO Mr. Yu Shanghai. So you may begin.
Speaker 2: Thanks. Welcome to the Burning Rock 2023 Q2 conference call. I'm Hian Hian, CEO and founder of Burning Rock. And today we also have our CEO Joe Zhang and Zepo Leo Lee.
Welcome to the burden of all the 2023 Q2 conference call Q2 conference call.
C O and found out running Iraq and today, we also have our CTO Joe Joe.
Speaker 2: So let's turn to page three in case there are some investors who are not familiar with the burning rock. I hear you illustrate what we do.
Alright.
So, let's turn to page three.
There are some investors who are not familiar with that pretty well here.
Speaker 2: Our business started from tissue-based service selection and then extend to multi-directions of liquid obsi, including liquid obsi-surface selection, MRD, and multi-cancer early detection.
What we do.
Our business started from tissue basis that would be a flagship.
Hand to mouth, your direction about liquid biopsy, including liquid biopsy and therapy selection and Marty and multi cancer early detection.
Speaker 2: So we have three business unit providing products and serving to doctors, farmers, and consumers. And let's...
So we have three businesses.
Providing product that they're serving two doctors farmers and consumers.
Now, let's turn to page four.
Speaker 2: So this is what we set up. I will go about 2023 early this year and reported to investors twice in the last two conference call. So the number one goal is probably
So this is what we set up our goal.
It's very early.
This year and.
Reporting to investors right.
Yeah.
Last two conference call.
You got number one goal is profitability.
Speaker 2: The goal is that it's to break even excluding R&D during a quarter in 2023.
Go with that to breakeven.
R&D during a quarter in 2023.
Speaker 2: And the second goal is continue the revenue growth. A healthy increase with profitability is what we want to achieve. And our initial outlook for 2023 are.
It didn't go as continue the revenue revenue growth.
The increase without profitability, it's all we want to achieve and our initial outlook for <unk> ER.
Speaker 2: Right now it's mildly going to increase over that here.
Revenue at the mine.
And create over last year.
Speaker 2: And the third goal is to further our leading position in MCD at number one player in China and at top player globally. The May R&D fan of WIFO.
The third goal is to further our leading position in M. C. D. At number one player in China, and a top player globally.
Are they fan out will focus on MTV.
Speaker 2: And let's break down the goals in four parts. So for therapy selection, we'll continue to improve the sales and productivity by strengthening the in-hospital model.
And let's break down that goes in.
Ballpark so for therapy selection will continue to improve their sales and productivity by Janssen that new hospital model.
Speaker 2: And for MRD, we launched and installed personalized MRD in top hospitals.
And for MRV.
Date and initiatives.
And he installed personalized MRV in top hospitals.
Speaker 2: and that start from the end of May this year. And usually it will take like a half year to one year to have one product in one hospital. So the early time, I will can see the impact is in Q4 this year.
And gas.
Let's start from the end up.
<unk> made this year and so I used.
It will take like half a year or two one year or two have won.
One product starting in one hospital. So the earliest time, we can see the impact in.
Q4 this year.
Speaker 2: For Belfarmer, the goal is to continue its profitable growth, and with the new platform of Mardi and more international orders, we are optimistic to the growth of Belfarmer.
For Biopharma to go is that continue is talking about growth.
The new platform up I'm, Marty and more international order.
Optimistic to the gross up top AMR business.
Speaker 2: And for UMCD, we have several big studies including prevent, predict, and present. So these are very important clinical trials that will set out very solid base for our UMCD data. And we are very proud of this data, give us several years ahead of our peers in China. And even globally we are leading a plate.
M. A C D. We have several big studies, including prevent predict and PREPA.
So they saw very important.
Clinical trial that will set a very solid base for our.
M a C D.
Data and.
We're very proud about this date all give us several years.
Had all of our peers in China.
I believe we are leaving our plate, we are a leading player.
Speaker 2: And then let's see what's the result of our effort in Q2 2023 and turn to page five.
Now, let's see what's the result of our effort in Q2, 2023 and turning to page five.
Speaker 2: As we illustrated, the number one goal this year is profit. The main indicator of commercial efficiency is non-gap gross profit minus a gym A.
As we illustrated the number one goal. This year is profit the main indicator of our commercial efficiency, if non-GAAP gross profit minus SG&A.
Speaker 2: So, Q2 2023, we made it. So the number of non-gabbed gross profit minus a GNA was 7.6 million RMB. And this is a first quarter of break even in our operating history, in that we are super proud of it, especially in this difficult economy environment.
So Q2 2023 we made it so the number of non-GAAP gross profit minus SG&A was seven 6 million RMB and this is a this is a first quarter op breakeven in our operating history in that.
We are super proud of it, especially in a in this difficult economy environment.
Speaker 2: The team will continuously work hard to improve this number in the coming year, in the coming time of...
And the team will continuously work hard to improve this number in the coming year.
In the coming time off this year.
Speaker 2: Let's turn to page six to see other important facts. So for therapy selection, as we said, the in-hospital model continued to growth of 44% over year-on-year. And for MRD, there are several important clinical trials going on and there will be additional data released at AACR.
Let's turn to page six a.
To see either in.
Important facts so for therapy selection athletes that the in hospital model continue to growth of 44% over.
Year on year.
And for Marty.
Several important clinical trials going on.
There will be additional data released at ACR.
Speaker 2: And for biofarmer, the contract value and growing backlog still continues. So the contract value of new projects is 43% year-on-year growth in the first half year of 2023. And the revenue of biofarmer is 46% increase.
For Biopharma.
The contract value and growing backlog.
Still continues.
The kind of contract value of new project.
It's up 43% year over year year on year growth.
In hot for half year, 2023.
And the revenue.
Uh huh.
Palmer.
46% increase.
Speaker 2: And for early detection of the clinical trial on track, we were still...
And for early detection or the clinical trials.
On check we were still.
Speaker 2: continuously on our dialogue with FDA and also NIMPA. Nothing very important or special to say about the discussion, about working, we can see that the dialogue is quite smooth and we achieve some consensus with them. That's a good news to this segment.
Continuously oh, our dialogue with FDA and also Uh huh.
Nothing very.
Important or special to say about the discussion about what can we can see that the dialog with quiet.
Smooth and so we achieved some.
A consensus with them.
Good news to this segment.
Speaker 2: And from page seven, I will turn to our CFO Leo to discuss about the numbers in detail. Leo.
And from from page seven I'll turn it to our CFO Leo.
To discuss about the numbers in detail.
Speaker 3: Thank you, Vision. I will supplement Vision 3 marks with our latest numbers and financials. So first on page 7, these are operating metrics in terms of our test volume.
Thank you Richard I will supplement you said in his remarks with our latest numbers and financials. So first on page seven is our operating metrics in terms of our test volumes and you can see over the years, we have migrated from the Central lab model to in hospital model and in hospital model increasingly make a dominant share.
Speaker 3: And you can see over the years we have migrated from the central lab model to in hospital model and in hospital model increasingly make a dominant share in our channel composition starting 2023. We have achieved very good volume growth in the second half of 2023. On a year-over-year basis, our in hospital grew 72% in volume turns year-over-year. And overall our volume grew about 33%.
In our channel competition, starting 2023, we have achieved very good volume growth in the second half of 2023 on a year over year basis are in hospital grew 72% in volume terms year over year and overall, our volume grew about 33%.
Speaker 3: As you can see here, we have managed down our volumes in central lab, as that is a less profitable channel and more competitively intensive or irregular.
As you can see here, we have managed down our volumes in central lab as that is the last profitable channel and more competitively intensive or irregular.
Speaker 3: compared to this more institutionalized hospital model. So we're happy about the result and progress of our transition.
Compared to the more institutionalized in hospital model. So we're happy about the result and progress of our transition.
Speaker 3: As you can see in our Q2 numbers, 33% overall growth, I think that's a very strong number, reflecting I think two things, not only a good transition towards in hospital, but also a share gain from other incumbents in the market. You might say that Q2 last year was a low base because of the COVID lockdown in Shanghai. Look at the graph here on a sequential basis, we have also grown very strong.
As you can see in our Q2 numbers for 83% overall growth I think that's a very strong number reflecting I think two things not only a good transition towards in hospital, but also share gain from other incumbents in the market.
You might say that Q2 last year was a low base because of the Covid lockdown in Shanghai.
A look at the graph here on a sequential basis. We have also grown very strong in hospital grew 24% on a sequential basis and overall volumes grew 19% on a sequential basis. So we are we're very happy.
Speaker 3: In hospital, good 24% on a sequential basis and overall volumes grew 19% on a sequential basis. So we are very happy about our progress and results during second quarter.
About our progress and results during the second quarter.
Speaker 3: There is news reports of industry-wide disturbance in China's healthcare industries.
There is news reports of industry wide disturbance in China's health care industries things.
Speaker 3: things the end of July then we can see that Based on our latest numbers the in-hospital testing volumes are still stable heading into Q3 So we're very happy about the resilience of that channel
Since the end of July and we can see that.
Based on our latest numbers the in hospital testing volumes are still stable heading into Q3. So we're very happy about the resilience of that channel Central Lab channel is more vulnerable. So that channel has seen increased.
Speaker 3: central lab channel is more vulnerable, so that channel has been increased.
Speaker 3: shift towards in hospital in the Q3. So we're happy that we have positions towards the better in hospital channel way ahead of time. And we're benefiting from the current industry turbulence.
Shifts towards in hospital in the Q3, so we're happy that we have positioned towards.
The better ink Hospital channel way ahead of time, and we're benefiting from the current industry turbulence.
Speaker 3: So that's the overall volume trend on page seven. And going to page eight, our financial numbers. As we mentioned, the biggest news item out of this quarter is break even excluding R and the expenses and on a non-gap basis, IE excluding share based compensation and depreciation and arbitration. So that is the first quarter we have achieved break even of our commercial business.
That's the overall volume trends on page seven I'm going to page eight our financial numbers as Vishal mentioned the biggest.
News item out of this quarter is breakeven, excluding R&D expenses and on a non-GAAP basis, I E. Excluding share based compensation and depreciation.
Depreciation and amortization so that is the first quarter, we have achieved breakeven of our commercial business.
Speaker 3: And we're happy and proud of that progress. And if you look at the breakdown here, our sales and marketing expenses continue to be very efficient. We were at about 44% as a percent of revenue in Q2. And we've gone into the low 40s range at the start of 2023 and that is the results of our sales force.
And we were happy to and proud of that progress and if you look at the breakdown here.
Sales and marketing expenses continued to be very efficient we were at about 44%.
As a percent of revenue in Q2.
And we've gone into the low forties range at the start of 2023 and that is the results of our sales force Rio.
Speaker 3: reorganization that we have carried out in the second half of last year, so we're bearing the fruits of that effort.
Reorganization that we have carried out in the second half of last year. So we're bearing the fruits of that effort.
Speaker 3: Now we'll continue to keep a very tight Lit of cell-to-market expenses going forward in addition to that You can also see that our GNA expenses have also trended down so we have been managing our overhead More efficiently and importantly we have increased or we have got better results in terms of receivable collections from a hospital cost
Now we will continue to keep a very tight.
<unk>, all sales and marketing expenses going forward. In addition to that you can also see that our G&A expenses have also trended down so we have been managing our overhead.
More efficiently and importantly, we have increased all we have got better results in terms of receivable collections from our hospital customers. So there is a drop in the provision of credit loss.
Speaker 3: So there is a drop in the provision of credit loss.
Speaker 3: which is carried in the GNA line in the second quarter this year. So that has helped us lower GNA expenses as well. So overall you can see the operating expenses have continued to trend out and we're still managing our expenses very well. So that's the overall result.
As carriage in the G&A line in the in the second quarter. This year. So that has helped us.
Lower G&A expenses as well. So overall you can see the operating expenses have continued to trend out now.
And we're still managing our expenses very well so that's the overall without one.
Speaker 3: One more thing to highlight is our farmer segments. So in this quarter we have achieved a good growth of that segment We grew our revenue by 46
One more thing to highlight is our pharma segment. So in this quarter. We have achieved a good growth for that segment. We grew our revenue by 46% and if you look at the leading indicators. If you look at the contract value signed during the first half of this year, we've grown that metric by about 46%. So we continue to sign more contracts.
Speaker 3: And if you look at the leading indicator, if you look at the contract value sign during the first half of this year, we've grown that metric by about 46%. So we continue to find more contracts.
Speaker 3: build our backlog and as we execute on these pharma projects, they get converted into revenue. So that has contributed to our overall revenue grows very well over the past.
Our backlog and as we execute on these pharma projects.
Converted into revenue so.
That has contributed to our overall revenue growth very well over the past.
Speaker 3: The Gross margin with also achieved good results around 75% on a long gap basis i.e. excluding depreciation.
And then gross margin. We felt also achieved good results around 75% on a non-GAAP basis I E. Excluding depreciation.
Speaker 3: We have grown our growth profits by about 20% in this year, on a year-over-year basis. So overall, continue to growth and lower expenses and break even for the first time in operating in history.
And we have grown our gross profits by about 20% and this year on a year over year basis. So overall.
Continuing to growth and lower expenses and breakeven for the first time in our operating history. That's.
Speaker 3: That's the financial numbers on page 8. Moving on to page 9, which is our cash balance. We've laid this out at the start of this year and we've been executing on track. So as you mentioned, we still have a few large.
That's the financial numbers on page eight now moving on to page nine which is our cash balance we've laid this out at the start of this year and we've been executing on track. So we still as Lisa mentioned, we still have a few large clinical programs on a multi cancer detection product development.
Speaker 3: clinical programs on our multi-cancer detection product development. And these are executed well and on time, according to schedule. So our cash outflow is, again, according to our plan. So we planned for about 400 million outflow of this year. And we've had about 199 in the first half of this year. So that's progressing on track.
These are executed well and on time according to schedule.
We are cash outflow is again according to our plan. So we plan for about $400 million outflow of this year.
We've had about 199 in the first half of this year.
Speaker 3: We will finish most of our clinical programs by the end of this year on MCAD development.
So that is progressing on track we will finished most of our clinical programs by the end of this year on N C. A D development.
Speaker 3: So our R&D clinical program expenses will run down actually as we complete those programs.
So our R&D clinical program expenses will run down naturally as we complete those programs.
Speaker 3: and we expect lower expense and this is the same number as we laid out at the father's year so 200 million
We expect lower expense and this is the same number as we laid out at the start of this year, So 200 million.
Speaker 3: operating outflow next year and that excludes any Upside that we may achieve from the commercial business so reduced share burn and Well-capsized for the next three years in terms of our cash balance
Operating outflow next year and that excludes any upside that we may achieve from.
From the commercial business, so reduced share burn and a well capitalized for the next three years in terms of our cash balance. So this concludes our prepared remarks, and we'll see if we have questions.
Speaker 3: So this concludes our prepared remarks and we'll see if we have questions.
Speaker 1: Thank you. Ladies and gentlemen, to ask a question on the phone line, you will need to press star 1 1 on your touch phone telephone and wait for your name to be announced.
Okay.
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Speaker 1: One moment please. Again, to ask a question on the phone line, you may press star 11. And next.
One moment. Please again to ask a question on the phone lines you May press Star one.
And actually we have no phone questions at this time.
Speaker 1: Ladies and gentlemen, Datasunkarab conference call for today. Thank you for your participation for today. You may not.
Ladies and gentlemen, Douglas will get on a conference call for today.
Thank you for your participation for today you may now disconnect.
Thank you.
Operator: Good morning, Yusheng Zhang, and thank you for sending by.
Okay.
[music].
Operator: Welcome to Burning Rock's 2023 second quarter earnings conference call. All participants are in a listen-only mode.
Okay.
Operator: After this presentation, there will be a question and answer session. As a question during the session, you will need to press star 1-1 on your touch on phone. You will then hear an automatic message advising your hand is raised.
Yes.
[music].
Operator: Please note that today's conference is being recorded.
Operator: Before we begin, I'd like to remind you that this conference call contains support-looking statements within the meaning of section 21e of the Security's Exchange Act of 1934 as amended and as defined in the U.S. Private Security Certification from Act of 1995. This board-looking statements can be identified by terminology such as will, expect, anticipate, future, intent, plans, beliefs, estimates, target, confident, and similar statements. Statements are non-storical facts, including statements about burning rocks, beliefs, and expectations.
Operator: Our board-looking statements such statements are based upon management's current expectations and current market and operating conditions and relate to events to involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond burning rocks control. For-looking statements involve risks, uncertainties, and other factors that could cause actual results to differ materially from those containing any such statements.
Operator: Burning rocks does now undertake any obligation to update any forward-looking statement as a result of new information, future events, or otherwise, except as required unopticable law.
Operator: I will now hand a conference over to the company CEO with the Ushing Hunt, so he may begin. Thanks.
Yusheng Zhang: Welcome to the Burning Rock 2023 Q2 conference call. I'm Hian Hian, CEO, and founder of Burning Rock. And today we also have our CEO Joe Zhang and CFO Leo Lee online.
Yusheng Zhang: So let's turn to page three in case there are some investors who are not familiar with Burning Rock. I hear you illustrate what we do. Our business started from tissue-based service selection, and I expand to multi-directions of liquid policy, including liquid policy service selection, MRD, and multi-cancer early detection.
Yusheng Zhang: So we have three business units providing products and serving to doctors, farmers, and consumers. And let's turn to page four. So this is what we set up our goal of 2023 early this year, and reported to investors twice in the last two conference calls. So the number one goal is profitability. The goal we set is to bring even excluding R&D during a quarter in 2023. And the second goal is continue the revenue growth.
Yusheng Zhang: A healthy increase with profitability is what we want to achieve. And our initial outlook for 2023 revenue is a mild increase over that year. And the third goal is to further our leading position in MCD at number one player in China and a top player globally. The main R&D fan will focus on MCD.
Yusheng Zhang: And let's break down the goals in four parts. So for the third-piece selection, we'll continue to improve the sales and productivity by strengthening the in-hospital model. And for MRD, we launched an initial, an install personalized MRD in half-hospitals. And that starts from the end of May this year. And usually, it will take like a half year to one year to have one product in one hospital. So the early time, we can see the impact is in Q4 this year.
Yusheng Zhang: And for BioFarmer, the goal is to continue its profitable growth, and with the new platform of MRD and more international order, we are optimistic to the growth of BioFarmer business. And for MCD, we have several big studies, including prevent, predict, and present. So these are very important clinical trials that will set out very solid base for our MCD data. And we are very proud of this data, give us several years ahead of our peers in China, and even globally, we are leading a player.
Yusheng Zhang: And let's see what's the result of our effort in Q2 2023 and turn to page five. As we illustrated, the number one goal this year is profit. The main indicator of commercial efficiency is non-gap growth profit minus SGMA. So in Q2 2023, we made it. So the number of non-gap growth profit minus SGMA was 7.6 million RMB. And this is the first quarter of break even in our operating history. And we are super proud of it, especially in these difficult economy environments. And the team will continuously work hard to improve this number in the coming year of in the coming time of this year.
Yusheng Zhang: Let's turn to page six to see other important facts. So for therapy selection, as we said, the in-hospital model continued to growth of 44% over year on year. And for MRD, there are several important clinical trials going on, and there will be additional data released at AACR. And for biofarmor, the contract value and growing balance still continues. So the contract value of new projects is 43% year-on-year growth in the first half year of 2023. And the revenue of biofarmor is 46% increase. And for early detection of the clinical trial on-check, we were still continuously on our dialogue with FDA and also NIMPA.
Yusheng Zhang: Nothing very important or special to say about the discussion about working, we can see that the dialogue is quite smooth, and we achieve some consensus with them, that's a good news to this segment.
Leo Lee: and from page 7, I will turn to our CFO, Leo, to discuss about the numbers in detail, Leo. Thank you, Yusheng. I will supplement Yusheng's remarks with our latest numbers and financials. So first, from page 7, these are operating metrics in terms of our test volumes. And you can see, over the years, we have migrated from the central lab model to in hospital model and in hospital model increasingly make a dominant share in our channel composition study in 2023.
Leo Lee: We have achieved very good volume growth in the second half of 2023. On a year-over-year basis, our in hospital grew 72% in volume turns year-over-year. And overall, our volume grew about 33%. As you can see here, we have managed down our volumes in central lab as that is the less profitable channel and more competitively intensive or irregular compared to this more institutionalized hospital model. So we are happy about the result and progress of our transition.
Leo Lee: As you can see, in our Q2 numbers, 33% overall growth, I think that's a very strong number, reflecting I think two things, not only a good transition towards in hospital, but also a share gain from other incumbents in the market. You might say that Q2 last year was a low base because of the COVID lockdown in Shanghai. The look at the graph here on a sequential basis, we have also grown very strong in hospital grew 24% on a sequential basis and overall volumes grew 19% on a sequential basis.
Leo Lee: So we are very happy about our progress and results during second quarter. There is news reports of industry-wide disturbance in China's healthcare industries since the end of July. And we can see that based on our latest numbers, the in hospital testing volumes are still stable heading into Q3. So we are very happy about the resilience of that channel. Central lab channel is more vulnerable, so that channel has increased shifts towards in hospital in the Q3. So we're happy that we have positions towards the better in hospital channel way ahead of time, and we're benefiting from the current industry turbulence.
Leo Lee: So that's the overall volume trends on page seven.
Leo Lee: And then going to page eight, our financial numbers. As we mentioned, the biggest news item out of this quarter is break even excluding our expenses and on a non-gap basis, excluding share-based compensation and depreciation and monetization. So that is the first quarter we have achieved break even of our commercial business. And we're happy and proud of that progress. And if you look at the breakdown here, our sales and marketing expenses continue to be very efficient.
Leo Lee: We were at about 44% as a percent of revenue in Q2. And we've gone into the low 40s range at the start of 2023 and that is the results of our sales force reorganization that we have carried out in the second half of last year. So we're bearing the fruits of that effort. Now, we'll continue to keep a very tight lit of sales and marketing expenses going forward. In addition to that, you can also see that our GNA expenses have also trended down.
Leo Lee: So we have been managing our overhead more efficiently. And importantly, we have increased or we have got better results in terms of receivable collections from a hospital customers. So there is a drop in the provision of credit loss, which is carried in a GNA line in the second quarter this year. So that has helped us lower GNA expenses as well. So overall, you can see the operating expenses have continued to trend down. And we're still managing our expenses very well. So that's the overall results.
Leo Lee: One more thing to highlight is our farmer segments. So in this quarter, we have achieved a good growth of that segment. We grew our revenue by 46 percent. And if you look at the leading indicator, if you look at the contract value signs during the first half of this year, we've grown that metric by about 46 percent. So we continue to find more contracts, build our backlog. And as we execute on these farmer projects, they get converted into revenue.
Leo Lee: So they have contributed to our overall revenue growth very well over the past. Then Gross margin, we've also achieved good results around 75 percent on a non-gap basis, i.e., including depreciation. And we have grown our gross profit by about 20 percent in this year on a year-over-year basis. So overall, continue the growth and lower expenses and break even for the first time in operating in history.
Leo Lee: That's the financial numbers on page 8.
Leo Lee: Moving on to page 9, which is our cash balance. We've laid this out at the start of this year and we've been executing on track. So we still, as you mentioned, we still have a few large clinical programs on our multi-cancer education product development. And these are executed well and on time, according to schedule. So we, our cash outflow is, again, according to our plan. So we planned for about 400 million outflow of this year.
Leo Lee: And we've had about 199 in the first half of this year. So that's progressing on track. We will finish most of our clinical programs by the end of this year on MCED development. So our R&D clinical program expenses will run down naturally as we complete those programs. And we expect lower expense. And this is the same number as we laid out at the start of this year. So 200 million operating outflow next year. And that excludes any upside that we may achieve from the commercial business. So reduced share burn and well-capitalized for the next three years in terms of our cash balance.
Operator: So this concludes our prepared remarks. And we'll see if we have questions. Thank you. Ladies and gentlemen, as a question on the phone line, you will need to press star 11 on your touch-down telephone and wait for your name to be announced. One moment please. Again, to ask a question on the phone line, you may press star 11. And I see we have no phone questions at this time.
Operator: Ladies and gentlemen, that is one of our conference call for today. Thank you for your participation for today. You may now disconnect. Thank you.
Operator: Music