Full Year 2023 iSpecimen Inc Earnings Call

Good day, everyone and welcome to ice estimates full year 2020 to be resorts conference call. At this time all participants are another ship only mode. This conference call is being recorded.

Today's call will be available on the Investor Relations section of ice documents website and really painful step for the next 30 days.

I will now hand, the call over to Phil Carlson Investor Relations for introductions and the reading the Safe Harbor statement.

There are any questions Mike in management following the call. Please email I specimen I T C. S E Dot com.

Go ahead.

Thank you operator, good morning, everyone and welcome to <unk> 2023, and full year results conference call.

With us on today's call are Strachey currently Chief Executive Officer, Glen Weiss Chief revenue Officer.

Before we begin.

I would like to remind you that today's call contains certain forward looking statements from our management made within the meaning.

Actually 2007.

Just curious that Covid 33, as amended and section 21 of the Securities Exchange Act of 1934 as amended concerning future events.

Words, such as May should projects.

<unk> plans beliefs.

Great.

Variations of such words and similar expressions are intended to identify forward looking statements.

These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the risk factors section of the company's Form 10-K for the year ended December 31st 2023 filed with the SEC.

These documents are available on the Sec's website at Www Dot FCC dot Gov actual results may differ materially from those expressed or implied by such forward looking statements.

The company undertakes no obligation to update these statements for revisions or changes after the date of this call except as required by law now it is my pleasure to introduce Tracy currently Chief Executive Officer Tracy. Please go ahead.

Good morning, and thank you for joining our call.

2023, we worked diligently to streamline our operations reduce costs and rightsize that business.

<unk> operational efficiency throughout the company.

<unk> be able to realize the true value I mean I.

I expect my marketplace quarter over quarter, and even month to month on today's call I will discuss how these ongoing improvements that strengthen <unk> position operationally at what we believe to be at the forefront of the bio specimens procurement markets. I will then turn the call over to our Chief revenue Officer, Eric Glen growth.

Hello address the advancements we made in 2023 and our revenue enhancing initiatives Cookie crunchy, which has launched a higher margin revenue stream, especially.

I will review our financial results for the 2023 and year end.

At the beginning of Q4 2023 and in preparation for 2024, we completed a top to bottom review of the entire business and concluded that focusing on specific initiatives capable.

Getting to our top line growth, but provide a clear path to take.

<unk> success.

To accomplish our goals.

Launched several important marketing initiatives and realigned our sales efforts.

Of which helped the company generate one $7 million in revenue in December the strongest sales month in our history.

Also encouraging for the fourth quarter, we accession over $3 $1 million investment. Unfortunately, Q4 revenue was negatively impacted by one time customer credits of approximately $545000, which reduced our GAAP basis revenue. This was due to our adoption of a more robust return.

In this process.

And we continue to streamline our operations and focus on our core business. We believe we are well positioned to capitalize on these operational achievements scale, our proven bio specimens procurement platform and achieve improved levels of growth throughout the remainder of 2024.

It's trying for of a record December sales results and our most promising initiatives for continued top line growth and then our next day Club program, which we launched in September 2023 through this initiative. We believe we have successfully unlocked underlying potential of the ice freshman marketplace.

We expect stronger financial results for the company going forward.

Fourth quarter.

First full quarter, having next day close we significantly reduce the sales timeline by improving the conversion of quotes to purchase orders.

In turn led to an increase sales momentum as well as a stronger backlog.

So all of the utilization of mixed day quotes during the fourth quarter, we achieved a 39% increase in conversion for close to purchase orders compared to the average kind of all prior quarters in 2023.

The success of this program can also be seen when looking at our sales breakdown in the fourth quarter were 32% of our total sales were attributable to the next day club program.

Our internal projections based on the impact. This program has had on our sales from our customer and supplier feedback and a proven capabilities of our platform underlying technology. We believe next day quotes will increasingly contribute to sales.

Goal is to steadily build this program. So that next day close eventually transfer a significant percentage of our total sales. We believe we can achieve these results with the rollout of our supplier contract refresh program, our new initiatives to re contract with our suppliers to improve their engagement with us.

So we are mining conference and information from our suppliers, including detailed capabilities standard minimum pricing and it periodically scheduled refreshed list of their inventories. This program is enabling us to provide even more information than ever before to our customers on our platform.

<unk> greatly increasing the number of samples available next.

The next day quotes.

And 2023, we identified and implemented at four key supplier sites are embedded coordinator program assigning dedicated especially in professional is charged with supporting and expediting the fulfillment of customer orders and ultimately driving increased revenue.

We had expected to rollout more sites in 2023, the pause the program due to preparations related to our supplier contract refresh program.

Embedding a coordinator of site for certain business criteria are determined to be sustainable both hand in hand with the objective of the supplier contract refresh program and we are prepared to advance our embedded coordinator program in 2024, as we refresh contracts with suppliers.

Finally, we have reevaluated the quality of our supplier network.

Our leadership position and to support the evolving needs of our research customers.

Shifted our attention from quantity to quality.

The quality wasn't historically be emphasized.

Simply recognizing that maintaining the highest quality supplier network possible is paramount to our long term success, even if it means reducing the size of our overall network throughout 2023. In addition to finding new high quality supplier agreements and expanding existing supplier relationship.

We began identifying suppliers that no longer meet our business and technology criteria throughout 2024, we plan to terminate contracts with suppliers.

Sure you are not being met at the same time, we continue to expand our network to offer high demand specimen with cancer cytology cardiovascular.

Immune neurological endocrine metabolic extra.

<unk> disease category among others.

Like to now turn the call over to Eric <unk> Chief revenue Officer.

The advancements that have strengthened the iceberg and marketplace.

And provide a status update on our revenue enhancing initiatives for sequencing as well as an update on the sales and marketing initiatives for 2024.

All of which are expected to drive long term growth for ice specimen.

Eric Please go ahead.

Thank you Tracy.

First the technology recap.

We've been strategically focused on leveraging that technology advancements we've made in the first half of 2023 to unlock the full potential of our core business, which we're now seeing in our operational and financial results.

Your technology efforts consisted of updating search function functionality.

Proving the user interface.

<unk> automation and enhanced matchmaking.

The matchmaking module allows us to automatically match supply sites to a project based on the specific criteria paired with the sites capabilities.

This module in particular when combined with our next day quote initiative has had an impact on the speed of our sales funnel, allowing our sales team to move opportunities to quote more rapidly leading to a higher win rate.

Our ability to consistently innovate and improve the asbestos and marketplace is what makes our platform one of the premier solution for connecting researchers and providers.

In addition, these advancements have allowed us to effectively rollout and revenue enhancement program.

Finally, we have also enhanced our curated remnick program, which has allowed us to update our supplier list as well as the test in analyte codes, we offer in order to locate a greater array of assessments.

Importantly, we began seeing improved results from Iran that line of business in Q4, 2023 and that has carried over into Q1 2024.

Next cancer sequencing.

One of the most impactful and visionary revenue enhancement initiatives as our cancer sequencing program and.

In addition to having a potential elevate our leadership position in our industry, but also offers the opportunity to significantly change the future cancer research.

Through our cancer sequencing program, we can provide cancer researchers with on demand access to sequencing bio specimens that enable them to advance their research.

There is a tremendous value in having extensive access to mutate mutation characterized formalin fixed paraffin embedded cancer tumor tissues. As these characterized tumor tissues are extremely difficult to find and obtain.

While this program has been well received by our customers. The sales cycle has taken longer than we originally anticipated.

Our commercial team is currently making the necessary marketing and sales adjustments to ensure the level of detail and follow up required to secure and grow our sequencing business in a timely manner.

These efforts are beginning to achieve traction as evidenced by the increased momentum and customer convert conversation as new budget in research projects were initiated at the beginning of 2024.

Launching a new product line cost effectively requires ongoing business development outreach, which takes consistency time patient.

Before 2023 in Q1 2024, our prospecting effort Richard a pipeline of approximately one $5 million of new business opportunities.

Both existing and new customers.

We've investigated 55 projects Michelle resulted in 25 confirmed orders.

Many of the projects that have not resulted in a win have been the direct result of being unable to find that particular markers being requested.

Overall pricing and value proposition of the program have been very well accepted by our customers.

Now for our sales and marketing initiatives for 2024.

So can you continue to scale, we've launched a new sales strategy to maximize new business opportunities in 2024.

It moved to a team and line of business oriented sales structure with key account management being a primary focus.

Five global zones have been created each zone comprise the rector and specialists in London and bank assessments.

These aren't games are associated with our lines of business teams internally, which fosters better communication internally from marketing suite fulfillment, while also giving that challenge more focused specialized attention.

Sales team members are properly incentivized to focus on closing purchase orders and growing key accounts, rather than fulfillment, which is the domain of our operations.

Most recently.

The pilot program with <unk> life Sciences, a provider of digital pathology laboratory, and AI workflow and automation solutions.

Hospitals pathology diagnostic and pharmaceutical companies.

Initially focusing on a substantial substantial subset of solid tumor type user utilizing <unk>.

AI powered automated digital pathology solutions.

Partnership is expected to help standardizing tissue sample evaluation.

Furthering our ability to support our research customers with the highest quality tissue samples available today.

We're currently conducting a pilot paas the screen the cohort assessing.

The next steps are technology, and media integration sales and marketing cross training and finally operational steps to ensure continuity.

This relationship will allow assessment sales and marketing teams to highlight our focus on enhanced quality for our tissue customers.

This also allows sales personnel to offer cost effective add on services for tissue related projects, which helps us.

Important limitations.

Tracy I will now hand, it over to you.

Thanks, Eric turning to our results for the fiscal year ended December 31, 2023 revenue was approximately $9 $93 million compared to approximately $10 $4 million for the fiscal year ended December 31, 2022, the decrease in revenue for the 2002.

Three fiscal year was primarily due to a decrease of 2938 investments or 11%.

And the count from 27503 divestments during the year ended December 31, 2022 to 23565 investments during the year ended December 31 2023.

Yes effect of the decrease in specimen count was partially offset by a change in the specimen mix, which resulted in the average selling price per specimen increased by approximately $26 or 7%.

Approximately $378 per specimen during the year ended December 31, 2022 to approximately $404 per specimen during the year ended December 31 2023.

Further color regarding the full year results during.

During our Q1 2023 earnings call, we expressed our concern about what we perceived as a general economic uncertainty in our industry and an owner or downturn.

These concerns were realized as our business was negatively impacted in Q2 2023.

The fact that we recognized record levels of opportunities and close.

Lower than expected conversion of quotes to purchase orders in Q1, 2023, which in turn left us with a much lower backlog of purchase orders at the beginning and early portion of Q2 2023 compared to prior quarters.

As a result, we recorded approximately $1 six $3 million in revenue for Q2 2023.

The average quarterly revenue recorded for the other three quarters of 2023 was approximately $277 million.

Cost of revenue increased by approximately $63000 or 1%.

Approximately 4.7 hundred $6 million for the year ended December 31, 2022 to approximately $4 $82 million for the year ended December 31, 2023, although there was an issue.

11% decrease in a number of specimens assertion during the year ended December 31, 2023 over the same prior year period. The average cost Chris that's been increased by 13% from approximately $173 perspective and for the year ended December 31, 2022 to approximately.

$196, Chris burst and then for the year ended December 31, 2023 for the year ended December 31, 2023, we increased our cash spend towards technology, approximately $539 million from approximately $4.45 million for the same period in <unk>.

Prior year the increase in spend for the year ended December 31, 2023 compared to the same prior year period is directly related to a record level of technology investments in 2023, which we believe has enabled the continued advancement of our online marketplace to be innovative in our industry.

And with significantly greater at approximately $3 4 million for the first half of 2023 for the year ended December 31 2023.

This cash outlay was comprise of approximately $3 $707 million of capitalized internally developed software and approximately $162 million of technology expense.

We're not able to capitalize and therefore classified as technology expense.

<unk> of technology expense for the year ended December 31, 2023 was comprised of approximately $195 million of noncash amortization related to internally developed software and approximately $142000 related to stock compensation expense total technology.

Expense for the year ended December 31, 2023 was approximately $3 $5 $7 million compared to approximately $3 6 million for the same period in the prior year.

Sales and marketing expenses increased by approximately $511000 or 15% from approximately $3 four $5 million for the year ended December 31, 2022 to approximately $3 $96 million for the year ended December 31 2023.

The increase was primarily attributable to increases in payroll and related expenses of approximately $345000 external marketing expenses of approximately $201000 in general and operating expenses related to sales and marketing approximately $6000, which was partially offset by a decrease in advertising.

Using and promotions expense of approximately $41000.

General and administrative expenses decreased by approximately $998000 or 14% from approximately $6 $93 million for the year ended December 31, 2022, approximately $594 million for the year ended December 31.

2023.

As of December 31, 2023, Ive specimen had approximately $2 three $4 million of cash and approximately $2 six 6 million of available for sale securities with maturities ranging from one to six months for <unk>.

<unk> total of approximately $5 1 million compared.

Compared to a cash balance of approximately 53 1 million as of December 31, 2022 for 2023, the company had a cash burn of approximately $10 three 1 million.

Merely comprised of approximately $558 million of operating expenses and <unk>.

Approximately $4 $703 million for capitalized development of the ice specimen marketplace technology and our sequencing data.

We have plans for significantly lower levels of operating expenses and capitalized investments between 2024.

The deliberate investments this past year, and our technology and sequencing initiatives, coupled with our inability to generate increased levels of revenue and negatively impacted our cash and cash equivalent balances during the year.

Half of the year and primarily on September six 2023, the company executed a reduction in workforce, resulting in an estimated reduction in monthly compensation costs of approximately 29% and additional expenditure reductions estimated to be over 50% of monthly expenditures for the remainder of the year after streamlining.

Operations, and rationalizing resources to focus on key market opportunities as.

As a result, the company experienced a significant decrease in expenditures during the second half of 2023 compared to the first half of 2023, the best way to articulate the impact of this is to understanding the quarterly cash burn for 2023.

For Q1, Q2, Q3, and Q4 quarterly cash burn was approximately $4, two 9 million to $8 million to $5 $5 million and $657000 respectively.

As we focus on the 2024 strategy and budgeting process, we have been mindful of our cash position and continue to have a goal of being cash flow positive in 2024 on March five 2024, we entered into an at the market offering agreement, whereby we may issue and sell shares of our common stock from time to time on the open.

Market with an aggregate offering price of up to $1 5 million.

Through our shelf registration statement, we may seek additional funding through public equity or other sources to fund further capital investments or for general corporate purposes.

I would like to thank everyone again for joining us on today's call and for your continued support we have achieved great progress operationally in 2023, and we believe we are on track to advance our new revenue generating sequencing opportunity in 2024 and with a stronger operational infrastructure in place we look forward.

Having you on our progress on our Q1 2024 results call during our quarterly conference call that is anticipated to take place in May 2024 with that thank you and have a great day.

Thank you and ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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