Burning Rock Biotech Limited Q4 FY2023 earnings call

• Strategy: Responding to macro environment changes in the past 3 years, formulated a strategy to drive efficiency and move towards profitability, including improving sales efficiency, gross margin, reducing G&A and R&D expenses.
• Sales Efficiency: Sales expense percentage decreased from 77% in Q2 '22 to 38% in Q4 2023, and is expected to decrease further in 2024, significantly improving sales expense efficiency.
• Gross Margin: Non-GAAP gross profit percentage of revenue continued to increase from 72.5% in 2021 to 74.3% in 2023, and is expected to continue growing in 2024 by replacing suppliers and negotiating costs.
• G&A Expenses: Reduced through measures like reducing headcount and related costs, cutting professional services fees, closing part of the Shanghai office, and expecting further reduction in 2024 by partnering with land owners; reduced by over 60 million RMB in 2023.
• R&D: Major clinical programs cooling down, and making conservative investments in MRD, CDx, and MCD after carefully counting NPV.

Central Lab had a substantial decrease, with the fourth quarter continuing trends described in previous calls. In-hospital had one-off adjustments in the fourth quarter; excluding the adjustments, it was pretty much flat or a negative 1% growth compared to Q4 2022, but underlying demand for related hospitals remained robust. The Pharma segment grew very well, with double-digit growth in the fourth quarter of 2023 and 59% growth in 2023 overall, and is expected to continue growing. Central Lab's revenue contribution percentage decreased significantly, In-hospital's percentage had a minor change with the one-off adjustment, and Pharma's percentage increased due to its strong growth.

• Commercial operation is expected to reach profitability in the first half of 2024.
• Cash outflow in 2024 is expected to be in the range of 150 million to 200 million RMB.
• Cash outflow is expected to further decrease after 2024, and there is good visibility on the cash runway for at least 3 years.

Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those contained in such statements. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Burning Rock's control.