iSpecimen Inc. Q1 FY2023 earnings call

• Tracy Curley was appointed permanent CEO in January, and Eric Langlois was named Chief Revenue Officer. They have been working to execute strategic plans and key initiatives. - Eric is leading the realigned commercial team to increase customer base and improve experience. - The company invested approximately $1.9 million in technology in Q1 2023, with front-loaded investments in the first half of 2023 for platform updates. - Revenue enhancement projects include sequencing pilot with ~300 samples starting to generate revenue end of Q2 2023, on-site coordinators with a pilot site online and ramping up to ~12 by end of Q2 2023, and remanence projects focused on internal process improvement. - Technology updates include improving provider integration, marketplace search capabilities, back-end architecture, and data-as-a-service pilot expected in second half of 2023.

For the first quarter of 2023, iSpecimen reported revenue of approximately $3 million, a 17% increase year-over-year. The increase in revenue was primarily due to a 75% increase in the number of specimens, from 4,924 in Q1 2022 to 8,629 in Q1 2023. However, the average selling price per assessment decreased by 30%, from approximately $489 in Q1 2022 to approximately $342 in Q1 2023. Cost of revenue was approximately $1.1 million in Q1 2023, a 2% decrease from Q1 2022, with the average cost per specimen decreasing by 43% compared to the prior year.

• The company expects revenue enhancement projects combined with core business improvements to contribute meaningfully to revenue starting in the second half of 2023. - Aim to be cash flow neutral by end of 2023 and cash flow positive by 2024. - Believes cash and cash equivalents together with anticipated cash flow from operations will meet working capital and capital expenditure requirements for at least the next 12 months.

• Impact from decline in biotech funding, including slower quote to PO, lower accounts receivable payments, and customer bankruptcies leading to increased allowance for doubtful accounts. - Concerns about how long the biotech funding decline will last, creating headwinds for the business.

Q: What impact are you seeing from customers relating to the decline in biotech funding for small pharma and biotech companies?

A: Tracy Curley mentioned it's a concern, with slower time to get from quote to PO, lower AR payments, and some customers (small boutique life science companies) having bankruptcies leading to increased allowance for doubtful accounts. Eric Langlois added companies are slow rolling larger projects, increasing bank requests, and larger multi-cohort projects are pushed into future quarters.

Q: What's the initial feedback on the new embedded project coordinators?

A: Tracy Curley mentioned the first site was eager and excited, and Eric Langlois stated sites are receptive, needing resources post-COVID, interested in prospective collections, and all sites are open to having on-site coordinators but need diligent selection of profiles.

Q: Will gross margins stick up at north of 60% for the year?

A: Tracy Curley said strategies to unlock quotes to PO may affect margins in the short term, but Eric Langlois mentioned they're working on unlocking prospective collections midyear which could boost margins back up, seeing margin impact as temporary likely lasting a quarter or two