iSpecimen Inc. (NASDAQ:ISPC) Q2 2024 Earnings Conference Call August 6, 2024 8:30 AM ET
Company Participants
Phil Carlson – IR, KCSA Strategic Communications
Tracy Curley – CEO and CFO
Leslie Hoyt – VP, Operations
Conference Call Participants
Matt Hewitt – Craig-Hallum Capital Group
Operator
Good morning everyone and welcome to the iSpecimen Second Quarter 2024 Earnings Conference Call. At this time, participants are in a listen-only mode. A question-and-answer session will follow managements’ remark. This conference call is being recorded. A replay of today’s call will be available on the Investor Relations’ section of iSpecimen’s website and will remain posted for the next 30 days.
I will now hand the call over to Phil Carlson, Investor Relations, for the introduction and the reading of the Safe Harbor statement. Please go ahead.
Phil Carlson
Thank you, operator. Good morning everyone and welcome to iSpecimen’s second quarter 2024 conference call. With us on today’s call is Tracy Curley, Chief Executive Officer and Chief Financial Officer; and Leslie Hoyt, Senior Vice President of Operations.
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 of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended concerning future events.
Words such as may, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates, and 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 31, 2023, filed with the SEC. Copies of this document are available on the SEC’s website at www.sec.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 Curley, Chief Executive Officer and Chief Financial Officer. Tracy, please go ahead.
Tracy Curley
Thank you, Phil. Good morning and thank you all for joining today’s call. I’m pleased to report that the second quarter of 2024 results exceeded our internal targets with many of the initiatives we implemented over the last few quarters starting to produce tangible results, including the Next Day Quote program that was rolled out in the third quarter of 2023.
With me today is our Senior Vice President of Operations, Leslie Hoyt, who will provide additional details about the operational programs we have implemented and the impact they have had on iSpecimen. Finally, I’ll review our financial results for the three and six months ended June 30th, 2024 and then open the call for questions.
As we noted during our first quarter 2024 earnings conference call, we continue to take a measured and disciplined approach to our business to ensure our long-term financial success by strategically reducing our capital, human resources and operational expenditures, and aligning to focus on key market opportunities. We are setting the stage for revenue growth for the rest of 2024 and beyond.
For the second quarter of 2024, we generated revenues of approximately $2.9 million as compared to approximately $1.6 million for the same period in the prior year, representing an increase of 76%.
As I mentioned earlier, these results exceeded our internal projections as we continue to improve operationally while simultaneously providing our customers a streamlined specimen procurement solution.
We also continue to strategically reduce our spending in various operational areas as we focus on our core capabilities. These efforts allowed us to continue to reduce our cash burn from approximately $7.1 million in the first half of 2023 to $2.9 million for the first half of 2024, resulting in a reduced burn rate for the first half of 2024 of 59% compared to the same period in the prior year.
Our results in the first half of 2024 clearly demonstrate our operational initiatives are taking hold, and we expect to see continued success as we move into the second half of 2024.
In our ongoing effort to strengthen our leadership team and optimize our sales structure, we welcomed Brielan Smiechowski, our new Senior Vice President of Sales and Business Development, to iSpecimen during the quarter.
Brielan brings over 15 years of experience in life sciences and health care. She will be leading iSpecimen’s business development and sales efforts going forward, helping scientists and their organizations procure the biospecimens necessary to advance their research and technologies.
As I mentioned earlier, Leslie Hoyt, our Senior Vice President of Operations, had played an integral role in developing several of our operational initiatives like the Next Day Quote program. She has also led the effort to ensure that we understand more deeply the competencies of our supplier network and engage with those suppliers that offer the strongest capabilities.
This effort has already helped us greatly improve the quality of our supplier network. And the Next Day Quote program has contributed to increased velocity through our sales funnel and the strong results we have generated.
I would now like to turn our call over to Leslie to review our operational improvements and what we believe the impact has been for iSpecimen. Leslie, please go ahead.
Leslie Hoyt
Thank you, Tracy. Second quarter results show that the actions we have taken to streamline our operations, coupled with the programs we implemented at the end of 2023, are starting to gain traction.
As Tracy mentioned, these programs contributed to the company exceeding its internal revenue targets. We remain squarely focused on the quality of our supplier network and the specimens that we provide to the research community.
With the Next Day Quote program, we also remain focused on an expedited quoting process in order to increase conversions at every point through the sales funnel. I believe that we are better positioned to meet the demand of our biospecimen customers than we have ever been.
As our Next Day Quote program grows, so do the results. The percentage of total opportunities we are qualifying as Next Day Quotes across all segments, for remnant and biobank specimens as well as prospective collections, continues to remain high. Our Next Day Quote program has allowed us to streamline the process for our customers and our suppliers.
For our customers, this means that iSpecimen will often respond to inquiries within the same or next day, outlining the cost, timeline, and approach to provide the needed specimens. We are proud to say that 99% of our customers are able to participate in the Next Day Quote program. For our suppliers, it means that we can search internal data on supplier capabilities and pricing, reducing time-consuming phone calls to suppliers and redundancy.
For Q2 2024, 44% of quotes provided to customers were part of the Next Day Quote program, a steady improvement from 38% of quotes in Q4 of 2023 and 43% in Q1 of this year.
In the first half of 2024, an incredible 58% of Next Day Quotes were converted to purchase orders, directly contributing to our ability to exceed our internal revenue goals for Q2 2024.
Over the coming quarters, we will continue to expand the Next Day Quote program. With information gathered from our suppliers and the ability to search that data, we are planning to provide Next Day estimates to customers even when we are not able to offer a quote.
This process should expedite and enhance conversations between sales and potential customers and lead to more quotes with higher conversion rates. Over the next few quarters, we will provide more information on the expansion of the Next Day Quote program and the tools that are being built to support it.
I would now like to turn the call over to Tracy to review our financial results. Tracy, please go ahead.
Tracy Curley
Thank you, Leslie. For the three months ended June 30th, 2024, revenue was approximately $2.9 million compared to approximately $1.6 million for the three months ended June 30th, 2023.
The increase in revenue for the second quarter of 2024 was primarily due to an increase of 1,236 specimens or 26% in specimen count from 4,682 specimens in the three months ended June 30th, 2023, to 5,918 specimens in the three months ended June 30th, 2024. The average selling price per specimen also increased by $137 or 39% from $347 in the three months ended June 30th to $484 in the three months ended June 30th, 2024.
For the six months ended June 30th, 2024, revenue was approximately $5.2 million compared to approximately $4.6 million for the six months ended June 30th, 2023. This increase was primarily due to an increase in average selling price per specimen of $119 or 34% from $343 in the six months ended June 30, 2023, to $462 in the six months ended June 30, 2024th.
The increase in average selling price per specimen was offset by a decrease of 2,152 specimens or 16% in specimen count from 13,311 specimens in the six months ended June 30th, 2023, to 11,159 specimens in the six months ended June 30th, 2024.
Cost of revenue increased by approximately $570,000 or 67% to approximately $1.4 million for the three months ended June 30th, 2024 compared to approximately $854,000 for the three months ended June 30th, 2023.
The increase in cost of revenue was attributed to a 26% increase in the number of specimens accessioned for the current period and a 32% increase in the average cost per specimen compared to the same period in the prior year.
Cost of revenue increased by approximately $423,000 or 21% to approximately $2.4 million for the first six months ended June 30th, 2024, compared to approximately $2 million for the six months ended June 30th, 2023.
The increase in cost of revenue was attributable to a 45% increase in the average cost per specimen impacted by the specimen mix, offset by a 16% decrease in the number of specimens accessioned compared to the same period in the prior year.
For the second quarter of 2024, we decreased our cash spend for technology to approximately $541,000 from approximately $1.5 million for the same period in the prior year.
For the six-month period ended June 30, 2024, we decreased our cash spend for technology to approximately $1.2 million from approximately $3.5 million for the same period in the prior year.
The decrease in spend for the three and six-month period ending June 30th, 2024, compared to the same prior year’s period is due to reductions in workforce stemming from our decision to invest at a significantly lower level in 2024 when compared to 2023 and prior years, while we focus on growing our revenues through key market opportunities and assessing our capital raise prospects.
For the three-month period ended June 30th, 2024, cash spend was comprised of approximately $172,000 of capitalized internally developed software and approximately $369,000 of expenses that we were otherwise not able to capitalize and therefore, classified as technology expense.
The remainder of the technology expense for the three-month period ended June 30th, 2024, was comprised of approximately $543,000 of non-cash amortization related to internally developed software.
Total technology expense for the three-month period ended June 30th, 2024, was approximately $912,000 compared to approximately $843,000 for the same period in the prior year.
For the six-month period ended June 30th, 2024, cash spend was comprised of approximately $448,000 of capitalized internally developed software and approximately $748,000 in technology expense that we were otherwise not able to capitalize and therefore, classified as technology expense.
The remainder of the technology expense for the six-month period ended June 30th, 2024 was comprised of approximately $1.1 million of non-cash amortization related to internally developed software.
Total technology expense for the six-month period ended June 30th, 2024, was approximately $1.8 million compared to $1.7 million for the same period in the prior year.
The sales and marketing expenses increased by approximately $105,000 or 11% from approximately $978,000 for the three months ended June 30th, 2023 to approximately $1.1 million for the three months ended June 30th, 2024.
The increase was primarily attributable to increases in compensation expenses of approximately $123,000 and advertising and promotion expenses of approximately $100,000, partially offset by decreases in external marketing expenses of approximately $96,000 and general operating expenses related to sales and marketing of approximately $22,000.
Sales and marketing expenses decreased by approximately $276,000 or 14% from approximately $2 million for the six months ended June 30th, 2023 to approximately $1.7 million for the six months ended June 30th, 2024.
The period-over-period decrease was primarily attributable to decreases in external marketing expenses of approximately $191,000, compensation expenses of approximately $179,000, and general operating expenses related to sales and marketing of approximately $42,000, partially offset by increases in advertising and promotion expense of approximately $136,000.
General and administrative expenses decreased by approximately $703,000 or 40% from approximately $1.8 million for the three months ended June 30th, 2023, to approximately $1.1 million for the three months ended June 30th, 2024.
The period-over-period decrease was attributable to decreases in compensation cost of approximately $183,000; taxes and insurance of approximately $176,000; professional fees of approximately $165,000; bad debt expense of approximately $102,000; general and operating expenses of approximately $51,000; depreciation and amortization of approximately $21,000; and utilities and facility expenses of approximately $5,000.
General and administrative expenses decreased by approximately $311,000 or 9% from the approximately $3.5 million for the six months ended June 30th, 2023, to approximately $3.2 million for the six months ended June 30th, 2024.
The period-over-period decrease was attributable to decreases in compensation costs of approximately $348,000; general operating expenses of approximately $105,000; bad debt expense of approximately $57,000; depreciation and amortization of approximately $44,000; utilities and facilities expense of approximately $9,000, which were partially offset by increases in professional fees of approximately 161,000; and taxes and insurance of approximately $91,000.
As of June 30th, 2024, iSpecimen had $2.1 million of cash and available-for-sale securities, which represented a decrease of approximately $2.9 million from approximately $5 million as of December 31st, 2023 and a decrease of approximately $405,000 from approximately $2.6 million as of March 31st, 2024.
As we mentioned in our last earnings call on March 5th, we entered into an ATM to issue and sell shares of common stock with an aggregate offering price of up to $1.5 million through our shelf registration statement.
During the six months ended June 30th, 2024, we sold 3,980,075 shares of common stock for gross proceeds of approximately $1.5 million under the ATM agreement.
We incurred offering costs of approximately $255,000, resulting in net proceeds of approximately $1.2 million. Proceeds were used primarily for the management of our accounts payable.
The future success of the company is dependent on its ability to successfully obtain additional working capital and/or to ultimately obtain profitable operations. We are actively working on both. We have initiated aggressive efforts to decrease our operational expenditures by cutting costs and rightsizing the company through reductions in the workforce.
Throughout the year ended December 31st, 2023, and into the first half of 2024, we have executed reductions in workforce, while streamlining operations and rationalizing resources to focus on key market opportunities.
The reductions in workforce since January 1st, 2023, through the end of June 30th, 2024, has resulted in an estimated reduction in compensation cost of approximately 45% and technology cost of approximately 66% by the end of June 30th, 2024, when compared to January 1st, 2023.
In addition, the company plans to add additional customers and suppliers to increase revenues as well as to continue to reduce and manage expenditures to improve its financial position and ensure continued funding of operations. We are actively seeking to fund operations as we reach a cash-positive position through public equity or debt financing as well as other sources.
This concludes our prepared remarks. Now, I’d like to open the call for questions. Operator, please go ahead.
Question-and-Answer Session
Operator
Thank you so much presenters and ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]
And our first question comes from the line of Matt Hewitt of Craig-Hallum Capital Group. Your line is now open.
Matt Hewitt
Good morning and congratulations on the strong quarter.
Tracy Curley
Thanks Matt.
Matt Hewitt
Maybe first up, could you describe or talk a little bit about the macro environment, what you’re hearing from customers and suppliers, but more so on the customer side of the equation, how are they feeling about their funding? Has there been any shifts in prioritization of projects, anything along those lines?
Tracy Curley
It’s still a little tough environment for our researchers right now. So, they’re being very careful on what they’re willing to invest in for research, but they’re still out there pursuing projects. Leslie, you’re a little bit closer to this than I am operationally, any insights that you’d like to share with Matt?
Leslie Hoyt
I would add two quick things, Matt. I would say that the projects continue, but the demands are high. We’re seeing more and more specificity in the requirements. And number two is timeliness matters. When they get funding and they’re ready to go, they’re ready to go, which is why we’re really working on the timing of our response in both getting to a quote back to the customer and then also the timeliness of starting our projects once we have a purchase order.
Matt Hewitt
Got it. Well, that’s a great segue into my next question on the Next Day Quotes, 58% converted to purchase orders in the quarter, that’s fantastic. Do you have an internal target? Or is there some type of a goal that you’ve kind of set where you’d like to see, is it 75%? Or how should we be thinking about that metric?
Tracy Curley
So, we do — but as you know, we don’t really give guidance, Matt. I would love for it to be 100%, to be honest. But — so we’re not giving guidance on that, but we do have an internal goal that we are tracking towards for that, and it is much higher than the 58%.
Matt Hewitt
Got it, okay. And then shifting gears a little bit. The focus on the increase in the quality of your suppliers, are those suppliers able to fulfill most, if not all, of the requests you had previously been getting from a broader spectrum of suppliers? Like have you found the 200, the 300 that you think can fulfill 99% of any request that you would come across hit the transom?
Tracy Curley
So, I’m going to answer that a little bit, but then I’m going to turn it over to Leslie because she’s really, really much closer to this. So, we realized last year that we have a lot of suppliers that we really had not been engaging with in a meaningful fashion, and they hadn’t been engaging with us either.
So, we embarked on what we call Supplier Refresh, which we’ve talked about in prior quarters and we terminated a lot of contracts with suppliers the first half of this year. We are now down to 105 suppliers from where we were at 240 in 2023.
And the reason for this is because as we did our Supplier Refresh and engage with the suppliers to understand quality, pricing, quantity, capabilities, we actually found out that over time, our suppliers’ capabilities had shifted and we had not been aware of that.
And so we have discovered that we actually have suppliers within our network that could provide us — maybe they were only doing remnant or bank specimens, but they had expanded their capabilities so that now they could provide us more perspective, which was a real eye-opener for us, a real pleasant eye-opener, if you will, for us to find that out. And so those are the suppliers that we want to and have been engaging with more.
I’ll turn it over to Leslie to sort of complete that.
Leslie Hoyt
Yes, I 100% agree, Tracy. With the limited or less suppliers that we have now, we actually have more capabilities and mostly because we are aware of the capabilities, having taken the time to survey and have conversations with suppliers to truly understand what they do and what they’re capable of doing.
I would say we are a larger percentage of their business now, which makes them more responsive to us and hence to our customers. So, it’s really been an interesting endeavor getting to know these suppliers, which we continue to do more and more and to see how we can have a smaller network with more aligned suppliers that we know more about. So, supply has not been an issue to-date.
Matt Hewitt
Got it. And then maybe a couple of metrics and I apologize if I missed this, but do you have the number of unique customers during the quarter and the number of registered research and supplier users during the quarter?
Tracy Curley
I think I’m going to have to get back to you on that. I don’t have that at my fingertips.
Matt Hewitt
No problem. All right. Congratulations again on the quarter.
Tracy Curley
Thank you, Matt. Appreciate it.
Operator
Thank you so much. [Operator Instructions]
And I show no further questions in the queue. At this time, I’d like to turn the call over to Ms. Tracy Curley, CEO for closing remarks.
Tracy Curley
Thank you. I would like to thank everyone again for joining us on today’s call and for your continued support. We believe the operational advancements that we’ve made this quarter and frankly, for the last several quarters, will play a significant role in our future growth.
We are changing the landscape of our business by more rapidly and effectively connecting biospecimen suppliers with researchers and we believe that, that is key for our success.
Our Next Day Quote program has proven successful and we look forward to updating you with our continued rollout of this program as well as other initiatives that we are currently working on.
And with that, thank you and have a great day.
Operator
This concludes today’s conference call. Thank you for participating and you may now disconnect. Have a good day.
