iSpecimen Inc. (NASDAQ:ISPC) Q4 2023 Earnings Call Transcript March 14, 2024
iSpecimen Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, everyone, and welcome to iSpecimen’s Full-Year 2023 Results Conference Call. At this time, all participants are in a listen-only mode. 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 introductions and the reading of the safe harbor statement. If there are any questions for the management following the call, please e-mail iSpecimen@kcsa.com. Please go ahead.
Phil Carlson: Thank you, operator. Good morning, everyone, and welcome to iSpecimen’s 2023 full-year results conference call. With us on today’s call is Tracy Curley, Chief Executive Officer; and Eric Langlois, 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 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 or revisions or changes after the date of this call, except as required by law. Now it’s my pleasure to introduce Tracy Curley, Chief Executive Officer. Tracy, please go ahead.
Tracy Curley: Good morning, and thank you for joining our call. Throughout 2023, we worked diligently to streamline our operations, reduce costs and right-size our business. By driving operational efficiencies throughout the company, we are increasingly able to realize the true value of the iSpecimen Marketplace quarter-over-quarter and even month-to-month. On today’s call, I will discuss how these ongoing improvements have strengthened iSpecimen’s position operationally, at what we believe to be the forefront of the biospecimen procurement market. I will then turn the call over to our Chief Revenue Officer, Eric Langlois, who will address the advancements we made in 2023 and the revenue enhancement initiative for sequencing, which has launched a higher margin revenue stream for iSpecimen.
Finally, I will review our financial results for the 2023 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 of contributing to our topline growth, would provide a clear path to future success. To accomplish our goals, we launched several important marketing initiatives and realigned our sales efforts, several of which helped the company generate $1.7 million in revenue in December, the strongest sales month in our history. Also encouraging for the fourth quarter, we have sanctioned over $3.1 million in specimens. Unfortunately, Q4 revenue was negatively impacted by one-time customer credits of approximately $545,000, which reduced our GAAP basis revenue.
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Q&A Session
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This was due to our adoption of a more robust returns process. As 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 biospecimen procurement platform and achieve improved levels of growth throughout the remainder of 2024. The key driver of our record December sales results and our most promising initiatives for continued topline growth has been our Next-Day Quote program, which we launched in September 2023. Through this initiative, we believe we have successfully unlocked the underlying potential of the iSpecimen Marketplace, which we expect to yield stronger financial results for the company going forward. In the fourth quarter, our first full quarter having Next-Day Quote, we significantly reduced the sales time line by improving the conversion of quotes to purchase orders, which in turn led to an increased sales momentum as well as a stronger backlog.
As a result of the utilization of Next-Day Quote, during the fourth quarter, we achieved a 39% increase in conversions of quotes to purchase orders compared to the average from all prior quarters in 2023. The success of this program can also be seen when looking at our sales breakdown in the fourth quarter, where 32% of our total sales were attributable to the Next-Day Quote program, surpassing our internal projections. Based on the impact this program has had on our sales, strong customer and supplier feedback and the proven capabilities of our platform underlying technology, we believe Next-Day Quote will increasingly contribute to sales. Our goal is to steadily build this program, so that Next-Day Quote eventually accounts for a significant percentage of our total sales.
We believe we can achieve these results with the rollout of our supplier contract refresh program, a new initiative to recontract with our suppliers to improve their engagement with us. In doing so, we are mining comprehensive information from our suppliers, including detailed capabilities, standard minimum pricing and a 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, thereby greatly increasing the number of samples available via Next-Day Quote. In 2023, we identified and implemented at four key supplier sites, our embedded coordinator program, assigning dedicated iSpecimen professionals charged with supporting and expediting the fulfillment of customer orders and ultimately driving increased revenue.
We had expected to rollout more sites in 2023, but paused the program due to preparations related to our supplier contract refresh program. Embedding a coordinator at site or 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. To maintain our leadership position and to support the evolving needs of our research customers, we’ve shifted our attention from quantity to quality. It’s not that quality wasn’t historically being emphasized, it’s 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 relationships, we began identifying suppliers that no longer meet our business and technology criteria. Throughout 2024, we plan to terminate contracts with suppliers, where our criteria are not being met. At the same time, we continue to expand our network to offer high-demand specimens with cancer, hematology, cardiovascular, autoimmune, neurological, endocrine, metabolic and infectious disease categories, among others. I would like to now turn the call over to Eric Langlois, Chief Revenue Officer, to discuss the advancements that have strengthened the iSpecimen Marketplace and provide a status update on our revenue-enhancing initiative for sequencing as well as an update of the scales and marketing initiatives for 2024, all of which are expected to drive long-term growth for iSpecimen.
Eric, please go ahead.
Eric Langlois: Thank you, Tracy. First, the technology recap. We’ve been strategically focused on leveraging the technology advancements we’ve made in the first half of 2023 to unlock the full potential of our core business, which we are now seeing in our operational and financial results. These technology efforts consisted of updating search functionality, improving the user interface, increasing 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 site’s capabilities. This module in particular, when combined with our Next-Day Quote initiative, has had immense impact on the speed of our sales funnel, allowing our sales team to move opportunities to quote more rapidly, leading to higher win rates.
Our ability to consistently innovate and improve the iSpecimen Marketplace will make our platform one of the premier solutions for connecting researchers and providers. In addition, these advancements have allowed us to effectively rollout our revenue-enhancing programs. Finally, we have also enhanced our curator remnant program, which has allowed us to update our supplier list as well as the test and analyze codes we offer in order to locate a greater array of specimen. Importantly, we began seeing improved results from our remnant line of business in Q4 2023 and that is carried over in the Q1 2024. Next, cancer sequencing. One of the most impactful and visionary revenue enhancement initiatives is our cancer sequencing program. In addition to having the potential to elevate iSpecimen’s leadership position in our industry, it also offers the opportunity to significantly change the future of cancer research.
Through our cancer sequencing program, we can provide cancer researchers with on-demand access to sequence biospecimens that enable them to advance their research. There is a tremendous value in having extensive access to 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. The 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 in customer conversations, as new budgets and research projects were initiated at the beginning of 2024.
