SomaLogic, Inc. (NASDAQ:SLGC) Q1 2023 Earnings Call Transcript May 11, 2023

SomaLogic, Inc. reports earnings inline with expectations. Reported EPS is $-0.18 EPS, expectations were $-0.18.

Operator: Good afternoon, and welcome to SomaLogic’s First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Marissa Bych with Gilmartin Group Investor Relations for introductory comments.

Marissa Bych: Thank you. Today, SomaLogic released financial results for the quarter ended March 31, 2023. A copy of the press release is available on the company’s website. Before we begin, I’d like to remind you that management will make forward-looking statements during this call within the meaning of federal securities laws, which are made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relates to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including without limitation, those relating to our market opportunity, gross margin and future financial performance, protein content and database growth, customer base, diagnostic pipeline, expectations for hiring, and growth in our organization are based upon our current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our latest Form 10-K or 10-Q filed with the Securities and Exchange Commission. This conference call contains time-sensitive information and is actuate only as of the live broadcast today, May 11, 2023. SomaLogic disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.

I will now turn the call over to Adam Taich, Interim Chief Executive Officer.

Adam Taich: Thank you all for joining us this afternoon. It has been a busy 6 weeks since stepping into the CEO role. There is work to do and decisions to make, but I remain excited to lead SomaLogic into this next phase with a talented and dedicated team. During my portion of the call today, I’ll provide a brief overview of our first quarter results and some of my early impressions before turning the line to Shaun, our CFO, who will then review our financial results for the first quarter. In our last call, we announced significant changes to the leadership and the board, and committed to focusing resources to serve our Life Sciences’ customers. The changes are centered around a simple objective, driving accelerated and predictable growth, while improving operational rigor and significantly reducing spend.

We are leading innovators in the proteomics market, and we know what we need to do to execute on this objective. Revenue for the first quarter was $20.4 million, tracking in line with our full year outlook. In addition, our expense reduction initiatives are on track, and we continue to actively assess opportunities to take our cost discipline further, reflecting our commitment to running the business efficiently with a focus on disciplined cash management to maintain the strength of our balance sheet. Plenty of work remains ahead. SomaLogic is just starting to become a scaled global commercial enterprise. In recent years, the transition has been too slow and the spend too high, and we are focused on fundamentally changing that dynamic. Translating our assets, most importantly, our innovative technology into sustainable revenue growth requires commercial execution and as part of that process thoughtful customer engagement.

This takes time and requires some shifts in how we develop and deliver innovation, support and service across the SomaLogic platform. Today, we are focused on expanding our commercial base, where we saw nice traction over the course of the first quarter. We continue to see ample opportunity to scale our existing customers, while we grow and diversify our biopharma engagements across clinical, translational and early discovery projects. Our operations are currently focused in North America, but we see significant opportunity to expand to new customers domestically and in EMEA and APAC. To this end, we recently announced a key partnership with BioStar, a Shanghai based leader in Life Sciences, to support our commercial rollout in China. This builds on our partnership with G42, our first authorized site in the Middle East, which we announced earlier this year.

An important contributor to commercial excellence is offering solutions to customers that meet very specific needs. To accomplish this, we are making our platform more accessible, in large part by accelerating our authorized site or kits offering, so that institutions around the world can run the SomaScan assay in their own lab. We expect to double the number of our sites by the end of 2023. We also remain on track with our partnership with Illumina to deliver the SomaScan assay utilizing Illumina’s market leading install base of next generation sequencers with the full force of Illumina’s commercial team equipped and incentivized to market and sell our proteomics platform, we continue to expect early access to begin in 2024. Bolstering our suite of solutions is our ongoing work to bring more comprehensive, biologically relevant information to customers.

As we drive forward in content leadership, we are pleased to reiterate that our SomaScan 10k plex solution is on track for the fourth quarter rollout. As I mentioned in my opening remarks, our balance sheet and cash position remain a key differentiator for our business, especially in this current market environment. Today, while we remain heads down on operational and commercial execution, the board and I are actively evaluating inorganic opportunities, including those that could fundamentally change our business profile. In closing, 6 weeks in, I have continued confidence in positioning SomaLogic to increase revenue and improve margins, while spending less capital. It’s a simple statement that requires hard work and discipline, but we are focused on delivering against these objectives and building shareholder value.

I will now turn the call to Shaun Blakeman, CFO, to review our financial performance and outlook.

Shaun Blakeman: Thanks, Adam. Turning to our financial results for the first quarter, revenue for the 3 months ended March 31, 2023 was $20.4 million, an 11% decrease from $23 million in the same period of the prior year. This quarter’s revenue was in line with our expectations and reflects continued customer expansion as our commercial team matures and achieves higher productivity. In the comparison of Q1 of 2023 to Q1 of 2022, it’s worth noting that Q1 of 2022 benefited from $3 million of NEB licensing revenue, and net of that number, our revenue growth was 2% year-over-year. Gross margin for the first quarter of 2023 was 39.6%, compared to 49.3% in the first quarter of the prior year. Gross margins were driven down primarily by customer mix, including assay services completed for our work with the Human Technical Institute.

As mentioned during our last earnings call, we expect full year gross margins will return to the 50% plus range as customer mix shifts in future quarters. Total operating expenses for the first quarter of 2023 were $48.3 million, an 8% increase from $44.6 million in the first quarter of 2022. R&D expenses for the first quarter of 2023 were $14.1 million, compared to $13.8 million in the first quarter of 2022. Sales, general and administrative expenses for the first quarter of 2023 were $34.2 million, including nearly $1.3 million in non-cash executive transition charges, compared to $30.8 million in the first quarter of 2022. On a cash basis, our operating expenses align with our expense reduction efforts. For clarity, our full year GAAP operating expenses are expected to be around $170 million with stock compensation being approximately $25 million.

Adjusted EBITDA for the first quarter of 2023 was a loss of $36.1 million, compared to an adjusted EBITDA loss of $32.3 million in the first quarter of 2022. Please see our press release on filed with the SEC as of this afternoon for a reconciliation between GAAP net loss and non-GAAP adjusted EBITDA, and we ended the quarter with $500.6 million of cash, cash equivalents and short-term investments. As expected, Q1’s burn of $39 million was higher than we anticipate for the remainder of the year due to the impact of various 2022 restructuring charges. We expect more modest restructuring charges in Q2 with quarterly cash burn decreasing sequentially for the remainder of the year. We reiterate our guidance of $120 million or less in total cash burn for 2023.

Turning to our full year outlook, we are reiterating our 2023 revenue guidance of $80 million to $84 million, driven primarily by assay services and product sales. We believe this guidance range reflects the appropriate outlook for our business as we lay the foundation for meaningful top line expansion in future years. As Adam expressed, our primary objective in 2023 is to apply more rigorous focus, process and fiscal discipline across the organization. Our progress in the first quarter is reflective of that with our commercial performance and cash burn tracking to plan. At this point, I would like to turn the call back to Adam.

Adam Taich: Thanks, Shaun. With that, we will open it up to questions. Operator?

Q&A Session

Operator: Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from the line of Dan Brennan of TD Cowen. Your line is now open.

Operator: Okay. Please standby for our next question. Our next question comes from the line of Dan Arias of Stifel. Your line is now open.

Operator: Okay. Please standby for our next question. Our next question comes from the line of Kyle Mikson of Canaccord. Your line is now open.

Operator: Please standby for our next question. Our next question comes from the line of Brandon Couillard of Jefferies. Your line is now open.

Operator: At this time, I would now like to turn it back to Adam Taich for closing remarks.

Adam Taich: Yeah, I want to just thank you all for joining us. We’re excited about the progress that we’re making and we look forward to speaking to you next quarter. Thank you.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.