SomaLogic, Inc. (NASDAQ:SLGC) Q2 2023 Earnings Call Transcript

Adam Taich: Sure, Dan. I think the way you’re thinking about that is great. I mean, I don’t want to provide specific quarterly guidance on the top line. But I mean you can — we’re halfway through. And so the math is fairly simple from that point out. We do expect we’ll continue to see uptake on the authorized sites. So you start to see more of that as we progress through the year. That said, it’s still a fairly small number of sites. We would expect that to be a little lumpy. And we’ve got a really nice pipeline on the services side of the business. And so I would expect the complexion of the business certainly won’t change overnight. There’s going to be ebbs and flows as it relates to mix between services and the product revenue, the kit revenue. But I think we would expect more of sort of what we’ve been seeing here in the first half.

Operator: Our next question comes from the line of Dan Brennan of Cowen.

Daniel Brennan: Maybe just on the kit business. You talked about doubling the number of sites. How many are in total today? So where do you expect to end the year? And then can you walk through some of the experience that the customers are having with these kits, namely what’s the kind of output they’re getting versus if they were to send the results to your lab to run in Colorado? Are they the same? Kind of what’s the training required for that? And then kind of any flavor just on the initial spending per customer for kit how that’s working out.

Adam Taich: Sure. Thanks, Dan. Yes. So when we did our year-end release, we had 8 sites — 8 authorized sites up and running. We made a commitment to double that by the end of the year. We’re well on track to do that. we’re on pace to have at least 16 sites by the time we ended the year. It’s really important that we’re not only selecting fantastic partners, which we have been. But to your point around output, it’s extremely important that these sites are successful. And so we’ve been investing, and it’s one of the areas we’ve invested in. It’s still relatively small on a sort of a broad scale, but compared to where we were a year ago, we’ve invested heavily in field application support. We really need our customers, and particularly, in those geographies that we haven’t been able to reach with the services offering, China being a great example of that.

It’s critical that the customer experience and the data and the output that they’re getting is consistent and equivalent with what they’d be getting if they were sending samples to us in boulder, and that’s what we’re seeing thus far.

Daniel Brennan: Just on gross margins, could you walk through a little bit more color about why the lowering. I know you cited royalty revenues, but they were kind of this into 1Q. So I don’t think we were aware that, that was a big driver of your guide for the year. Is there any impact from the kit versus the service side of the business? Just some more color on kind of gross margins.

Adam Taich: Sure, Dan. Let me start with that, and then I can turn it over to Eliot for additional color, if needed. What we really saw coming out in Q2 was less around sort of the product mix between service and kits and just more as we’re ramping up our manufacturing campaign as it relates to 10K. We had a significant production ramp and some associated manufacturing variances as we were ramping up in Q2. Eliot, anything you would add?

Eliot Lurier: No, I really think it’s a mixture of that. We had the variances in Q2. And then if you’re comparing the prior period, you’ve got royalty revenue with no cost of goods.

Operator: Our next question comes from the line of Brandon Couillard of Jefferies.