BNR 燃石医学 2023年第4季度财报电话会议文字稿中英文

Operator

各位好，感谢您的耐心等待。欢迎参加燃石医学2023年第四季度业绩电话会议。[接线员提示]请注意，今天的电话会议正在录音。在会议开始前，我想提醒您，本次电话会议包含根据修订后的1934年《证券交易法》第21E条以及1995年美国《私人证券诉讼改革法案》所定义的前瞻性陈述。这些前瞻性陈述可以通过诸如"将"、"预期"、"预计"、"未来"、"打算"、"计划"、"相信"、"估计"、"目标"、"有信心"等类似术语来识别。非历史事实的陈述，包括关于燃石医学信念和预期的陈述，均属于前瞻性陈述。此类陈述基于管理层当前的预期以及当前市场和运营状况，涉及已知或未知的风险、不确定性和其他因素，所有这些都难以预测，且许多因素超出燃石医学的控制范围。前瞻性陈述涉及可能导致实际结果与任何此类陈述中所包含内容存在重大差异的风险、不确定性和其他因素。除非适用法律要求，燃石医学不承担因新信息、未来事件或其他原因而更新任何前瞻性陈述的义务。现在，我将会议交给今天的主讲人，韩昱晟先生。请开始。

Yusheng Han

谢谢，Gena。我是燃石医学的创始人兼首席执行官韩昱晟。今天，我们的首席财务官李雷和首席技术官张乔也在线。非常高兴能与我们的投资者分享年度财务报告。让我们翻到第3页，这解释了我们的起步和发展历程。我们从2014年的治疗选择开始，随着NGS技术的发展，我们将市场扩展到早期检测、MRD[听不清]以及生物制药服务。接下来看第4页。随着过去三年宏观环境的变化，我们制定了专注于效率提升、实现盈利的战略。我们希望在去年——我们希望在去年实现推动销售效率、提高毛利率、降低行政管理费用以及减少研发费用的成果，首要目标是让公司实现盈利。在推动销售效率方面，我们计划提高人均销售生产力。同时，随着资本市场降温，我们受益于更加理性的行业竞争。第二是提高毛利率。我们做的第一件事是扩大销售规模，并以此为基础。此外，我们实施了利润率改善项目，包括减少对销售和营销费用的依赖，以及通过与供应商合作降低商品成本。第三是降低行政管理费用。我们削减了管理费用并降低了固定成本基础。第四是减少研发费用，因为我们的主要临床项目，如多癌种早期检测已完成，研发热潮正在降温。在新投资方面，我们非常谨慎，仔细计算净现值，但我们仍以保守的方式投资于MRD、CDx和MCD。第5页解释了我们在推动销售效率方面取得的成果。您可以看到，在2022年第二季度，销售费用占比达到了77%的最高点。从那时起，我们逐步且显著地将这一数字降至2023年第四季度的38%。这是一个显著的变化，我们预计在2024年这一数字将进一步下降，这将大幅提高我们的销售费用效率。第6页是我们的非GAAP毛利率占收入的比例。商品成本是NGS行业，尤其是肿瘤学领域的重要成本。因此，我们不断更换供应商，并在运输和其他方面就商品成本进行谈判。我们可以看到，毛利率从2021年的72.5%持续增长到2023年的74.3%。我们预计，2024年毛利率将继续增长。在第3页，我解释了如何降低行政管理费用。我们可以看到，主要的削减来自员工人数和相关成本的减少，其次是专业服务费用，如法律费用。第三是办公空间的缩减。我们关闭了上海办公室的部分区域。此外，在2024年，我们预计通过与土地所有者合作，进一步减少办公空间。还有其他方面的削减。总体而言，2023年，我们的行政管理费用减少了约6000多万元人民币。现在看第8页，从第8页到第10页，我将交给我们的首席财务官李雷来解释图表和数字。李雷，请开始？

Yusheng Han

Thanks, Gena. This is Yusheng Han, the CEO and Founder of Burning Rock. And today, you also have our CFO, Leo Li; and CTO, Joe Zhang online. So very glad to share the annual financial report with our investors. So let's turn to Page 3 that explains that how we started and how we evolved. We started from therapy selection from 2014 and then with the development of NGS technology, we expanded our market to early detection to MRD [indiscernible] to biopharma services. And in -- let's turn to Page 4. So with the macro environment changes in the past 3 years, we have makeup strategy dedicated to the efficiency gain driving towards profitability. And our -- we want to deliver in the early next -- last year, we want to deliver the result on driving sales efficiencies, improving gross margin, reducing G&A expenses and also reducing R&D expenses and the target is making the company profitable first. And in terms of the driving sales efficiency, we're going to -- we plan to increase the sales productivity per head. And also with the capital market cooling down, we benefit from a more rational industry competition. And the second is the improving gross margin. So the first thing we do is we have a scale of our sales. So we'll leverage on that. And also, we delivered our margin improvement project, including cutting reliance on sales and marketing expenses and also cutting the cost of goods by partnering with the suppliers. The third is reducing G&A expenses. We cut the overhead and lowering fixed cost base. And the fourth thing is reducing R&D expenses as our major clinical programs, such as multi cancer, early detection complete and the burning wage is cooling down. And in terms of new investment, we are very disciplined counting on the NPV carefully, but we still invested in MRD and also CDx and also MCD in a conservative way. So Page 5 explains how we achieve about driving sales efficiency. You can see that in the Q2 of '22, we reached the highest point of sales expense percentage to 77%. And then from there, we gradually and significantly drove the number down to the Q4 of 2023 to 38%. So there is a significant change, and we expect that in the coming 2024 the number will go down further, that increased our -- sales expense efficiency increase a lot. In Page 6, and that is our non-GAAP gross profit as a percentage of revenue. We -- cost of goods is a significant cost of NGS industry, especially for oncology. So we continuously to replace the suppliers and also bargaining with shipment and other issues in terms of cost of goods. So we can see that the gross margin continues to increase from the 72.5% in 2021 to 74.3% of 2023. And we expect that, that rate the gross margin will continue to grow in 2024. In Page 3, I explained how we reduced our G&A expenses. We can see that the major cut is a reduction in headcount and related costs. And then the professional services fees such as legal fees. And the third thing is a reduction in office spaces. We closed part of the Shanghai office. And also in 2024, I think we can see further reduction by partnering with the owner of the land to see the reduction in office space. And there's other reduction as well. So overall, in 2023, we can see that the G&A expenses reduced in terms of RMB of around, over 60 million. So in Page 8, let's see, Page 8 -- and from Page 8 to Page 10, I will hand to our CFO, Leo Li, to explain the chart and numbers. Leo, please?

Jinxiang Li

好的。谢谢Yusheng带我们了解我们采取的各项举措以及这些举措如何体现在损益表各项目中。在第8页，我们试图通过从营业利润开始，将其分解为商业运营方面与研发投资方面，以及现金与非现金项目来补充说明。在第8页，我们从报告的营业利润负1.66亿元开始。首先加回研发费用7300万元。这是为了区分已处于商业化阶段的部分与投资部分。所以首先，我们剔除研发费用。然后剔除非现金项目。三大主要项目是股权激励、固定资产折旧摊销，以及应收账款和合同资产的减值准备。这三项我们预计未来会减少。但这里，仅作说明之用，我们剔除这三项非现金项目，得到商业业务（不包括研发费用和非现金计提）的情况。按此衡量，2023年第四季度我们实现了正400万元。因此，在剔除研发费用和非现金成本的基础上，我们在2023年第四季度已经实现盈利，并且我们预计随着进入2024年，这一情况将进一步改善。第9页讨论我们的现金状况。这是我们每次季度电话会议都会展示的幻灯片。截至2023年底，我们的现金余额为6.15亿元。年内，我们的现金流出约为2.65亿元，相比2022年5.32亿元的现金流出大幅减少。因此，Yusheng描述的许多举措确实取得了成果，并对减少2023年运营现金流出产生了积极影响。展望未来，我们仍有一些非常精选的投资领域希望继续推进，并且我们预计商业运营将在2024年上半年实现盈利。结合这两个因素，我们预计2024年全年现金流出将在1.5亿至2亿元之间。我们预计2024年之后，这一流出将进一步减少。基于此，我们对至少未来3年的现金跑道有很好的可见性。因此，减少运营现金流出、充足的现金余额以及持续向盈利迈进，这就是我们试图通过第9页的数字展示的内容。然后第10页更详细地分解了我们的损益表。首先看总收入，总计为1.21亿元。按不同细分市场来看，首先，中心实验室业务大幅下降。这是我们主动减少中心实验室业务的结果，同时也反映了自2023年7月开始观察到的行业变化。因此，第四季度中心实验室业务基本延续了我们上次财报电话会议中描述的趋势。我们预计院内业务未来将占据越来越大的份额。对于院内业务线，我们在第四季度确实有一些一次性调整，这在脚注中有详细说明。如果剔除这些一次性调整，与2022年第四季度相比，2023年第四季度我们基本持平或微降1%。即使考虑调整，如果我们看与调整相关的两家医院，其潜在需求仍然强劲且大致稳定。因此，我们没有看到基础业务需求恶化，这主要与一次性调整有关。我们的制药业务在第四季度增长非常良好。第四季度实现了两位数增长，2023年全年也实现了两位数增长。2023年全年增长了59%，我们预计该业务线未来将继续增长。关于运营费用，我们在之前的幻灯片中已经花时间详细讨论过，因此这里不再详细说明。最后需要指出的是，在运营现金流出方面，我们看到运营现金流逐季度改善，这是Yusheng描述的我们实施的一系列项目和举措的结果，我们的运营现金流出在2023年全年显著改善。以上就是我们的准备发言。如有任何问题，请随时联系我们。今天的电话会议到此结束。感谢大家今天的参与。

Jinxiang Li

Sure. Thank you, Yusheng, for taking us through the initiatives we've taken through and what has that translated into the P&L lines. On Page 8, we are trying to supplement that by starting from our operating profit and break that down into what is the commercial aspect versus the investments in R&D and also what's cash and noncash. So on Page 8, we start with our reported operating profit of a negative RMB 166 million. We first add back our R&D expenses of RMB 73 million. So this is to separate what's already at commercial stage versus what's in the investment. So first, we take out R&D expenses. Then we take out noncash items. The 3 major items are share-based compensation, depreciation and amortization of our fixed assets. And lastly, the provision of receivables and contract assets. So these 3, we actually expect to decrease going forward. But here, just for illustrative purposes, we take out these 3 noncash items and get to where we are on the commercial business, excluding R&D expenses and noncash provisions. And on that measure, we are at a positive RMB 4 million for the fourth quarter of 2023. So on that basis, excluding R&D and excluding noncash costs, we are at profitability already in the fourth quarter 2023, and we expect this to further improve as we head into 2024. Page 9 talks about our cash position. So this is a slide that we have been going through on each of our quarterly calls. At the end of the year 2023, we ended with a cash balance of RMB 615 million. In the year, we had cash outflow of about RMB 265 million, this is a significant reduction compared to the cash outflow of RMB 532 million in the year of 2022. So a lot Yusheng has described did deliver to results and positive impact on reducing operating cash outflow for the year 2023. Going forward, there are still a few very selective investment areas that we want to keep on going and we expect the commercial operation to reach profitability in the first half of 2024. So these 2 factors combined, we expect an outflow in a range of RMB 150 million to RMB 200 million in a year 2024. We expect this outflow to further decrease in the year after 2024. So on that basis, we have very good visibility on our cash runway for at least 3 years. So reducing operating cash outflows, ample cash balance and continued progress towards profitability, that's what we're trying to show by numbers here on Page 9. Then Page 10 breaks into our P&L in more detail. First, looking at the top line, which is at RMB 121 million in aggregates. And by the different segments, first, Central Lab had a substantial decrease. This is our active efforts going away from Central Lab, but also industry change that we saw starting July in 2023. So fourth quarter for the Central Lab is pretty much a continuation of the trends that we described on our previous earnings call. So we expect In-hospital to take greater and greater share going forward. For the In-hospital line, we did have one-off adjustments in the fourth quarter, that's described in detail in the footnote. And if we take out that one-off adjustments, we are pretty much flat or negative 1% growth in the fourth quarter in 2023, compared to the fourth quarter 2022. And even for the adjustment, if we look at the 2 hospitals related to that adjustment, their underlying demand remains robust and roughly stable. So we're not seeing deterioration on the underlying business demand, but it's mostly to do with one-off adjustments. Our Pharma segment grew very well in the fourth quarter. It grew double digits in the fourth quarter and it grew double digits in the year of 2023. It grew 59% in the year of 2023, and we expect continued growth for that line going forward. Now on the operating expenses, we have taken time to go through that in the previous slide, so I'm not going to walk through them in detail. And finally, to note here, I think on the operating cash outflow side, we have seen improving operating cash flows quarter-over-quarter, and that is the result of what Yusheng has described of a number of projects and initiatives that we have taken through and our operating cash outflows have improved significantly throughout the year in 2023. So that concludes our prepared remarks. For any questions, please feel free to reach out to us. And that would conclude the call here today. Thank you, everybody, for joining us today.

Operator

今天的电话会议到此结束。感谢各位的参与。您现在可以断开连接。