Good morning, and welcome to iSpecimen First Quarter 2023 Earnings Conference Call [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Tracy Curley. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to iSpecimen First Quarter 2023 Results Conference Call. With us on today's call is Tracy Curley, Chief Executive Officer; Benjamin Beilak, Chief Information 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, intend, plan, 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, 2022, 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. Tracey, please go ahead.

Good morning, everyone, and thank you for joining today's call. I will begin with a review of current business and operational activities and then discuss our financial performance for the 3 months ended March 31, 2023. We will then open the call for questions. Allow me to begin with a quick review of the Q1 2023 filing, a number of which were also touched upon during our year-end call in March. In January, I was appointed to the position of permanent CEO, and Eric Langlois was named Chief Revenue Officer. Although we have new titles, Eric and I have been with iSpecimen since 2020 and 2016, respectively. Armed with our new titles, we have been working closely with the entire iSpecimen team to execute our strategic plans and key initiatives that were identified and communicated at the end of 2022, setting the stage for an exciting and challenging 2023. Eric is leading the efforts of our recently realigned commercial team to increase our customer base and improve the overall customer experience. New responsibilities also include addressing supplier constraints as well as supporting innovation, collaboration and productivity across our lines of business, all of which are required to drive scalable and profitable growth. I am pleased to report that a number of the initiatives we launched in Q4 2022 to resolve operational inefficiencies contributed positively to our Q1 outcome, resulting in revenue of approximately $3 million, a 17% increase year-over-year. These results were in line with internal expectations, which also reflect the seasonality of our business. Historically, Q1 revenue is lower than Q4 revenue as researchers new budget cycles typically do not kick in until the March-April time frame. iSpecimen is committed to investing in and developing our technology. To support these efforts, we made a significant investment of approximately $1.9…

We will now begin the question-and-answer session [Operator Instructions]. The first question comes from the line of Matt Hewitt with Craig Hallum Capital Group.

Maybe first up, a broader question. What, if any, impact are you seeing from your customers relating to the decline in biotech funding for a small pharma and biotech companies. Are you seeing any impact from that? If so, what kind of a headwind is that creating?

We are. And it is concerning to us. I'm actually at a conference in Seattle. So it's like Slide 5.30 for me. And in talking with a lot of the companies here, they're seeing the same thing. And we don't know how long this is going to last. So it is a concern to us. we're seeing a slower time to get from quote to PO. We're seeing lower payments on accounts receivable. We also have several of our customers that were smaller boutique life science companies that we've got notification in Q1 and then with my legal bankruptcy. And so we had to increase our allowance for doubtful accounts. So we are seeing that there are a lot of things that we are doing internally to see if we can overcome specifically the conversion from quote to PO a little bit faster. I can turn it over to Eric, if you can talk a little bit more about that, our Chief Revenue Officer, Eric Laanglois is also online.

Yes, I'd just echo what Tracy was saying. I mean, I think what we've been seeing is companies kind of slow rolling their larger projects. Right now, which was a bit of a surprise to me in the norm of the beginning of the year. We're seeing an increase in the number of bank requests. So people that are looking for spectrum that are kind of ready off the shelf and available immediately. That seems to be the biggest adjustment is just in the past, a lot of times, companies would be starting off their projects at the very early part of the year than perspective on -- so they would have the longest possible collection run time. We just see that kind of being pushed out hearing that some certain projects are getting low together. And the larger multi-cohort type projects are just getting slower and pushed into future quarter. So I'd say just on the ground, that's probably the most significant thing we're seeing.

And [Craig], it's a little bit interesting because for Q1, we had record opportunities come in. And we did record quote, but they're stopping right before they get to the PO. Last earnings call, I talked about the fact that a lot of companies are adding additional layers of review before they move forward with projects. I think that's part of the slow roll as well that we're seeing.

Yes, that's the other part I meant to mention yes. The top of the funnel is up an aggregated approximate amount of almost 100%. So it's not that these customers are not making the request or asking [Indiscernible], the decision process, vendor qualification and all of those things is moving slower than that.

And then maybe a question on the new embedded project coordinated. I realize it's early days. First one in, what has been the initial feedback that you're getting from your partner? What kind of opportunities are you seeing even in that first site?

I'll let Eric. So this site has -- when we first talked to them, they were like sinusoidal. We need this desperately. We want to increase revenue stream with you. And so it's been really exciting working with them. Matt. And I think Eric can talk more into the details of what we're learning from that experience.

So the main thing we're seeing is that when we go into the supply conversations with a much more commercial bench, a much more commercial focus and bringing to them growth plans in the sense that we have it in the past, they're really interested in these resources. What we found, once Tracy and I have gotten involved in these meetings from a much higher executive level, we found that these sites are dying for resources coming out of COVID. And unless it's a major nationalized hospital system. They need resources just to be able to operate day-to-day, and they're looking for alternative revenue streams. So in the case of our first site that we lined up, they've been a site for a very, very long time, but they had struggled with resources to help with picking remnant -- and they also had massive FFPE pathology archive that again, they lack resources to even put these samples into a win system in any kind of searchable format. So -- and then we've come to find out through the conversation, we're actually very interested in prospective collections. They've just never really been asked. So when you look at a pilot like that, there's three different papers materially affect the amount of revenue that may be generated for themselves and also for us. And by having that resource, it wants some all of that. So we're pushing this forward and looking at additional sites, we're looking at them through the lens of what have they been doing so far? How much revenue have they been generated for us? How much is their turnaround time on feasibility assessments, just viewing projects that bring the way? And then what other opportunities are there, what also the will want to do. So that's driving force behind this conversations. But what we're finding is [Indiscernible], they're all receptive to it. And you think of things like surgical sites that see patients, you really kind of need an on-site coordinator to be able to do fresh tissue or some much more complex logistical projects. So they're pretty much all open to it, and you just have to really do a diligent job of picking the right profiles and taking the right ones to get the resources. Some of them are going to be weaker phase, but other ones are based purely in the facts of what they have available, what they haven't been able to do and what they could be not.

And then I would also say that every coordinator at every site is going to be slightly going different things. It's not a prescribed approach. We're going to give you somebody and this is what they're going to do. There's a lot of conversations with these sites about what do you actually need so that you can be successful with our program. And then the job description and the activities that the embedded curtain will be doing arterial to what they do.

And then maybe last one here. Obviously, a really nice quarter from a gross margin perspective. Was there anything kind of that hit this quarter that may not recur in Q2 or the rest of the year or should we anticipate gross margins kind of sticking up at north of 60% for the year?

Yes, I was just going to say that. I don't think you're one of our one of our strategies for unlocking quotes to PO as we are looking hard at the margins as if we can get a little bit on those to get those quotes to convert to PLC. You might see that our margin has goes down [indiscernible] revenue goes up because of all. Anything, Eric, else you want to say?

No, actually. Yes. No, I was just going to try the same thing is I've actually already authorized our [Indiscernible] doing that just because when you have kind of millions of dollars of unexpired quotes. There's obviously something going on there when we need to push them a little bit. So we have gotten feedback on pricing. So as the whole market is tightening up so the wallets. And so we're probably going to have to give a little on the margin but mostly only on the bank side. So if we unlock the prospective collections, say, midyear, we see seeing a lot more movement, that boost the margins right back up [Technical Difficulty] So that core you think of it more as a temporary effect that might last a quarter or two and then come back around and fix itself.

[Operator Instructions] This concludes our Q&A session. I would like to turn the conference back to Tracy Curley for any closing remarks.

Thank you, operator. I'd just like to thank everybody that was on the phone today and especially Matt for all of his really great questions. Have a great day, everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.