Greetings. Welcome to the Singular Genomics Systems, Inc. 1Q 2023 Earnings Conference Call. All participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Philip Taylor. You may begin. Thank you, operator. Presenting today are Singular Genomics Founder and Chief Executive Officer, Drew Spaventa, and Chief Financial Officer, Dalen Meeter. Earlier in the day, Singular Genomics released financial results for the 3 months ended 31 March 2023. A copy of the press release is available on the company's website. Before we begin, I would like to inform you that comments and responses to your questions during today's call reflect management's views as of today,9 May 2023 only and will include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations, and other information related to our financial and operating results, plans, and strategies. Actual results may differ materially from those expressed or implied by the statements as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission, including our most recent Form 10-Q and 10-K filings and the Form 8-K filed with today's press release. Our SEC filings can be found on our website or the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements. Please note that this conference call will be available for audio replay on our website at investor.singulargenomics.com in the Presentations and Events section. With that, I will turn the call over to CEO, Drew Spaventa. Good afternoon, welcome to Singular Genomics' 1Q 2023 earnings call. It was another productive quarter, and we look forward to updating you on the progress made across the business. We will focus our update on the following four key areas. One, commercial execution. Two, market opportunity. Three, operational execution. Four, our innovation pipeline. Starting with commercial execution, I am pleased to report another positive quarter of commercial progress for the company, including new G4 shipments, an increase in the order book, and increasing system utilization in the field. I am proud of the team's work during a busy Q1. We shipped three G4 systems during the quarter. This included two academic labs and a commercial clinical lab. We are encouraged to see the G4 getting traction across different customer segments, which we believe is a testament to the value proposition of the speed, power, flexibility, and accuracy. Our customer service and support team was actively engaged with system shipments, installations, and trainings during the quarter, contributing to sequential quarter-over-quarter revenue growth as we recognized revenue on 3 G4 instrument placements in addition to shipping one reagent rental during the quarter. Customer feedback continues to validate the G4's value proposition as it relates to use cases in the field. For example, the University of New Mexico noted that, quote, "Overall, we are very pleased with the performance of the G4 and with the support we have received from Singular Genomics. Our core facility has many users doing different kinds of projects, and the G4 fits perfectly into that setting. We have successfully used the G4 for bulk RNA-seq, 10x Genomics single-cell RNA-seq, and for epigenetics assays like ChIP-seq and CUT&RUN assays." End quote. In addition, I recently had the opportunity to visit several customers and prospective customers in the Boston area. The feedback on the G4 was positive, and they were impressed with the fast run times, flexibility of four flow cells with individual lanes, and quality of the system, noting the consistency of data across flow cells in a run. Early customer utilization and the rampant consumable pull-through is still in its early stages, and we expect this to increase over time as customers gain experience with the system and move more of their work onto the G4. Consistent with the launch of any new and complex technology, we intend to continue implementing enhancements to the system, which are designed to further improve usability and robustness. We expect this to support increasing utilization and consumable pull-through for systems in the field over time. I want to sincerely thank our early customers for their continued partnership and support in our mission to accelerate genomics for the advancement of science and medicine. Turning to market opportunity. We remain confident about our TAM, or total addressable market, and the G4's product market fit. We continue to believe that over half of the roughly $6 billion NGS market today is broadly addressable by mid-throughput sequencers such as the G4. This portion of the market is predominantly made up of about two-thirds research and translational labs and one-third clinical labs running applications such as targeted panels, RNA-seq, and single-cell RNA-seq. The G4 addresses these customers' needs and provides a compelling alternative in a market that is today largely served by a single NGS provider. Our sales funnel is strong and growing, with triple-digit qualified sales opportunities. A qualified sales opportunity fulfills these four criteria. One, there is a specific need. Two, there is budget available. three, we are engaged with the decision-maker. Four, there is a near-term timeline to purchase. While the funnel spans a variety of market segments, we are seeing early traction with academic core labs. Core labs are often managing varying sample volumes and output requirements from a wide range of applications. The combined speed, power, and flexibility of the G4 can enable these labs to optimize sequencing runs, scaling up or down based on the needs of their PIs experiments and delivering results in less than a day. Beyond academic core labs, the speed and flexibility of the systems make them ideal for clinical research and commercial labs. We recently showcased the G4's performance capabilities along with some innovative methods and applications at the American Association for Cancer Research Conference in Orlando. Here, we presented posters and data sets demonstrating the G4's ability to deliver data with more speed, power, and operational efficiency than any other sequencing technologies in the market for applications in cancer research, including rapid somatic and germline variant detection. While the clinical market segment represents a smaller part of the sales funnel today, we expect this to grow over time as we increase our install base, grow the number of customer reference sites, and establish the G4 in the market. Turning to operational execution. Our focus has been on optimizing the supply chain, streamlining the manufacturing process, and continuing to improve the usability and robustness of the G4. We continue to execute on a foundational set of capabilities and infrastructure to support our next phase of growth in the H2 of the year and into 2024. In operations, we are taking steps to improve our G4 production capabilities. These steps include increasing redundancy and alternative suppliers for certain critical components and working with vendors to refine specifications and improve component testing. Internally, we are implementing additional QC testing for incoming parts, reducing the time required to build and bring up the G4 instrument, and enhancing field service and support. We recently received ISO 9001 certification for our dedicated manufacturing facility in San Diego, a milestone accomplishment that represents our commitment to continual improvement and product quality. Turning to our innovation and product pipeline. We are excited about the pipeline of innovations, including improvements in performance and specs on the G4, higher throughput consumable kits, and specialty application kits with novel content and workflows for specific applications. We have started shipping F3 flow cells to early access customers. The F3 flow cell will expand our consumable offerings on the G4, doubling the number of reads and throughput for the most widely run applications. Earlier this year, we announced the launch of our Max Reads kits for single-cell sequencing. This kit is designed to allow users to get up to 800 million reads per flow cell or 3.2 billion reads per run. Max Reads provides a novel method to achieve NovaSeq level pricing for single-cell sequencing on a benchtop system. We look forward to offering this kit in early access format later this quarter with a full commercial release in Q3. With the F3 and M Series single-cell kit both widely available in the H2 of 2023, we expect to see an uptick in G4 system demand as these highly differentiated kits provide significant value to a wide set of customers in our target markets. We also expect an uptick in reagent pull-through, given the higher data outputs and corresponding kit prices of both the F3 and Max Read kits. Finally, we continue to progress the PX system with a focused team working on the PX instrument and methods development. We are also engaged with several potential TAP or technology access partners. We are collaborating with these KOLs to demonstrate novel applications utilizing the PX's high throughput in situ sequencing technology to provide spatial information in single cells and in tissue. At this stage, we are busy in the lab working on this system and look forward to sharing additional updates as we continue to develop. Before turning the call over to Dalen, I would like to provide some directional commentary on the 2023 outlook. We continue to believe a moderated deployment of systems in early 2023 is appropriate to lay the right foundation for sustainable success and prepare for a scaling phase in the H2 of the year. We are seeing a positive start to the year with respect to the commercial engine. Our sales funnel is strong, and the number of qualified opportunities is growing. We are getting early traction in the academic segment, with six of our eight G4 systems in the field being placed in academic labs. We believe budget cycles in this customer segment will be more back-end loaded during the year, resulting in purchases in the H2 of the year. In addition, customer interest in our F3 and Max Read kits remains high for many of the opportunities in our funnel. We believe this will be a significant driver of adoption as they become more broadly available in the coming months. Now, I'll turn the call over to Dalen to go through the details of our 1Q financial results. Thank you, Drew. I'll start by covering the Q1 2023 financials. I'll provide additional directional remarks on key metrics for the rest of 2023. Revenue for the 1Q of 2023 totaled $863,000, made up predominantly of the revenue recognized on an additional three instrument placements during the quarter. Operating expenses for the 1Q of 2023 totaled $25.4 million compared to $22 million for the 1Q of 2022. These totals included non-cash stock-based compensation expense of $3.1 million in Q1 2023, and $3.6 million in Q1 2022. The year-over-year increase in total operating expenses was driven primarily by scaling SG&A headcount to support our growth for the G4 launch. Net loss for the 1Q of 2023 was $23.6 million, or $0.33 per share, compared to $22 million or $0.31 per share in the 1Q of 2022. Our weighted average share count for the 1Q used to calculate net loss per share was approximately 71.9 million. Ending cash equivalents and short-term investments, excluding restricted cash, totaled $226.1 million. Turning to comments on 2023, the G4's value proposition is being validated through instrument placements and field discussions with our target customer market segments. Our team is supporting early G4 placements, installing new systems, training and supporting customers, and working to drive consumable utilization. As expected, pull-through is in the early stages, we anticipate learning more about early customer utilization patterns over time. As mentioned by Drew, we expect sales to be concentrated in the H2 of the year, resulting from budget cycles and commercial releases of the F3 and Max Read kits. Regarding operating expenses, we are steadfast in our focused expense management. While we do expect 2023 investment to modestly increase in areas directly related to the G4 success, we intend to manage existing resources to provide cash runway into the H2 of 2025. Thank you. Back to Drew for closing remarks. Thank you, Dalen. In closing, I'm proud of the progress our team has made during the quarter with our earliest customer placements. The G4 value proposition is resonating. Commercial interest is growing in our target markets. We are taking the right steps to build the foundational infrastructure to scale our operations over the course of the year. We have a strong product portfolio of system improvements, new kits, and an innovation pipeline that positions us well for the future. Our team remains confident and committed to driving long-term value by executing on our product launch, prioritizing key activities and investments to ensure continued innovation, meticulously managing expenses, and building a business with sound fundamentals and a path to profitability over time. Now, let's open up to the questions. Operator? Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Your first question is coming from Tom Stevens at TD Cowen. Mr. Stevens, your line is live. Got it. I was on mute there. My mistake. Just a quick one on placements. Fees for the quarter was about in line with consensus it looks like, and you're baking a much bigger back half from. Can you talk about maybe some of the manufacturing challenges you continue to see and maybe be more precise with some areas that you continue to work on? Then I've got some follow-ups from that. Yeah. Hey, Tom. Thanks for the question. This is Drew. You know, I think overall, we're really encouraged where the system is and how the customers are using the system. On the manufacturing side, with a complex instrument such as the G4, it's very common that you're gonna have learnings, and you're gonna have a variety of ways that you're improving the robustness and reliability of the system and also incorporating upgrades such as additional kits, faster run times and run modes. I'd say the core of what we're doing right now is working on, you know, vendor management for quality control of incoming complex subcomponents. We're also doing a lot of work doing quality control testing of those components internally before we put them into the instrument. Then there's also a number of learnings that, you know, after putting the first four or five instruments in the field back in November, December, you know, you learn things in the field. There are small places where you wanna make upgrades, change things, to the system or the subcomponents, and this is just very natural. Part of, you know, the slower and moderated pace in the H1 of the year is, you know, taking the time to really incorporate those changes and those improvements, and make the most robust and reliable systems you can. It's really just not one thing, it's just all of the normal things that go with a complex system with many moving parts and making sure you're assembling them and building them in a predictable way and working through all the challenges that are very typical. It's not one thing. We're comfortable where we are, and it's just, you know, it's gonna take time to harden the system and get it to the point where it's kind of gold standard level, you know, manufacturing efficiency like, you know, companies that have been doing it for many years with really large budgets. Yeah, that makes sense. I guess in terms of capacity for production in the back half, given a kind of slightly more aggressive ramp than initial, should we expect maybe mid-teens capacities kind of where you're at at the moment or going into the back half? Well, I think we're very aware of the consensus numbers, and I think, you know, for the comments we made for the H1, it's really kind of getting our feet under us, moderating the pace of deployments. Definitely there's a lot of demand out there, so it's just making sure we're ready to really scale. In the H2, I think our plan is to be, you know, more in line with being able to have supply and demand kind of in sync 1 to 1 and kind of ramping through Q3 really into Q4. We're aware of the consensus numbers. Again, part of this is making sure that as you're scaling, you have the right field application support, technical support, you're setting expectations the right way, and it's all about the customer. Yeah, we believe capacity will go up in the H2, and it's trending that way, and so is demand. I think the important thing is to make sure we scale appropriately so we can ensure our customers are happy and they're successfully using sequencers. Right. Just one last one on the PX, if I could. It's great to hear you guys have some TAP, TAPs, you know, almost ready to go. I guess, could you give any more color as to kind of what those are, what kind of projects they'll be embarking on or what kind of checks they'll be running the PX with? Yeah, you know, we'll make a note to provide more color on the next call on this. What we can say is there's three partners that we've kind of engaged with all leading academic institutions and kind of KOLs in their space. We've really picked a variety of applications that help demonstrate the novel capabilities of being able to sequence in cells or in cells and tissue that the PX offers. We'll work with those partners, you know, over the next few months to receive samples, run assays, provide that data to them, then to work with them to really show new capabilities and new things that the PX can offer that other systems can't. Over the course of the year, we'll share more information on that. Again, I think we're in a place where we have a very lean team working on it. We, you know, we really wanna set expectations modestly on, you know, what we can do. We turned away many potential TAP partners just 'cause we don't have bandwidth right now. We chose three that we think are awesome partners that will really be, you know, good examples of these novel capabilities that the in situ sequencer offers. Right. Yeah, I'll hold back from the queue. Thanks, guys. Your next question is coming from John Sourbeer at UBS. Good evening, thanks for taking the question. You know, it sounds like you're having some success in the academic markets. Just any additional color when you're going to those customers on where you're thinking that you're winning. I guess, you know, how do you think that the potential for the Max Read kit when that is launched, how that could fit into those conversations with the academic labs? Thanks. Hey, John, this is Drew. Thanks so much for the question. I think that the G4 value proposition just fits really well for the academic community. If you think about how a lot of the academic core labs, or even the investigator labs are doing sequencing, the ability to have fast turnaround times, which gives people the ability to take a sample, run an experiment, and get data faster, mixed with the ability to scale up or down to press go. What I mean by that is the instrument's ability to run in sub 24 or 20 hours or even 15 for, you know, shorter kits. That's one part. The part that's equally important is that you can load up a single flow cell. You don't have to fill up, you know, 400 gigs worth of run capacity. Giving them that ability to scale down and press go at a cost effective price point is really attractive. By the same token, a lab that has higher throughput or has more samples that come in in a given day or week, they can fill up multiple flow cells or go to a higher throughput flow cell, and it doesn't really change the cadence in which they're operating their lab. It's just a really nice fit from a workflow and a usability standpoint for those labs. I think the other thing that's really nice about the G4 is individual lanes. A lot of core labs sell individual lanes, or they sell individual samples, and other sequencers don't have individual lanes. Their ability to say, you can have a single lane out of a 4-lane flow cell on an F2 or an F3, and that's only gonna cost you know, $100 or $200 or $300 bucks, that's very unique. It doesn't exist somewhere else. Typically, people are buying much higher price points, and they are forced to buy more data for a given run if they want their own lane. It's really kind of providing a unique solution that doesn't exist. That's why I think the academic labs are so interesting. I think one other point is that the application set that we're offering and the library prep partnerships that we've developed are all right in the sweet spot of most of what these academic labs are running, which is RNA-seq, single-cell sequencing, and then, you know, targeted panels. It kinda just fits on all fronts, and that's why I think there's so much traction and interest there. Max Read and F3 is just an extension of what I already talked about. It's just providing higher throughput and even better economics for labs that have maybe more volume or more variability in volume. On the Max Read, specifically for single-cell, again, there's a lot of single-cell that's done in the academic segment right now, and having that kind of capacity to get 800 million reads in a single flow cell at about a $1 per million reads is just, it's unique. It doesn't really exist. It's a really attractive value proposition. A lot of the customers in the funnel are waiting for that. They're saying, "Once you have that, I want the system. When will you have it?" It's an exciting place to be, but also, you know, we wanna get it out as soon as possible and, you know, capture those customers that have interest in that kit. Appreciate that. I know it's early days, but now that you have placements out in the field, just any color you can find on learnings from those initial installs, any areas you could also touch on, like software or just how those users are starting to ramp on the G4. Yeah. I'd say broadly speaking, we're encouraged by the diversity of applications. That's something that's just cool to see, kind of, you know, different types of applications, everything from, you know, paired-end exomes and, you know, targeted panels to single cell, to RNA-Seq and different library prep providers, you know, working on the system. It's really cool. Different customers are ramping at different rates. Some people are using the system, and we're learning things, you know, much quicker when you see usage day in and day out in the third-party hands. You know, I talked about that directly and transparently, that we are learning things about the systems that you only learn when you have somebody using the system at high frequency in their hands. We're taking all those learnings, supporting the customer and incorporating that into, you know, all types of upgrades to the system. On the software side specifically, you know, that's an area where it's pretty common with other systems and kind of the existing, you know, major player out there that you will see upgrades in software over time that can allow faster run times, better error handling. It could be, you know, a UI component. There's always gonna be software upgrades that you make over time that improve and enhance the user experience, and those are also, you know, typical things that we're working on, probably at a more frequent cadence early on with an initial launch than when you're a hard and established product that's many years in. I guess last one here on my end. I think you mentioned in your prepared remarks, Drew, that there was 1 reagent rental in addition to actually the selling cycle. Any color there on the opportunity and, you know, how you think that could potentially expand some of the user base. Thanks. Yeah, it's encouraging. I mean, I think we've talked about it before that we wanna have kind of a menu of options on how people could get a system. You know, we support obviously the sale of a piece of equipment. We have a lease option, we have a reagent rental option. I think there will be interest in the reagent rental. We're starting to see it, the traditional way, and the majority of our interest has been in the traditional capital purchase. I think the reagent rental is a really nice way that somebody could get into a system, you know, without money out of pocket up front, and with kind of a commitment over time to use the system that still has better economics on the consumables than if you were to buy a system and run a current mid throughput kit. It's kind of like a very attractive if you look at it in view or in context of what's the existing offering on kind of a NextSeq benchtop system. Got it. Thanks for taking the question. Of course. Thank you. Your next question for today is coming from Michael Ryskin at Bank of America. Great. Thanks for taking the question, guys. First one is just gonna be a quick tack on to the very last little bit you said there. I just wanna make sure I reconcile the numbers correctly. I think this quarter you said you shipped three, and it looks like you accounted revenues for three. In 4Q 2022, you shipped 5, but you also recognized revenues for three. Are the other two that are part of the install base now, are both of those reagent rental? Is that the delta? Were there some that were sort of like, you know, really late in March that you just didn't see the revenues from? Yeah. Hey, hey, Mike, this is Dalen. We had shipped five systems at the end of December, and in Q4, we had recognized revenue on three. rolled into Q1. We recognized on those two, shipped three new ones, recognized on One. One was a reagent rental, and the other one we'll expect to recognize here in Q2. Fantastic. That just making sure, you know, two plus two still equals four. All right. The real question then is consumables pull-through and utilization. I know you're, you know, given what you just said, you're five, six months into getting these boxes up. Anything you can say in terms of like the first customers out there, are they, you know, reordering and reordering and reordering at a faster rate when it comes to consumables? Anything you can say in terms of when do you think those initial placements are gonna hit steady state from a pull-through perspective? Is that four quarters post, you know, a plate shipment or install? Just to give us some idea of how to think about the consumables ramp over time. Yeah. Yeah, good question. It's still very early days, like you'd mentioned, right? You know, we're learning about the utilization patterns. You know, our team's out there engaged with customers, we're gonna definitely learn more about how, you know, customers ramp up the utilization curve here over time. You know, the consumable revenue in Q1 was, you know, $34,000, still pretty small, predominantly instruments in the quarter as you'd expect. You know, we do go through, you know, and offer discounts to some of these early customers. You know, I think that's pretty normal with a, with a launch like this. You know, over time, I think as they get, you know, used to the system, comfortable with it, you know, turning their applications over, you know, more and more volume will start to move over there, and our teams are, you know, helping engage on that. And I think just as they understand kind of the value proposition of the speed and flexibility, that just, you know, adds more comfort to move and sample volume over. In addition to that, you know, we're gonna offer, you know, the F3 kit, you know, more broadly, the Max Read kit. You know, both those increase the throughput and essentially the ASP, you know, on the consumables. That's gonna, you know, I think be a nice tailwind for us once we get that more broadly issued. We really think about this as, you know, kinda multi-quarter ramp up, you know. You know, so that could be anywhere, you know, 6, 9, 12 months, you know, to get to kind of a steady state utilization. That's how we think about it internally. Like I said, you know, we're definitely learning and we'll share more as, you know, we see, you know, more customers running them out in the field here over the next quarter. Michael, just to tack on. Dale mentioned discounting. I don't know if you misspoke or you meant to say, but a credit of reagents for early customers. As they go through their credits, obviously we're not booking revenue on reagents reflected in, in the realized revenue. As people run through their reagent credits, it'll start to show up as revenue as they ramp as well. We kind of expect that to start to show up more. That's right. Got it. Makes sense. Then the last one, if I can squeeze one more in? Just to make sure, I think this was kind of asked, but I don't know if I caught the answer properly, so would appreciate the repeat. You know, you talked previously about two to four shipments per month, definitely back-end loaded. Is that still the right way to think about 2023 overall for the year as a whole, even with the back half ramp or two to four as an exit rate to the year? Just it's a number you've talked about the last couple of quarters. I wanna make sure if that's still on the table. Yeah. I think in the last call, we kind of redirected to kind of on the lower side of that and moderated pace for the H1 and then really scaling in Q3 and Q4. Beyond that, I think we've pointed to kind of the consensus numbers, and they kind of show a more appropriate scale quarter-to-quarter through the back of the year. I think that that's kind of a good guidepost for how we're thinking about it. Definitely Q3 and really Q4, we see, you know, kind of a confluence of factors that lead us to believe those will be really strong quarters for us and we have some real start to ramp. All right. Thanks, guys. This concludes the question and answer session and conference call. You may disconnect your lines at this time. 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