Good day, everyone, welcome to the Singular Genomics Systems, Inc., second quarter 2023 earnings conference call. At this time, all participants have been placed on a listen-only mode, we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Philip Taylor. Sir, the floor is yours. Thank you, operator. Presenting today are Singular Genomics Founder, Chair, and Chief Executive Officer, Drew Spaventa, and the company's Chief Financial Officer, Dalen Meeter. Earlier today, Singular Genomics released financial results for the three months ended 13th June 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,9th August 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 these 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 on 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, and welcome to Singular Genomics' second quarter 2023 earnings call. I'm pleased to provide you with an update on our company's performance. We will focus our update on the following four key areas: one, commercial execution, two, market opportunity, three, operational execution, and four, our innovation pipeline. As a reminder, we previously outlined these key areas during our Q1 earnings call as the 2023 four pillars of success. These pillars are the framework for how we intend to measure our progress throughout the year. Let's start with commercial execution. The second quarter was an important time for the company, which yielded a moderated pace of additional key external placements that we expect will support our ramp of unit shipments in the second half of 2023. We continue to believe that this measured deployment of systems among influential Key Opinion Leaders, or KOLs, and other strategically important partners, is the appropriate strategy to establish our G4 platform as the foundation for our sustained success during the second half of the year and into 2024. We shipped three G4 systems during the quarter to academic labs, bringing our total system placements in the field as of the end of the quarter to 11. We also added to our library prep compatibility menu and grew the number of qualified leads in the sales funnel. We are excited to continue expanding our installed base and delivering the speed, power, flexibility, and accuracy of the G4 system to our customers. Customer feedback continues to validate the G4's value proposition as a superior alternative to other mid-throughput sequencers. For instance, the University of Vermont noted that, quote, "The flexibility and consumable costs were undeniably compelling to purchase the G4, substantially better than an Illumina instrument with excellent flexibility in flow cell loading tolerances. Output is much higher than reported in company spec sheets," end quote. We continue to be pleased with the G4 performance at initial customer sites. Customer feedback has validated that our G4 instrument exceeds key data specifications and is capable of addressing a broad set of applications. As you would expect at this stage, it takes time and work to get users up and running, including time for trainings, workflow and protocol optimization, and completing field services and upgrades on the instrument. Nevertheless, there has been encouraging progress throughout the quarter, which is enabling quicker customer bring up, more seamless support and training, and better system support. These important improvements will enable customers to scale quicker, run more frequently, and raise pull-through. We will provide more color on utilization and pull-through now. We believe higher utilization of our G4 platform will be enabled by two things: usability and product availability. First, the usability of the platform. It is critical we make the G4 as easy to use as possible for customers to move their work and scale their work on the platform. This includes ease of training or onboarding, ongoing operation of the system, usability feature sets such as dashboards, run tracking, system monitoring, and system uptime, which is a symptom of both system reliability and field service support. We have made significant progress on each of these in the second quarter. We'll continue to focus on these key factors for the rest of 2023, which are critical to utilization and pull-through. Second, product availability. New consumable kits offerings will be available in the second half of the year, including the F3 and Max Read Flow Cell kits. The F3 doubles the throughput of the F2 kit, delivering a highly competitive price per gigabase or price per read, and further expands the set of applications that make sense to run on the G4. The Max Read single-cell kit delivers over 800 million reads on a single flow cell or 3.2 billion reads per run. This will deliver a unique combination of throughput, flexibility, and cost for a leading application, single-cell sequencing, in the academic and research segment. We expect these additional product offerings to drive utilization of the system and increase consumable pull-through for systems in the field over time. Turning to the market opportunity. We believe the demand for our G4 platform continues to be strong among our target customer segments, as evidenced by a growing funnel of qualified leads, additional prospective G4 evaluation sites, and increased inbound interest from positive reference sites. The sales funnel continues to grow, with total qualified opportunities nearing 200. In addition, we are seeing initial traction with academic core labs, the majority of which comprise our current placements. These labs are often managing varying sample volumes and output requirements from a range of applications like RNA-Seq and single-cell sequencing. The speed, power, and flexibility of the G4 enables these labs to optimize sequencing runs based on varying experimental needs and delivers results in less than one day. Interest in the G4 has continued to increase from researchers and lab directors at leading academic labs. For example, MIT recently noted that, quote, "We have been very excited by the enthusiasm of the researchers we support for the G4, with many labs already submitting projects to be run on the sequencer. These include samples for RNA-Seq, both standard and high throughput, CUT&RUN, as well as custom protocols where the laboratories are preparing their own libraries," end quote. We are encouraged by the positive traction and growing interest and expect this to translate to increased demand and unit placements over time. As expected and discussed on prior earnings calls, we shipped a moderated number of G4 systems in the first half of the year. We believe that this measured deployment of systems was the right approach for three reasons. First, to establish a foundation for sustained success. Second, to implement system improvements aimed at reliability, usability, and manufacturability. Third, to make sure customer expectations are met or exceeded. We believe unit placements will ramp in the second half of 2023, given the progress made in manufacturing and the ability to supply instruments to the field, coupled with increased commercial traction, growth in the sales funnel, and availability of F3 and then Max Read Kits for single-cell sequencing. Turning to operational execution. Our focus has been on optimizing the supply chain, streamlining manufacturing processes, and enhancing the G4's usability and reliability. We've been executing on several key initiatives to support these goals. In operations and manufacturing, we've taken steps to strengthen our G4 production capabilities. This includes engaging second sources for suppliers of critical components, working collaboratively with vendors to refine specifications and subcomponent testing protocols, and implementing additional QC testing for incoming parts. These initiatives are designed to reduce the time required to build and bring up a G4 instrument and increase predictability in the supply chain. We rolled out several important software updates to systems in the field, providing new features and enhancements designed to improve usability and reliability. In our commercial organization, we are expanding our presence outside of the U.S. We attended the European Human Genetics Conference in Glasgow, Scotland, in June, where our commercial team met with industry KOLs and scientific leaders from the region and showcased the G4 through system demos, technical talks, and presentations. We are excited to have brought on board a general manager of Europe, which we believe is an important step in our international commercial growth strategy. Turning to innovation and our product pipeline. Our team is excited about the progress being made on the pipeline of innovations, including improvements in the G4 system performance and specs, higher throughput flow cells and consumable kits, and novel content and workflows for widely run applications. We're pleased to have F3 flow cells available after a successful early access period. The F3 flow cell doubles the number of reads from our F2 flow cell offering, allowing users to get up to 450 million reads per flow cell or 1.8 billion reads per run, addressing some of the most widely run applications. We have also started shipping Max Read Kits for single-cell sequencing to early access customers. This kit is designed to allow users to get up to 800 million reads per flow cell or 3.2 billion reads per run. This enables NovaSeq level pricing for single-cell sequencing on a benchtop system. We look forward to offering this kit for broader commercial release later this quarter. With a compelling set of kits available in the second half, our major focus will be on execution of the already announced products, ensuring quality, availability, and supporting customers in moving their work onto these new offerings. Thus far, feedback from customers on F3 and early access users of Max Reads has been positive. We believe this will be an important catalyst for scaling the G4 placements over the rest of the year and facilitating more system usage and higher pull-through. Finally, we continue to progress our work in multi-omics. We have a lean team dedicated to the development of the PX, our high throughput in situ spatial and single-cell system. We look forward to providing additional updates in the future at the appropriate time. Now, I'll turn the call over to Dalen to go through the details of our second quarter financial results. Thank you, Drew. I'll start by covering the Q2 2023 financials, then I'll provide additional directional remarks on key metrics for the rest of 2023. Revenue for the second quarter of 2023 was approximately $500,000, predominantly made up of revenue recognized on two instruments during the quarter. Operating expenses for the second quarter of 2023 totaled $27.5 million, compared to $24.2 million for the second quarter of 2022. These totals included non-cash stock-based compensation expense of $2.8 million in Q2 2023 and $3.6 million in Q2 2022. In addition, Q2 2023 included a non-cash expense of $1.9 million related to a one-time adjustment in the carrying value of property, plant, and equipment. The year-over-year increase in total operating expenses was otherwise driven primarily by scaling headcount, facilities, and infrastructure to support commercialization of the G4 and development of our product roadmap. Net loss for the second quarter of 2023 was $25.6 million, or $0.35 per share, compared to $24 million, or $0.34 per share, in the second quarter of 2022. Our weighted average share count for the second quarter, used to calculate net loss per share, was approximately 72.5 million. Ending cash, cash equivalents, and short-term investments, excluding restricted cash, totaled $206.7 million. Turning to comments on the rest of 2023, commercial interest continues to be strong, as reflected in the growing number of qualified opportunities in the sales funnel. We believe that the number of placements in the second half of 2023 will ramp, supported by commercial availability of the F3 flow cell consumable kits and our Max Read Kits for single-cell sequencing. Consumable pull-through is still in the early stages. As Drew noted, we're seeing early commercial traction with academic customers, with nine of our 11 G4 placements at academic labs. Utilization at these academic customers is dependent on experiments and sequencing project volumes and could be slower to ramp initially, depending on sequencing project needs. We anticipate learning more about customer utilization patterns over time and expect to provide updates on consumable pull-through as it becomes more predictable. Regarding operating expenses, while we do expect investment in the second half of 2023 to modestly increase in areas directly related to the G4 commercialization and development of our product roadmap, we intend to manage existing resources to provide cash runway into the second half of 2025. Thank you, and back to Drew for closing remarks. Thank you, Dalen. I'm proud of the team's dedication during Q2. Our hard work and efforts are establishing the critical foundation from which we can scale as a business. In the second quarter, we made significant internal progress in manufacturing, quality, and operations. We also shipped three G4 systems, supported customer installations and upgrades, added to our order book, and grew the number of qualified opportunities in the sales funnel. Our recent product launches, including the F3 flow cells and consumable kits, and the early access version of our Max Read Kits for single-cell sequencing, are expected to be important catalysts, driving commercial demand and scaling across the second half of the year. Perhaps most importantly, we continue to receive validation that we designed the right product with a feature set and value proposition that meets the needs of many of the largest and fastest-growing segments of the market. We remain steadfast and confident in the opportunity in front of us. Now, let's open it up for questions. Operator? Certainly. Everyone, at this time, we'll be conducting a question-and-answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask, though, while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star one on your phone. Your first question is coming from Matt Sykes from Goldman Sachs. Your line is live. Hey, Drew, Dalen. Thanks for taking my questions. Good afternoon. I just wanted to, kind of on the back of your comments about the second half ramp, Drew, previously, in previous quarters, you kind of laid out sort of a cadence of two-four per month, with sort of the first half of the year at the low end and, and maybe the end of the year being at the, at the higher end of that. Is that still kind of a measure we should be using as you talk about this back half ramp, or should we be thinking about a different kind of cadence as you kind of measure that demand going forward? Hey, hey, Matt, thanks for taking the time to listen and for the question. We, we haven't communicated anything differently that two-four will likely step into it. I think you can, you know, gather from the comments that, you know, we, we still are, you know, scaling and very much in the early stages of getting the first handful of instruments out. That is the previously, you know, discussed range, and we should be stepping into that in the second half of the year and hopefully ramping, you know, into next year. Got it. Just maybe a little more detail on the expansion into Europe. Just given the academic presence in Europe, and your success so far with academic core labs, is that part of the reason why you're kind of investing in that area, or any other kind of color you can provide on that expansion would be helpful? Yeah, absolutely. We've actually had quite a bit of, of inbound demand from, from Europe. A number of conferences that, that we've, we've attended, it seems that the G4 will be a really good fit for that market. The European market's much more decentralized. You don't have any, as many large central labs doing really high throughput sequencing. It's much more decentralized and fragmented, and the speed and the flexibility speaks very well to, to that environment. It's a modest investment at this point in Europe. Again, you know, putting the foundation in place, getting a, a general manager for the area, and starting to think about support and application, you know, scientists to, to bring up customers is, is really the first part of that. We're just starting to lay that foundation now to set us up for the ability to enter that market next year. We do think overall, Europe will be a really compelling market and a nice fit for the profile of the G4. Got it. Just one last one, if I can sneak it in. You, you talked about shipping Max Read and F3 Flow Cell. It sounds like that, that just commenced. In terms of like, sort of the, the pulling in of demand from the instrument side with those products and sort of the positive feedback that you've gotten from the people who've trialed it so far, should we be kind of thinking that sort of like in, towards the end of the year type dynamic, if, if as those products get, get shipped out over time? Yeah, I, I think it, it will definitely inflect the demand. You know, what we're seeing out there in general is that sales, sales cycles are longer than, than I think a lot of, you know, people anticipated, and, and a lot of that has to do with the, the macro environment and the evaluation framework for which customers are putting new technology, you know, through, through. You know, the, the interest is really strong. It, it's very much a show me with F3 and Max Reads. You know, customers often wanna run samples, or they want references and, and, and, and other sites they can call, and we're, we're starting to get those up and running, which we think will be a really strong catalyst, but it's still gonna be, you know, a longer sales cycle than I, I think, you know, many had anticipated. I think your comments on, you, you know, Q4 into next year, you know, absolutely, we, we expect to really start to see the, the catalyst from the, the new products, start to have an effect on sales funnel conversion, you know, this year and, and even more so into next year. Got it. Thanks very much. Appreciate it. Thank you. Your next question is coming from John Sourbeer from UBS. Your line is live. Hey, everyone. It's actually Christian on for John. Thank you for taking my question. You know, I know you, you guys called out about, I think it was 200 people within the sales funnel. I was just looking for any more color. Can you talk about how that, you know, that funnel has progressed throughout 2023? I think you kind of touched on it on the previous question, you know, the sales, the sales cycle, how has that progressed? Then if you could give any color on pricing and how that really is affecting the conversation. Thank you. Yeah. Maybe, you know, I'll start with, with, with kind of the sales funnel. You know, going back into the back half of last year, I think in our Q3 earnings call, you know, I don't think we gave a specific number. It was probably into, you know, the dozens of qualified leads. I think let's, let's remember what a qualified lead is. A qualified lead is something that's passed several, you know, filters and is now an entity that, that has a need for a sequencer. We're speaking with the right person that has the authority to make a purchase, and they have budget. Those are, those are important factors to understand in, in the, the quality of the, of the lead. We've seen it steadily increase, but this last quarter we saw, you know, probably the most significant increase in the funnel now up to close to 200 qualified leads. Not all of those are near term, meaning they will, you know, convert right away, but they are all real opportunities, and it's very encouraging for us to really see this start to build. You know, we're confident that, you know, over time, we're gonna start to really see a higher level of conversion. We're gonna see the ramp really start to take form. We're excited about it. I think the second question was on kind of the sales dynamic or the pricing. Is that right? Yeah. Yeah. Yeah, we've taken a strategy so far to try and maintain price integrity. If you look at, you know, it's a small N number, but if you look at our ASPs that have been trending in the high $200,000s, for the last three quarters over the, you know, the 11 instruments, we do have, you know, a reagent rental, and we have a lease model. We will do strategic placements as, as needed, or evaluations, but by and large, our strategy has been to, to try and, you know, show the value for the G4, and hold the line on price to make sure the customers, you know, are really stepping in and making a commitment, and they realize the value of the, the platform, the speed, the flexibility, the cost point to run the system. All of that should, should easily justify a purchase price of the instrument that's, that's, you know, kind of in line with, with, you know, Illumina. You know, Illumina lists at $335,000 and typically sells, you know, close to that. I think it's really a matter of time to get the system established, but so far, we, we have, I think, been fortunate to, to realize ASPs that are, you know, indicative of the system value, and we, we will, we will try to continue to do that. Thank you very much. That's all I have. Thank you. Your next question is coming from Dan Brennan, from TD Cowen. Your line is live. Great. Thanks, guys, for taking the questions. Maybe just a little bit on, I guess, competitive dynamics. I know it's a, a large market. You guys have a couple of boxes in there, you know, kind of placed, but just what are you seeing in the labs? Has anything changed in terms of, you know, when you're going up against, you know, whether it be Element or, you know, whether it be Illumina? How are things going there? Yeah, I'd say that the, the general trend in the labs is that, that, you know, people are understanding that there is a choice, and I think they're doing, you know, more thorough evaluations, and they're, they're taking their time to really look at... you know, the different options and what meets their needs. At, at times, you know, labs are asking to test samples, at times they're asking for references. You know, overall, the Illumina is, is, is, you know, the, the competitive alternative that we are going up against 98% of the time, and that really is the, the, the, predominant player out there. Illumina, I think, will, will ship close to 1,200 NextSeqs this year and many more MiSeqs. You know, for us, those are really the opportunities on where we can offer much more compelling value at a similar price point, you know, given the profile of the instrument. I think the, the positive part of it is the value proposition, especially within the academics and the cores, and, and kind of the principal investigator labs, really resonates. It's essentially a similar price point, but you get a ton more flexibility, it's a lower cost for an experiment. Our flow cells are down to $600, and, you know, it's just a much better system for how they want to use and, and do their sequencing. You know, we feel really good about kind of how we stack up competitively. I think the big issue, Dan, is really just establishing the platform of the company as, you know, being a zero or, you know, low risk acquisition. That's something that just takes time, it takes references, and, you know, we're working on that right now. Great. Thanks, Drew. Just, just in terms of setting the model straight for the back half of the year, I guess, I mean, it sounds like you're confident you can get into that ZIP code that Matt mentioned, the two- four per month, but is it a little bit more skewed to 4Q versus 3Q, in terms of how we should be thinking about the third quarter? Yeah, I think so. I mean, just to the comments, you know, we're being, you know, pretty direct and candid. You know, the sales cycles are taking a little bit longer. Leads are growing, references are growing, everything's trending in the right direction. A ton of progress made internally to be able to supply instruments, we're feeling good about that. As we look into the, you know, third and fourth quarter, you know, absolutely, kind of stepping into that range in the low end for the third quarter, and then hopefully, you know, starting to raise into the middle to higher range for Q4, and, and setting up for a really nice next year. That's, that's absolutely how we're thinking about it. Kind of your capacity for next year would be, assuming you can get to that six and, you know, call it like nine in Q3, Q4, kind of how would we use that as a jumping off point for what you could do next year? You know, let us take this quarter and really understand a little bit better kind of how, how this and next quarter are looking. I, I think we, we do want to be more forthcoming with, with how we think about next year could look, in terms of kind of goalposts on, you know, unit placements and revenue, but I, I just don't think we know enough yet to be able to give you an accurate answer there. You know, give us a little time, but we'll, we'll certainly be planning to give more information about how, how 2024 is shaping up in coming calls. Dan, maybe just one comment. Yeah. to add to that, Dalen. You know, in prior calls, we have talked about the dedicated manufacturing space that we have. You know, that, that has plenty of, of infrastructure capacity to get us through the next couple of years in terms of supply with, with the G4. It's just a matter of, you know, the labor and, and some of the other kind of ancillary, you know, variable cost and investment items to, to support the units. We've got the infrastructure, it's just how, how quickly we want to scale it up. Great. Okay, guys. Thanks a lot. Thank you. Your next question is coming from Mike Ryskin from Bank of America. Your line is live. Hi, this is Avantika on for Mike. We wanted to ask you, where do you see the gross margin moving to in the second half and maybe in 2024 as the consumables ramp up? Thank you. Yeah. Hi there, this is Dalen. The gross margin, yeah, we, we expect the model to, you know, be similar in line with other tools companies. You know, if you think about kind of the traditional razor-razorblade model, you know, instruments get placed at, you know, a lower gross margin profile. Then as the pull-through increases, you know, the consumables, you know, really start to take over the mix of revenue at, you know, a, a much higher gross margin profile. So as that mix changes, you get a nice gross margin tailwind. And we would expect, you know, we're at such small end counts right now in terms of the install base, pull-through is still in the very early stages. You know, as we move into next year, we would expect to see, you know, kind of that, that traditional tailwind off the, the model as, we're able to move customers up the utilization curve and grow the installed base. Got it. Thank you so much. Then, given your comments on the cost control, how much of a priority is a PX currently? Yeah, it's a good question. The PX remains, and our spatial effort in general, remains something that we're committed to. You know, we believe using the sequencing technology that we have and applying it to cells and tissue is really novel, and something unique that we can offer. We, we've had quite an abundance of feedback through, through KOLs and interactions, that, that really verify and validate that. We are moving forward with a TAP program right now. It's a Technology Access Program with two leading, you know, novel methods, with the technology we've developed to do in situ sequencing and, and look at, you know, kind of spatial context and tissue and cells, and it's something we plan to share more about later this year and into next year. As far as the, the PX system itself relates, it, it will take a, a broader effort to bring forward, and we've talked previously about looking and, and exploring partnerships or alternative ways that we can fund that program. The work is continuing. It's a small and lean team. We're being judicious with our capital spend, you know, at this point, we, we do believe it's, it's the right place to have a modest investment, given the high value of the opportunity. Got it. Thank you so much for that. Then if I can sneak one more in, I know this quarter you had three shipments to academic. Are you surprised with the heavy bias towards academic customers, and, like, is there a reason why you're not seeing customer, commercial customers buying more? No, not really. I think when we look at the, the adoption profile, different market segments, your academics are typically gonna be the early adopters. That, that, that really rings true for, for a lot of different new technologies that sell into this, this type of environment. They're gonna kick the tires, they're gonna provide feedback, they're gonna work with you. They're, they're usually on the, the cutting tip of, of, of new, new technologies. Once the academics, adopt, and you start to get publications, and, and, and you kind of have that foundation, the next segment that we would, we would expect, and we, we do have, you know, these represented in our funnel, would be, you know, kind of your private companies, your, your, your large, research or your large and medium-sized research companies. People that are essentially using sequencing as an internal tool to develop whatever products they're doing. There's a ton of sequencing being done for cell therapy, for CRISPR applications. That would kind of be the next wave of customers. Then kind of beyond that, would, would be kind of, you know, hospital medical centers, academic medical centers, or larger clinical customers that are running, you know, sequencing, fleets to run, you know, clinical testing or LDTs. There, there's really a continuum of, of, you know, buyers, but it, it really depends on, you know, kind of where you are in the, in the life cycle of your system launch. You know, I'll just give you one example. If you're thinking about the application of, you know, neonatal intensive care unit sequencing, you know, that's not an application that you're gonna offer with a, a new technology that you're still kind of ironing out the kinks, that's, that's new to market. That's something you're gonna go into when you have a very mature box and, and, you know, that's something that we're very, very much think is, is, is a good application for the G4, given the speed and the flexibility, but it's also something you go to at the point in time when you have a really stable, established platform and, you're a bit down the road. Long-winded way of saying, not surprised at all with the early academic interest. Our funnel right now is probably about two-thirds academic, but there's a good third of, of, of, entities in the funnel that, that are the other profiles as well, that I think will, will be adopters of the technology. Got it. Thank you so much. Thank you. That completes our Q&A session. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.