In the first quarter of 2024, Burning Rock (ticker not provided), a company specializing in precision oncology, reported a return to profitability. CEO Yusheng Han, alongside CFO Leo Li and CTO Joe Zhang, highlighted the company's efforts in improving sales efficiency, gross margins, and reducing both general and administrative (G&A) expenses and research and development (R&D) costs. The first quarter marked a significant turnaround for Burning Rock, as it achieved a positive gross profit minus SG&A for the first time since encountering industry turbulence in the latter half of 2023.
Key Takeaways
- Burning Rock reported a return to profitability in Q1 2024 after overcoming industry challenges.
- Sales and marketing efficiency improved, reaching a historic low of 35% as a percentage of revenue.
- Gross profit margin remained steady with no material updates in the quarter.
- Significant reductions in G&A expenses contributed to cost savings.
- The company's cash balance stood at RMB573 million, with reduced cash outflow and a projected three-year cash runway.
- Transition from central lab to in-hospital revenue streams has accelerated, with in-hospital now surpassing central lab revenues.
- Overall revenue increased by 4% quarter-over-quarter, primarily driven by in-hospital business growth.
Company Outlook
- Burning Rock expects to continue reducing cash outflow, with a projected range of RMB150 million to RMB200 million for 2024.
- Additional savings anticipated into 2025, although specific quantitative guidance is not yet available.
- The company aims to maintain a positive non-GAAP gross profit minus G&A throughout 2024.
- Focus on expanding in-hospital business and deploying new products to win over more hospitals.
Bearish Highlights
- The company experienced setbacks in Q3 and Q4 of 2023 due to unexpected industry turbulence.
Bullish Highlights
- Achieved a positive commercial breakeven point in Q1 2024, ahead of the initial first-half 2024 guidance.
- Sales and marketing expenses as a percentage of revenue reached a historic low, supporting improved operating profitability.
Misses
- No specific misses were discussed in the earnings call.
Q&A highlights
- There were no additional remarks or questions addressed in the Q&A section of the call, indicating a straightforward presentation of the financial results.
Burning Rock's first-quarter earnings call ended on a positive note, with the company successfully navigating through previous challenges and setting a strong foundation for future growth. The management team expressed confidence in the company's direction and financial health, supported by strategic operational improvements and a solid cash position.
InvestingPro Insights
Burning Rock's recent earnings call has positively reflected on its strategic operational improvements and the return to profitability in Q1 2024. To provide further context on the company's financial health and investor sentiment, here are some insights based on real-time data from InvestingPro:
- The company holds a market capitalization of $77.04 million, indicating a relatively small but potentially agile player in the precision oncology space.
- Despite returning to profitability, Burning Rock shows a negative P/E ratio of -0.89 for the last twelve months as of Q4 2023, which can be a signal of investor skepticism about future earnings or an indication of recent losses.
- A bright spot for potential investors is the company's high gross profit margin of 67.59%, showcasing its ability to retain a significant portion of its revenue as gross profit.
InvestingPro Tips that are relevant to Burning Rock's current situation include:
1. Management has been aggressively buying back shares, which often suggests confidence in the company's future prospects and a commitment to enhancing shareholder value.
2. The company holds more cash than debt on its balance sheet, which is a positive indicator of financial stability and may provide a buffer against future industry turbulence.
For readers interested in a more comprehensive analysis, there are additional InvestingPro Tips available for Burning Rock at https://www.investing.com/pro/. These tips could offer deeper insights into the company's valuation, financial health, and market position. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Burning Rock Biotech Ltd (BNR) Q1 2024:
Operator: Good day and thank you for standing by. Welcome to the Burning Rock’s 2024 First Quarter Earnings Conference Call. At this time all participants are in listen-only mode. Please be advised that this conference is being recorded. Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as will, expects, anticipates, future, intends, plans, believes, estimates, target, confident and similar statements. Statements that are not historical facts, including statements about Burning Rock's beliefs and expectations are forward-looking statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Burning Rock's control. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those contained in any such statements. Burning Rock does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. And now I would now like to hand the conference over to our first speaker today, Mr. Han. Please go ahead.
Yusheng Han: Thank you. Welcome to Burning Rock's Q1 conference call. And I'm the CEO and Founder of Burning Rock, Yusheng Han. And today you also have our CFO Leo Li and our CTO Joe Zhang online. So today we'll go through our Q1 financial report. Let's turn to page three. There's a brief introduction of what Burning Rock is doing. We started from therapy selection in 2014 and then expanded to multiple areas, including early detection, MRD, and biopharma services. So we know that in our past two years we tried very hard to improve our capability of being to be profitable and we have made a lot of efforts. So if we turn to page four that is what we have done in a past one quarter basically we are driving our sales efficiency to a better level and we are improving our gross margin and there will be data show later on. And then we reduced our G&A expenses to a better level. And also, the R&D -- reduced the R&D expense, so that -- to make the order company to getting more profitable. And let's turn to page five. That's the result, the financial result of different quarters in the past two years. We have seen that in Q2 2023, it was the first time that we get the results of gross profit minus SG&A to be positive. And because of the unknown unexpected industry turbulence, so in Q3 and Q4 in 2023, we suffered from the profitability. But now things are getting to normal and we have seen that in Q1 2024, we're getting a return to profitable again. And that's a very good sign for Burning Rock. And we will try our best to make the number bigger and bigger until the whole company cash flow becomes in the future. And in terms of the detail of what we have done to make the company profitable, I would turn to our CFO Leo Li to explain that. Leo?
Leo Li: Thank you, Yusheng. So as Yusheng mentioned, we continue to make progress in the first quarter, and I'd like to elaborate on specific expenses lines going forward. So let's go to page six. This is the most important item in our striving our operating efficiency. You can see that the latest quarter, we achieved sales and marketing expenses as a percentage of revenue at 35%, that is a historic low or the most efficient quarter in our recent operating history. You can see that we've come a long way in the middle of 2022 and that is driven by a lot of the hard work for my sales and marketing team. So we are delivering on the risk result and this improving sales and marketing efficiency is what underpins our improving operating profitability, that is the most important factor behind the trend. Then going forward on page seven, we talked about our gross profit margin in our previous call. We continue to make progress and there is no material update on this matter in this quarter. Then going to page eight, looking at our general and admin expenses. In our previous quarterly call, we talked about reduction of headcount, reduction of office space, and other fixed operating footprint that we have carried out that drops, that reduces our G&A expenses. We mentioned that we continue to expect further savings into this year, so you can see that in the first quarter we have achieved a significant drop in this quarter, compared to the same period last year. So the factors that we mentioned before they continue to give us additional savings and we will keep working hard at reducing our operating footprint. We like to also make comments on our cash position, which is shown on page nine. We ended the quarter with RMB573 million cash balance. And if you contrast that with our cash outflow, so we have reduced our cash outflow significantly from 2022 to 2023. We expect to make further progress in 2024. Our guidance is for cash outflow in a range of RMB150 million to RMB200 million for the year of 2024. We still have a couple regulatory and important projects going on for this year, so we expect additional savings into 2025. So we expect our opening cash outflow to drop further in the year 2025, although at this stage we are not at a point to give specific quantitative guidance. So I want to benchmark that operating cash outflow against the cash balance that we have on hand. We see a good three-years of cash runway, so we should be in no rush to do any capital raising. So we have the initiative on ourselves and that provides us a good runway going forward. Page 10 talks about our P&L And here I have some comments on the revenue lines. So we had a change in our industry's operating environment and that was well reported by the press, which started in July last year. Within that context, you can see that we are accelerating our transition away from central lab and more towards in-hospital. So we are getting more share of revenue from in-hospital. And first quarter this year marks the first quarter where we're getting more revenues from in-hospital than from central lab. So I think we are continuing to make progress in that transition. You can see in the first quarter we have recovered the in-hospital business. It is growing on a year-over-year and sequential basis, and that is going to be the long-term share growth driver for our revenue lines. We continue to get into new hospitals, deploy new products, and we expect to win more hospitals going forward. So this is the most important line for our clinical business. So the overall revenue is up 4% on a quarter-over-quarter basis and that's mostly driven by the in-hospital line. So that is the additional comments we'd like to add here. On the operating expenses, we've talked about them before and we'd like to recap here that if you look at the non-GAAP gross profit and minus sales, G&A expenses, we are at a positive commercial breakeven point in first quarter. In the previous results call, we said that our guidance was to achieve this objective in the first-half of 2024. And we are very pleased that we hit that goal in the first quarter. Our latest guidance is to achieve positive non-GAAP gross profit minus G&A for the whole year of 2024, so that is what we're working on for the year of 2024 to show that on the operating level, our business are profitable. Then we have a few R&D items that we're going to work through, and we're going to work towards a positive breakeven for the whole company going forward. So that concludes the remarks for our financial section. And operator, if there are no further remarks or questions then we're happy to conclude the call.
Operator: Thank you. That concludes our conference for today. Thank you for participating, you may now all disconnect. Have a nice day.
End of Q&A:
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