Good day, and thank you for standing by. Welcome to the Seer, Inc. First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Carrie Mendivil, Investor Relations. Please go ahead.

Thank you. Earlier today, Seer released financial results for the quarter ended March 31, 2024. If you've not received this news release or if you'd like to be added to the company's distribution list, please send an email to investor@seer.bio. Joining me today from Seer is, Omid Farokhzad, Chief Executive Officer and Chair; and David Horn, President and Chief Financial Officer. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release Seer issued today. For a more complete list and description, please see the Risk Factors section of the company's quarterly report on Form 10-Q for the year ended March 31, 2024, and its other filings with the Securities and Exchange Commission. Except as required by law, Seer disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time sensitive information and is accurate only as of the live broadcast May 8, 2024. With that, I'd like to turn the call over to Omid.

Thanks, Carrie, and thank you, everyone, for joining us this afternoon. I will begin our call today by providing updates on our business, and I will then turn the call over to David to provide more details on our financial results for the first quarter of 2024 and our outlook for the year. We remain incredibly bullish on the potential of our technology to transform our understanding of the proteome. Proteograph data produced and presented by our customers is truly outstanding, and we fundamentally believe in the long-term value of our differentiated technology. However, the pace of adoption and utilization of the Proteograph platform is not yet on track with our expectations. As we have previously stated, an important factor to driving adoption and utilization is a demonstration of the biological insights provided by the Proteograph in the form of peer-reviewed publications from our customers. To that end, we've had several important papers published in the recent months and have a strong pipeline of customer publications that will be forthcoming in high-impact journals throughout the year. First quarter revenue came in at $3.1 million as we continue to experience headwinds to adoption of the Proteograph Product Suite, in large part due to the elongated sales cycles from the paucity of publications as well as ongoing macro-challenges. Given our performance in the first quarter and the current pace of adoption, we now expect 2024 revenue to be in the range of $16 million to $18 million. Until we see an inflection in revenue, we're focusing our resources on our commercial organization while reducing our cash burn to preserve our strong balance sheet. In line with the strategic direction, we're taking the following actions. First, we're continuing to invest in and expand our commercial team to ensure we have the right people…

Thanks, Omid. Total revenue for the first quarter of 2024 was $3.1 million, representing a decrease of 24% compared to $4.1 million in the first quarter of 2023, and was primarily due to a decrease in product and related party revenue. Revenue recognized primarily consisted of sales of the Proteograph SP100 instrument, consumable kits, and service revenue, of which $1 million was attributed to related parties. Product revenue for the first quarter of 2024 was $2.5 million, including $828,000 of related party revenue, and consisted of sales of SP100 instruments and consumable kits. This quarter, several customers purchased instruments that were placed through our SIP program, demonstrating the value these customers see in the Proteograph once it is in their hands. However, we did see continued pressure on CapEx budgets and elongated sales cycles for the outright purchase of new instrumentation. Consumable kit purchases were also lower, primarily related to lower related party consumable sales. Service revenue was $534,000 in the first quarter of 2024, including $126,000 of related party revenue, and primarily consisted of revenue related to STAC service projects. As Omid mentioned, in the first quarter, we prioritized running projects for key strategic studies that will result in additional presentations and publications in the near term, but were conducted at a lower price point than our typical STAC service projects. Grant and other revenue was $36,000 for the first quarter of 2024, and consisted of leasing and shipping revenue. As we mentioned on our previous earnings call, we utilized the remaining funds available under the SBIR grant and do not anticipate booking any more revenue under this grant in 2024. Total gross profit was $1.4 million for the first quarter of 2024, representing a gross margin of 44%, compared to $2.1 million in the first quarter of 2023,…

Thank you, David. We remain committed to reducing barriers to the commercial adoption of our technology. The journey to commercialize innovative technology is never linear. I continue to be grateful to our team for their hard work and dedication they are putting in every day. I am confident in our technology and believe that as our publication base expands, we will see increased adoption of our technology. I look forward to keeping you updated on our progress. With that, we will now open it up to questions. Operator?

[Operator Instructions] Our first question comes from the line of Yuko Oku of Morgan Stanley.

With respect to lowering the barrier for access to mass spec via STAC for genomics customers, could you talk to the proportion of STAC customers coming from genomics researchers versus traditional mass spec researchers?

Yuko, this is Omid. I think the customer base is actually relatively similar, meaning there are customers of STAC who actually have in-house mass spec and just because of capacity constraints, they send their mass spec to us. Now, we don't do any mass spec services for any non-Seer customer, meaning the customers who send their mass spec to us, these are Proteograph owners who are running the Proteograph in-house, have access to a mass spec in-house, but choose because of ease and capacity reasons to leverage our mass spec. We have some customers like that and the STAC that serve those customers, but the lion's share of the customer base is actually customers who don't have access to a Proteograph or a mass spec in-house, and they end up with end-to-end services at our STAC.

Got it. And then with green shoots and biotech funding being called out by many of your peers, while it may be too early for our environment to be improving, do you feel that sentiment is turning?

Yes, Yuko, this is David. What we certainly saw in the first quarter is some budget impact from biopharma for sure, certainly the large biopharmas. We had a couple of deals actually that we were expecting that got pushed for budgetary reasons. So we're still seeing an impact. That said, the use of STAC by some of our smaller biotech firms has been good. So to your point around green shoots, I do think it kind of depends. I think in the case of large biopharma, the adoption of new technologies, especially where it requires CapEx, can still be challenging where it's a service model, a STAC model. I think we're seeing good reception there. And so, again, I think it depends obviously on the company and the situation. But again, we are still seeing some headwinds depending on the account type.

Our next question comes from the line of Rachel Vatnsdal of JPMorgan.

This is Marta Nazarovets on for Rachel from JPMorgan. So I wanted to touch a little bit on your updated guidance. Can you perhaps discuss the 2Q top line expectations and then touch a little bit more on seasonality through the year, and then talk about your visibility into the second half of the year?

Sorry, Marta. The first part of your question, you wanted the 2Q -- I missed what you asked.

Just like 2Q top line expectations.

Got it. 2Q top line. Got it. Okay. So in terms of 2Q, we don't give quarterly guidance. I think what we're seeing is we're continuing to see lots of opportunities in the pipeline. It's just a question of the elongated sales cycle through that pipeline in terms of how quickly we can move those through. So I'd say 2Q, we're going to continue to be conservative in our outlook just given what we see and some of the headwinds we've been facing. In terms of the seasonality, I do think we'll continue to see the seasonality we've seen in years past. I think certainly the revenue will be more second half weighted in terms of what we see. We certainly have some interesting publications coming out. We expect in the late second, early third quarter, which we think was going to help drive interest, continued interest in the platform. And so we do experience the same seasonality that the industry generally sees, which is a very strong kind of fourth quarter is kind of the strongest quarter of the year given where people are in their cycles and things. So we would expect the same here and certainly with our year being back end weighted.

That's helpful. And then can you talk about STAC traction a bit more? You touched on the call a little bit, but I remember last quarter you talked that you have 48 organizations that are using STAC. How many do you have as of now? And then do you still have a backlog of projects? And then lastly, on STAC, can you talk about your visibility on the revenue layer, especially now that you're opening the center in Europe?

Yes. I don't have an update in terms of -- the updated total customer number beyond what I mentioned last time. The STAC continues to run at capacity and we expect that to be the case through Q2 and also into Q3. And my visibility for it is that the STAC was exactly what the market needed, meaning the purpose of establishing it in the U.S. was to lower the barrier for a potential customer to access the Proteograph data. It was also meant to lower the barrier for a potential customer to bring in a Proteograph when they're relatively unfamiliar with the mass spec and so we didn't want that lack of familiarity with the mass spec to be a hindrance to taking a Proteograph in-house. In that context, the STAC has done exactly what we had hoped. By the way, so has the SIPP program in terms of lowering barrier. And the challenge for us was that we were serving U.S. customers but not European customers given the GDPR rules with data, et cetera, going across the ocean and now we're opening the European STAC, we'll be able to provide similar types of services to our European customers. And as I mentioned earlier to Yuko, the customer base really is diverse. It's both customers that have a Proteograph in-house that may or may not have a mass spec in-house but it's also genomic customers, some of them folks that want to do large-scale studies that get access to the STAC for end-to-end services. So my expectation is that STAC will continue to be an important source of product adoption for us, but it really is not meant for us to pivot into a service business and I mentioned that the very, very first time that we announced this STAC, it's really meant to facilitate adoption of our platform.

I am showing no further questions at this time. This does conclude the question-and-answer session and the program. Thank you for your participation in today's conference. You may now disconnect.