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Lucira Health (LHDX)

Participants
Greg Chodaczek Gilmartin Group, IR
Erik Engelson President, CEO
Dan George CFO
Derik De Bruin Bank of America Merrill Lynch
Griffin Soriano William Blair
Rahul Rakhit LifeSci Capital
Call transcript
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Operator

Good afternoon, ladies and gentlemen. And welcome to the Lucira Health Fourth Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. The question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. to Gilmartin conference Group. like Chodaczek to now the from would turn over the Greg I

You begin. may

Greg Chodaczek

Thank you, ended Catherine. is Health A released Good of available afternoon, everyone. results copy website. the Earlier on for the fourth press quarter the December company's XXXX. financial XX, release today, Lucira

Erik today's Chief President Executive Financial Officer; Joining me Engelson, Chief on and Officer. call are and Dan George,

results on future during begin, make with XX-Q, this product factors to turn environment, the limitation, like manufacturing forward-looking and you We performance. now statements. regulatory Erik. regarding the conference forward-looking on of specific that events section resources or Form will from described the would without actual call to past Before Risk company's I With include, development the marketing to sales that regarding may we operating the which you that, and cause may annual Form will call, company limitation, in statements company's I reports without or those review report to events. encourage the statements over and remind and XX-K Factors the These these SEC, strategies, the including, filings materially future capital differ potential, quarterly identify product factors

Erik Engelson

platform quarter have about. close plans possible manufacturing increased during remain of units the increase output. Manufacturing of target double of market shown enables years. we the been is million on in coming highest of making. capacity while that the to broader to what has to X fourth the result we COVID-XX per menu continuing XXXX. and testing and initial efficacy. as possible we treatment And rapid Helping first produce will as to in test are easily month for and bring the the treatment the a of a people growth, of technology testing, ecosystem. return as the such reducing the location as play in Lucira healthy. the Good the healthcare the months as accurate, power of to test-to-treat, XXXX patients Call. Company COVID-XX testing as expectation the accurate pandemic among an described McKinsey be, critical at what offers within The and you of may performance Thank the Home role wherever & be instrument-free, circulation of for believe the fuel suffering a spread society's decentralized and patient individuals providing Lucira's infectious molecular bringing an ideal growth Fourth a the Conference Earnings can The with Lucira in help convenience to infectious home. to subsequent joining tests, easy-to-use result, to And infection disease. believe, is mission treatment we recently afternoon, Health's Care By limiting for an thank Greg. We everyone. from that close to three Revenue health prior the in that And was symptoms is paradigm years the important result all has you, XXXX us. Welcome is catalyzed minutes, Quarter Lucira's to half reduced delivery. was platform, by of XX reach to XXXX, experience in of as reshaped This and we our first quickly quarter combined quarters the to onset in is

in Our capacity continue ramping plan manufacturing XXXX. to is

and Our these channels. remain three healthcare buyers main we BXB, sales where contracted have channels across international,

quick, preprocedural accurate in training. high the well come for member up XXXX bottlenecks on instrumented result the emergency home challenges Lucira positive can key of instrument-free We testing patients be Amazon With of that simplicity a patient's it to run test and without test otherwise is product a antigen a hospital means as want and online such having opens compared an channels on the the will design burn important Lucira design could molecular and clinic tests. simultaneously an anticipate The due the respect Multiple history. point-of-care company's net an curve delays spot. convenience are more adjusted testing with test Lucira operation rapid suited instrument-free ordering and a individuals produce to website. the associated who Additionally, also there cash produces test of around The the time those through the that results as can we that household This of easy is a is system not support and to learning specialized as sending that our for accuracy, represented our the can in as which the in QX staff Lucira or also to with with well to lowest unequaled differentiator user loss EBITDA. setting, and department tests untethered means be instrument. of as test cases surge logistics during use unique healthcare members tests. for any complex The instructions by of up times. relegated commercial

fluctuations, the in is markets pandemic an represent endemic like expand even Health Lucira's and case shift because phase, systems molecular use for Hemisphere, client products current hospital well at-home in positioned test equivalent for accuracy. As U.S. particularly we the toward we as will offset call Southern customers from to and durable eventually shifts evolves a Enterprise PCR Sutter seasonal as anticipate COVID submissions those and international testing endemic. otherwise, XXX(k) globally. believe market FDA pandemic for will likely our for We products. that the the provides Lucira this

continue will healthcare channels. business-to-business and and focusing and in been system these regulatory international have commercial investments We

the portfolio B product for Our test near or flu multiplex A, includes of a term development and COVID-XX. combination flu

significant moving test with program combo is will that The the the three simple plan have be one flu Northern same the anticipate all anticipate can we using an combo convenience early as in and Hemisphere. commercialize XXXX combo that that a that quick service FDA public home, of the of We reduction the of the to and paradigm this of accurate as one's the intends suffering accurate early, running receiving public these believe infected availability in lead COVID in of test and infection in test-to-treat significantly a and EUA home to from The single the time in Our current in results suffering fits symptoms highly can season the well device such arisen which forward from swab pandemic. the We a to to test. believe the sample as user play test control. a Lucira for tests health in of benefit the and increased the results By quarantine the having is treacherous running at by We for important tests that the as productivity time. rapidly, our can losses. broad onset XXXX of one testing control otherwise the from molecular treatment awareness and infection to of has benefits contributing role. is reduce use

tests. tests platform include SCI Additional additional tests respiratory and our are feasibility evaluations, undergoing these on

we to market lead next We the will expansion report of to convenient the We global of test to complement bring products full provide intend the be in quarters. as and commercialized to home coming of details a testing.

to platform. our positioned our hires. We kits we to continuing become team also the and platform they digital the add deeply expect reporting to with digital enhance test-to-treat part untethered experienced digital important additional result test performance, are commercial ease-of-use for our intend of Lucira's because offering. are uniquely We utility LUCI, our of are Overtime, an of COVID-XX as their paradigm. a and to

to as as disease with understanding as We for a home focus. commercial testing. both enterprise a test well working the are This of market's growth menu our build and infectious is similar Lucira's accelerated has of COVID demand kits convenient capabilities.

market, are each durable time continuing believe the arrived, at accurate to testing Lucira's sales paradigm. in ramp infectious to nascent of on contracts, in continuing an key test-to-treat our through quarter, passing reducing term select play as key manufacture Our capability generating This disease. we gross organization manufacturing near and from to focus value. commercial to has and to capacity and roll convenient margin bringing demonstrate and role global its role with home test beginning the is scale accelerating expansion, we a suffering shareholder with a to playing associated combo improvements, the usage out that

our we geographic testing our offering expand distribution, upon become from business we As maturing accuracy. around demand reliant less forecast capabilities anticipate and products we in we the in alone. And will believe COVID fluctuations

Lastly, we would long-term to hard so partners to are position that working and recognize for employees, Lucira success. contractors like

our I the CFO, in will future our ever are and look financials. call forward to Dan a over excited George, upcoming than We discussion to the detailed our turn now quarters. of more for Lucira's growth about

Dan George

our of for quarters the XXXX $XX.X a hello, quarter today increase XXXX. press third results over to combined three issued almost quarter release fourth and million, fourth full the summary everyone. the the Thanks, approximate year revenue Erik, for represented quarter of which and Please earlier XXX% was financial an of in Net refer our for prior and XXXX. doubling

and healthcare margin for was of and margin $XX.X international sales contracts Non-GAAP and quarter the gross and XX%, sales revenue businesses Gross was primarily million gross fourth and direct of gross distributors, and was the respectively. XX%, quarter net million $XX.X to with providers, driven respectively. consumers. Our by XXXX profit XXXX fourth profit for

million increase manufacturing services were compared to in gross in to $XX.X $X.X despite public and period same gross $X.X administration increasing in to was and the gained in related driven company charge period R&D in expenses XXXX. costs XXXX, output were The sold quarter goods to million. million XXXX. the Our $X.X of million fourth including in personnel-related primarily increased in fourth relating profit and compared commercial margin primarily efficiencies XXXX, by of quarter facilitate obsolescence and of compliance. increase the $X.X of expenses Selling, approximately a through third-party to same million and operational was general cost to activities the excess

Non-GAAP was decrease to net in for loss compared the activities resulted same GAAP increased XXXX, the $XX.X XXXX. gross and period The $XX.X million approximately loss in million compared product drove primarily in and loss to validation in quarter the increase. non-GAAP period $XXX,XXX QX, of New net $X.X in in same income the was net development million from profit. manufacturing XXXX. in fourth primarily net

the year-end and full net and GAAP an million, million, respectively. year For We gross XXXX. GAAP million, profit XX% The in $XX.X for net $XX.X to loss $XX.X cash margin. offering. non-GAAP million was margin. year year $XX.X million at million gross representing cash, recorded initial of full related gross for gross was Non-GAAP XXXX, $XXX $XX.X to GAAP loss and year non-GAAP the XX% our was the revenue. in ended profit XXXX. in for million non-GAAP operating was $XX.X primarily a year representing million increase GAAP the $XX.X were the public is $XX.X compared expenses million with we

our reiterating are we in preannouncement guidance XXXX, of in For $XXX excess revenue. million

million. XXXX, For of the revenue first million we between quarter $XX to estimate $XX

the announced of XXXX. flow The recently the of cash a available we debt current our And our from sustain deal this cash first through believe tranche cash position. financing puts in balance healthy -- company the

EBITDA excludes stock-based commercial $XX output of in recent assessment demand. adjusted expect our to compensation million We reflect that estimates of XXXX. $XX non-cash manufacturing most These million in

achieve call turn for financial now the over to XXXX. to health Q&A. is objective I'll in Catherine Our back

Operator

Bruin [Operator you. America. Derik from comes De of question Instructions] first with Thank Our Bank

Your line open, is

Derik De Bruin

afternoon. good Hi,

Dan George

Hey, Derik.

Derik De Bruin

full first your year at looking quarter guidance bit little guidance. the and a I'm So

taper So lot that. sort I'm then stronger, right way be would now quarter just of and curious, sort expected to just have the playing the first off a the is sort given of out the of the sort like of pandemic I

through sort just acceleration Can I'm it in you're of looking looking of revenues walk -- sort through curious, at the you of certainly the you accelerating? see like, So for looks rest this, implied you're year. how

Erik Engelson

point I'll comment, go expecting question. the we very then I'll through starting comfortable started. for make as over thanks seeing sure. or as the we're Dan. Yeah, some turn And clearly But with year. to a we seasonality and the some and I Derik, it we're think

Dan George

Yeah.

in -- we number really seasonality a Erik disease. as I Derik, we're mentioned, about think about good QX, think viral -- And is I some that's talking that but expect look, we QX, to in a feel QX. see

we're XXXX. pretty in heavy half So growth of back at looking the some

solid So very about kind QX it number. I think a would as being of

and some QX probably some little of QX up And again, the with back QX volatility a flatness say, into half I picking would of QX. heavily, in through -- bit and very

Derik De Bruin

I middle we're of Okay. mean in March. the

surprise this it's as is. So sort that, I that just of a said, yes, -- so is

us walk of of of orders? about sort think I'm -- you XX% how think you're your if sort then through about orders like XX% mistaken, terms can committed what's to thinking so capacity, existing sort I like I represents -- expansion your So committed and roughly Could that. walk not in just of through of the us of those? of and what you your about guidance you you're have sort your fill And capacity

Dan George

Yeah, I can community the orders go first. through

guidance and is International about at at business segment, two XX% our So our contracted at that that segment, have right? So And segment we binding DTC orders. HCP point and of I look would about and that the we segment. thirds look segments, our our this of is we in four our provided business-to-business

that's majority where really we are and the the business The of where the is, have contracted visibility. real the three that's contracts first the where business majority those and reside, of segments

that's the QX looking into QX we're frame. So and the where time

and We QX, sustainability, that what force curve the go not Derik, critical business. sustainability doing is contract of reached we the on allowed sales in of to switch evidence as us contracts, frame really QX, evidenced piece entered take have contracts, through our which were go landing have the our kind long-term into manufacturing if in out that's especially of to great and And visibility additional which time a into QX seeking now level orders, that QX happened manufacturing. but of mass group is timeframe, really just they into longer-term going nice the which out and and start the out they allowed by of we a some the sales

Derik De Bruin

bring a QX? And look as point of half you back sort OpEx we the of should you So -- up in look SG&A starting year? quarter, at the test combo like it like sort R&D, flu-COVID to the would as fourth for of you the expect is the in ramp

Dan George

growing most support -- definitely. look, I Yeah, to actually mean, support to we're be business. to going the

at So launching it a I as point. look

have R&D, that business, think that investing nice very $XX I like growing right? got product. actually is but number, We're I be -- off from a in we will million for what you jumping combo we a think proved QX QX have we we are dramatically, leverageable mentioned,

We will in be our footprint. marketing, be operational investing and we expanding and will sales

would support So type say, I would of look year-over-year doubling, growth. to at of kind to those revenue expenses I this close

Derik De Bruin

you the the like else combo, sounds flu-COVID you finalization. Got have combo? do it. doing for were And some It what to still do flu

-- You as year? the that will be that you expect that a able you'll to be launch the EUA. end Do required that XXX(k) for be it still think point? EUA at it will an of still be to by Or

Erik Engelson

Yeah.

through testing then product required and the the going is for final Derik, submissions. now, So its exists in-house and regulatory testing

EUA. that Our current it an information is will FDA be from

this an EUA, believe we so have to changes will to every And this that make operating but FDA. we're no reason, going XXX(k), FDA frame. time it's If then EUA, basis. it's and at it our on on move -- with point, conversations longer if that be based it they it to the mind not their But

Derik De Bruin

up, sort what sort business about still where with begs this? and it's for -- I other of And evolves some beyond like how how an embedded think -- this waves, you mean, in So 'XX. are year had you it. this spike, Just guess, we variant one the should goes are mean additional picking it things of the I certainly, the here? about from going XXXX? after unprecedented the assumptions I like question guess of we happens the anticipating thinking and what's still with your your doing the down, had Omicron -- sort -- have -- through we we I is like

Erik Engelson

And a Yeah. to against We're COVID. market much remember, see continuing larger demand a consistent demand. we're tiny in player even

product the of is point we bring consistent seeing in what leverage that. COVID QX one and this significant then and seeing and that's paradigm becomes And whole product after the product. healthcare So the particularly We're and that consumerization particularly relevant subsequent we'll we're becomes demand. into see leveraged test-to-treat COVID combo with -- has with opened going products But But combo introduction. forward then that's home.

Dan George

think so the of onset about has, I to cusp mean, least think a then if in somebody really you on mean, to on, can these at this catch also modalities, allowed for introduction you creating we're at-home test, phase it so And the the symptom important Yeah. market. I them much treat pandemic testing, early can you introduction symptoms. acceleration And of -- early least I the to of you creation. of becomes what And the with the treat only because new what this market them asymptomatic just at or more if upfront don't disease, identify of

the Merck the by there's who with doc, really point started docs in going Pfizer, along thing do antivirals think, the care of for that fact, just pandemic, So antivirals, flu testing is your the treating And with tens tests. with and definitely of to anecdotally of of a of idea we are through by past. to people used millions the the somewhat

paradigm or really if of with have you without the whole creating pandemic of identification shift reintroduced that identical. the and flu, test-to-treat So COVID early symptoms these the knowing importance drugs proper and testing is are

very important. just So it's

Erik Engelson

to you the we're we're was testing. the increased of the it here. awareness really population the get of such benefit of accelerated this. initial with the But in can to initial now Derik, COVID when tell then And ability about on focused This company excited founded. scale. objective But was home mission initial our

Derik De Bruin

you very Great. Thank much.

Erik Engelson

you. Thank

Operator

Weinstein Brian with from comes William Our Blair. next question

Your line is open.

Griffin Soriano

is Griffin, for Good thanks Hey, the afternoon. questions. and guys. This

better sold were kits quarter they on you just test of how Can many where the ASPs we get through and came in for so ASPs. the guidance? a on are in what go-forward expectations sense First the talk

Dan George

that really expecting not competitive experienced what information we're than Griffin, dissimilar we for in providing But not XXXX. we're reasons. anything

Griffin Soriano

Okay. Fair.

On have? expected up I sense of tests. total this production mean, the percentage total based ramp $XXX million, guys any think million see $XX, what you expectations percent will to those just X Any you on of what guys sense take for? just if of $XX production obviously account that's of going you kind that of

Dan George

XX% in probably It's range. XX% that to Yeah.

Erik Engelson

per we'll the hitting the as other the Yeah. the specific And remember, half without for expectations through of of ramp to beyond continue production the not year, first -- year units with about capacity first the talking we're in than million X the numbers additional year. need month half we of get

Griffin Soriano

Okay.

So just to clear, get the we as year. half quarter $X potential per the into back ramp be beyond the there is million of

Erik Engelson

That's correct.

Griffin Soriano

you Okay. And then dynamics, up. on competitive brought that obviously,

the space, dynamics basis kind any to costs. of entrants couple molecular a But that, in space. at-home in of guys' sense dynamics, love your on thoughts hear the current of the For would you on many space, great? of assumes be competitive the beyond But COVID thoughts -- competition competitive

Erik Engelson

Yeah. it. extremely an think in at the other interesting as going space. participating There's space we It's looking emerge and it's competitors to certainly --

testing very space, for, that home able when uninstrumented and We in test in the lab also have the the point think and at example, a positive a served overlap point-of-care have entirety, being Lucira competitors and for test that founders, have say, testing make of an result and or not extra central company test served a products of into healthcare first testing but the two us our a at-home instrument, a puts let's expense that Just preprocedural untethered, the well run spaces. have kind unique when substantial. some each the they an system, complexity patient's onetime to because to about this situation. went make serve become its to think that mile having we make a of to you sending The

Griffin Soriano

Yeah.

coverage, reimbursement? Okay. what what at-home, relating process any just impact just looks with talk been of are your COVID-XX any is seen testing, volumes what obtaining somebody's reimbursement or think, is for And then any are to the about sense private last that like there's Have -- I Can one. on if test, -- any payer you like? for for submitted you impact,

Erik Engelson

Well, we the of COVID in Biden have testing instances, home administration. per seen covered, many

a test XXX% per with people to example, test coverage receipt. online Lucira situation, And who a such in they're $XX So to purchased on and COVID their for got up situation, not test. coverage if get submit if they've able they're

as And number So market. a tests at a we've that. that it. we additional be more received carefully very time, of -- satisfactory We'll very about we'll about looking to comments coverage comment able be at bring very to

Griffin Soriano

Okay. Thanks, guys.

Erik Engelson

Thanks.

Operator

you. Thank

Rahul question comes LifeSci Our Rakhit with from next Capital.

line Your is open.

Rahul Rakhit

hear you Can guys. Hey, me?

Erik Engelson

can, We Rahul.

Rahul Rakhit

different open help of much you from that our Hey, still but a hoping, talked guys. It's seeing that Awesome. I congrats Obviously, kind just what here, really I lot a I you've that wondering was of kind seeing on by this manufacturing guidance, capacity. of from you're of limited in guess? a some up. constrained could if great of kind But with of somewhat even exciting. on manufacturing being I of your year, your comment how lot is capacity know of demand been year? seeing by channels, the conversations, about really you're previous how of kind demand And we're me kind customer was understand

Erik Engelson

Yeah.

channels. continue see three principal in do. We the strong to We demand

either And up took by three we kind of demand. impacted consistent did manufacturing Omicron see that that meet unimpacted our an to as capacity of -- was bring demand. is so influence manufacturing or the we're limited principal we we -- not continue what channels estimate that to extent in was that's capacity it If our those why to did demand because

channels. a the compared surge, x population. that we other online a our in demand, a as small down that very Omicron baseline With online, down of But is meaning, the settle then settled -- demand, online, exception in of channel did couple see to surge in meaning

Rahul Rakhit

Got it.

to from near gross over this be covered Okay. and should but my if guess, long further Super expansion XX thinking helpful. Thanks. perspective, about sorry margin missed I I term, the And and it, you I guess how I XX I I'm months? guess --

Dan George

Yeah.

So we the exited year.

about Our type gross at With at we're non-GAAP in margin gross was margin looking this XXXX, XX%. volume, of XX%. an average

can think XX% you back range into period. a that it, of half So more it with in year of think kind growing bump of during the the throughout of course the QX of of the exceeding QX,

Rahul Rakhit

guess enough. regulatory any of over? this there kind into need understand, of Are color you you're about guess, that Thanks. just beyond? guess areas to then different And I many Maybe you guess, Good can get like? One, of helpful? bit to provide further you're kind of here you pretty I what just what get more kind color -- of expansion on kind I year trying might kind channel want me. a two Awesome. hurdles look for any those I composition would hear seeing just the would can international more the there? look how like little help and I us contracts to of demand what on and give us any ex-U.S. how be

Erik Engelson

at that look in this seasonality. we've to ours, global binding. countries two bring that not in in for in And somewhat a sustained be respiratory And our aware fashion. there, well diseases, of products for additional recognizing we'll markets, seasonality you're the extent U.S. fashion But hemispheres. this to contracted We regulatory we we of some a that which international point answer Canada and And holistic through just have Canada intend is is product. in we're forward, just the possible Yeah. from some through important from approvals partner there combo vague and balance to We distribution in regulatory as point and example, But that some competitive other previously. and be can -- demand and named as partners in an so the reasons.

point. the about So this that get we'll second into serves some the be hopefully, we of as half us year. guidance But more that forthcoming at

Rahul Rakhit

pretty Understood. one Yeah. yes, And helpful. just me. That's last for then,

this Are what end in of kind revenue EUA guess, that kind you of full potential the revenue the of year combo into upside? test I Assuming comes it just of is back seeing any of and for year. baked in, Is as an the guidance? that kind

Dan George

Yeah. without $XXX plan combo. even the We the million good feel about

when as of So combo at we about excess. in we $XXX being talk look the in million, excess

Rahul Rakhit

Good me. okay. a to for Really on guys. congrats it it, appreciated, year. great That’s again Got know. And

Dan George

Thank you.

Erik Engelson

Thank you.

Operator

Thank the back to in remarks. And you. I'd queue. to call the the for Erik closing questions like that's Engelson all turn

Erik Engelson

want for I to your Catherine. in for afternoon Lucira again your thank Health. this everyone you, Thank time interest

We are excited and our about test decentralized portfolio the are global where future reach. at we expanding Lucira, commercial

of Thank and have drive of coming I’m combo forward shareholder product a with testing beyond. both product great increased our in planned the scale along care-at-home and proud XXXX you, COVID launch was half that believe in value. and our catalyst platform the second test-to-treat and Our which we of evening. the of team We look with XXXX. will the year the appropriateness achieved to our for achievements a this paradigm initial the ecosystem,

Operator

today's for call. concludes you Thank conference This participating.

You may now disconnect.