Olink Holding AB (publ) (OLK) Q3 2022 Earnings Call Transcript

Olink Holding AB (publ) (NASDAQ:OLK) Q3 2022 Earnings Call Transcript November 10, 2022 8:00 AM ET

Company Participants

Jan Medina – Vice President, Investor Relations & Capital Markets

Jon Heimer – Chief Executive Officer

Carl Raimond – Chief Commercial Officer

Oskar Hjelm – Chief Financial Officer

Conference Call Participants

Puneet Souda – SVB

Matt Sykes – Goldman Sachs

Tejas Savant – Morgan Stanley

Operator

Good day, and thank you for standing by. Welcome to the Olink Proteomics Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker today Jan Medina, Vice President, Investor Relations and Capital Markets. Please go ahead.

Jan Medina

Thanks, Katherine and good morning, everyone. Thank you all for participating in today’s conference call. On the call from Olink, we have Jon Heimer, Chief Executive Officer; Carl Raimond, Chief Commercial Officer; and Oskar Hjelm, Chief Financial Officer.

Earlier today, Olink released financial results for the third quarter ended September 30, 2022. A copy of the press release and an updated corporate presentation are available on the company’s website.

Before we begin, I’d like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the US federal securities laws, which are made pursuant to the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance, are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. For a list and descriptions of risks and uncertainties associated with Olink’s business, please refer to the risk factors section on Form 20-F, commission file number 001-40277, filed with the US Securities And Exchange Commission on March 17, 2022, and in our other filings with the SEC. We urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.

Also, in our remarks or responses to questions, management may mention some non-IFRS financial measures. Reconciliations of adjusted gross profit and EBITDA, constant currency revenue growth, and certain other non-IFRS financial measures to the most directly comparable IFRS measures, are available in the recent earnings press release available on the company’s website. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 10, 2022. Olink 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, except as required by law.

And with that, I will turn the call over to Jon. Jon?

Jon Heimer

Thank you, Jan. Good morning, everyone. And thank you for joining Olink’s third quarter 2022 earnings call. I’ll begin with a quick review of the quarter’s accomplishments and recent milestones then wrap things after our outlook for the remainder of the year. I’ll then turn the call over to Carl for details on our considerable commercial progress and then to Oskar for more details on our performance and guidance.

3Q was another strong quarter for Olink, benefiting from our industry-leading execution and building on a very positive start to the year. We believe we are well positioned with customers and prospects across biopharma and academia.

As we look at broader industry dynamics and macro crosscurrents, Olink’s execution remains strong. Our overall customer base appears healthy with solid project funding and strong interest in proteomics. We delivered quarterly revenue of $31.8 million, 59% growth over the third quarter of 2021. The quarter was highlighted by strong growth from Explore Kits and kits revenue overall, demonstrating strong progress in our product mix goals.

Other highlights included a record number of Explore externalization during the quarter and strong performances in low- and mid-plex with Signature Q100 and Target. Olink has become a driving force in the modern proteomics field and is increasingly viewed by the industry as an enabling platform to derive unprecedented insights and value from protein data, leveraging the decades worth of genomic efforts pursued by scientists.

We continue to see an expansion of use cases for proteomics with customers throughout the entire Olink portfolio. This includes Explore users adopting the Signature and Target platforms as their work demands and low-plex users moving towards high-plex as well. Overtime, we hope to define a new approach to treating disease, provide new options for healthcare providers and patients and to improve health care overall.

Olink is driven not only to meet today’s needs for proteomics customers but also to enable new use cases and new ways to unlock the value of protein. We want to highlight a few such recent initiatives. Last month we announced the launch of Olink Insight, an open access platform for the global research community and owning customers to share data and insights to accelerate proteomics.

It’s been created from the ground up to address the complex challenges of proteomic data analysis, introducing a modern and user-friendly interface to explore Olink NPX data, which will help deliver on the urgent scientific questions asked by the community. The expectation is to accelerate the strategic use of proteomics in the scientific field with faster and more accurate results shortening time to the next experiment. We’re also launching a fully flexible made-to-order product that will allow customers to create small protein panels from our library. Carl will cover this shortly and please stay tuned for more details at our Investor Day for more on both initiatives.

Lastly, we’re currently tracking ahead of our R&D goal to generate 4,500 validated PA assets this year. Following extensive conversations and feedback from customers, we’ve accelerated our strategy to expand our protein library increase throughput and simplify workflows within the Olink platform.

We’ve incorporated customer feedback into our development plan while maintaining the same level of exquisite data quality that Olink is known for. We are excited about the progress we’ve made and look forward to sharing more information as timelines get firmed up.

The Olink scientific community also reached another important milestone, the achievement of more than 1,000 thoughtfully executed research studies published in high-impact journals around the world, using PA technology in every major therapeutic category from research and discovery to the downstream clinical settings.

In other scientific venues, Olink’s technology was also on display at ASHG in October, with multiple abstracts and presentations featuring PA across multiple major conditions. This includes high interest in Olink-hosted and co-hosted industry sessions with rooms filled to capacity and even standing room only.

In October, at the European Multiple Sclerosis meeting, ECTRIMS, our partner Octave Bioscience presented multiple abstracts and data sets as well. Octave also announced the commercial launch of their first-in-class precision care solution for multiple sclerosis a multi-dimensional tool that incorporates an 18 biomarker signature underpinned by PA technology. We will have much more to say about the science at Olink next Monday’s Investor Day and hope you’ll join us to learn more.

Of course, our exemplary results would be possible without the incredible talent and drive from people at Olink. It’s due to their determined and combined efforts that we can achieve results like this and look forward to a bright future. And we remain committed to growing this already broad and deep talent pool. We started the third quarter with 516 employees and reached 548 upon entering the fourth quarter, including 208 full-time employees on the commercial team.

These efforts also include the strengthening expansion of our management team for continued leadership in the modern proteomics area, including announcing the appointment of Carl Raimond to President, our plan to hire a new Chief Commercial Officer, strengthening our already impressive supply chain capabilities with Fredrik Netzel and appointing Anna Marsell, Chief Operating Officer effective at the end of this month.

Turning to our expectations, to-date holdings execution has been extraordinary and our customers continue to appear healthy. However, given that multiple global economic headwinds have arisen over the course of the year, including foreign exchange, inflation war and other dynamics, our fourth quarter outlook now contemplates our updated outlook on these issues.

We now expect full year 2022 revenue to be in the range of US$138 million to US$142 million, representing yearly growth of 45% to 49% with constant currency revenue expected near the top end of this range and reported revenue expected near the bottom end of this range when factoring in the considerable FX headwinds we faced this year. By either calculation, we consider this exceptional performance into tremendous commercial opportunity still in its early innings.

I’ll now turn the call over to Carl to provide a few more details on the quarter. Carl?

Carl Raimond

Thank you, Jon. Third quarter revenue grew 59% on a yearly basis, highlighted by strong performance in our kit business and Explore platform. This total was comprised of $13.4 million in kits revenue, $15.1 million in analysis services revenue and $3.2 million in Other.

Q3 kit mix improved strongly from Q2 and was the highest since our IPO, reaching 42% of total revenue and growing 265% year-over-year. Other revenue was up 174% on a yearly basis with Signature representing the largest contributor to dollar growth.

Third quarter growth was driven by strength across our entire customer base with high level of interest from biopharma and academic customers. We’re optimistic about the prospects for Olink through the balance of 2022, but we’ve contemplated a more uncertain macro environment as we head into the last couple of months of the year.

Starting with Explore strong performance. Total Explore revenue of $21.7 million or 68% of our total revenue in Q3 and on a trailing 12-month basis represented 68% of total revenue as well. On Q3 Explore externalization, the addition of 11 installations was the most ever during a single quarter and we ended Q3 with 40 total.

These installations in aggregate represent approximately $840,000 in annual sample volume potential and we achieved roughly $725,000 in average customer pull-through during the 12 months ended September 30th, 2022. This group includes installations at an increasing number of service providers as well a customer segment that has become very interested in bringing Olink into their product portfolios.

While our presence with service providers is still in its early phases, we believe this growing appetite bodes well over the long-term. We also delivered 12 new Signature instruments to customers for a total of 63 by the end of Q3. Signature adoption continues to show our strength in the mid and low-plex segments and uptake by new and existing customers.

Signature and Explore are still relatively new and we think their early successes point to the incredible opportunity that still lays ahead of us across all segments of our business.

To build further on that opportunity we’re excited about two significant product introductions that expand the capability and value of our portfolio, Olink Insight, which was launched in October and the soon-to-be launched Olink Flex platform. Jon has already provided some background on Olink Insight and I’ll provide a little bit on Olink Flex, which is a customizable mix-and-match panel-building product that allows customers to select and combine up to 21 human proteins from a library of over 200 into one biomarker panel.

Both new products are eagerly anticipated by our customers and we’ll provide more detail next week during our Investor Day in New York City. In-person or virtually, we hope you can join us.

Our strong results were driven by solid performances and contributions from every member of the commercial group and I’d like to thank the entire team for their considerable efforts yet again. We believe the drive for new tools and new insights to improve human health is only growing with modern proteomics and Olink NPX data specifically representing a key enabling technology to drive a new era of biological understanding.

I’ll now turn the call over to Oskar to provide additional financial details as well.

Oskar Hjelm

Thanks Carl and hello everyone. Before I start I’d like to make a quick reminder that next week in addition to our Investor Day on November 14th, we will also be at Canaccord Genuity MedTech Diagnostics Forum on November 17th. We hope to catch you at one of these events while we are in New York City.

Third quarter revenue growth was strong once again in Q3, up 59% on a yearly basis even with more sizable FX headwinds than we had anticipated at the start of the year. We continue to invest in line with our strategic plan and adjusted EBITDA was negative $1.7 million for the third quarter as compared to negative $7.5 million for the third quarter of 2021.

As Carl mentioned at the end of Q3, we had 40 externally placed revenue-generating Explore installations. Even with this significant number of new externalizations, average customer pull-through with these customers over the last 12 months was a strong $725,000, an indication that the quality of our Explorer externalization remains high.

As a reminder, we’ve seen average annual pull-through for Explore range from $500,000 to $750,000 per customer with individual spend ranging from less than $100,000 to multimillion-dollar orders. We continue to expect variability in quarter-to-quarter pull-through which could be further impacted by our customers’ spending seasonality, but overall we anticipate continued strong growth.

Driven by a very strong performance by Explore, kits revenue for the third quarter grew 265% to $13.4 million as compared to $3.7 million for the third quarter of 2021. Analysis Service revenue in Q3 was flat year-over-year at $15.1 million.

The mix of kit versus Analysis Service revenue improved significantly from Q2 to Q3 from 26% of total revenue to 42% of total revenue respectively. Other revenue was $3.2 million for the third quarter as compared to $1.2 million for the third quarter of 2021. Growth in Other was driven primarily by Signature Q100 instruments.

By geography, revenue during the third quarter of 2022 was $12.4 million in Americas, $15 million in EMEA, and $4.4 million in China and Rest of the World. Consolidated adjusted gross profit was $21.8 million or 69% of revenue in the third quarter versus $13.1 million or 66% in the third quarter of 2021.

Adjusted gross profit margin for kits was 89% in Q3 of 2021 as compared to 91% in Q3 of 2021. Q3 adjusted gross profit margin for Analysis Services was 55% as compared to 59% in Q3 of 2021. The decline in Analysis Service margin was driven primarily by deliveries to the UKB and lower lab activity during the summer months. As we exited the third quarter, service margin reverted to the normalized levels we have observed historically.

While quarter-to-quarter variation should be expected, we expect the combined positive impact of increasing kit mix, Explore 3K adoption, and our antibody library to have a positive impact on gross margin over the long-term.

Adjusted gross profit margin for other was 49% in Q3 as compared to 74% for Q3 2021. The decrease was due to a mix shift in revenue stemming from the growth of Signature revenues.

Total operating expenses for the third quarter of 2022 was $29 million as compared to $24.1 million for the third quarter of 2021. The increase was largely due to continued investment in Olink’s commercial organization and research and development.

Operating expenses are broken out as follow; selling expenses for Q3 2022 were $11.2 million versus $9 million for Q3 2021; administrative expenses were $12 million versus $11.1 million for Q3 2021, and R&D totaled $6.4 million and $4.2 million for Q3 2022 and Q3 2021, respectively. Other operating income was $725,000 in the latest quarter as compared to $276,000 in Q3 2021.

Net loss for the third quarter was $1.3 million as compared to a net loss of $5.5 million for the third quarter of 2021. Net loss per share was $0.01 as compared to a net loss per share of $0.05 in the third quarter of 2021. We ended the quarter with a strong cash balance of $77 million in cash and cash equivalents.

Our strong cash position and efficient use of capital is an indication of our ability to responsibly balance investment needs with a positive ROI, and consequently we believe we remain sufficiently capitalized to achieve our return to profitability and to fund our existing strategic plan.

Moving to our outlook the top of our 2022 full year revenue guidance calls for growth of approximately 49% on a constant currency basis and roughly 45% at the bottom of the range when incorporating FX headwind based on today’s rates.

To provide some background, we offset approximately $2 million of FX headwind during the first nine months of the year and now expect a significant amount of FX headwind in the fourth quarter as well. Given the movements of the US. dollar, we believe providing this additional layer of analysis is useful for investors as we enter the most important period of our fiscal year.

I would also like to highlight that our FX exposure is somewhat impacted by the mix of revenues and demand for products and services around the globe, which does vary from quarter-to-quarter. Despite the macro-related impact from foreign exchange volatility, war and global monetary policy, we believe Olink’s business is performing very well. And as we consider 2023, we believe we remain well-positioned for a return to profitability and continued strong growth.

I’ll now turn the call back to Jon for his concluding remarks.

Jon Heimer

Thank you, Oskar. Thank you, Carl and Jan. We believe our leadership position in proteomics continues to grow with Olink seeing increasingly broad adoption across plex and across customer segments, and across the globe.

At this point, we’ll open up the call for questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from Puneet Souda with SVB. Your line is open.

Puneet Souda

Yes. Hi, Jon. Thanks for taking the question. First one really, I mean, — first of all congrats on the strong quarter here. The Explore installs were really impressive in the quarter. I don’t think you had 11 installs in any quarter since the launch of this product. So tell us a bit more about that what drove that? And does it mean that there is a little bit of a pull-forward here, or also what does it mean for 2023 with the rising mix of revenue towards kits? Maybe if you can talk about that? And then just briefly around what does this mean for the pull-through sort of longer term?

Jon Heimer

Great. Thanks, Puneet. And yes much appreciate your comments on the past quarter, right? I mean truly impressive, right? Every KPI one could measure us on we certainly deliver on or above. So yes, we’re super excited by 3Q. And definitely on the Explore installations as well. So maybe Carl can add to those comments. I know Carl would you — maybe you can just answer Puneet directly on how you view the 11% which for sure is the biggest we’ve done in one quarter and why that is?

Carl Raimond

Yes, absolutely. Hi, Puneet. Yes, so as we’ve talked about in prior quarters it’s a bit non-linear. And so I think what this reflects is execution on our strategy which we’ve spoken about in terms of shifting to more of a product versus the service business. I think you could see that growing in our prior performance in terms of Explore demand, how high that is and that’s sort of permeating now to customer adoption.

So on — you had asked about pull-forward, I think, again there’s a bit of lumpiness. So I don’t think I would look at it that way. I think we’ll again over a shorter period of time it doesn’t look linear. I think if you stretch that over a longer period of time, you’ll see that trend continue to rise. I mean it’s still early days talking about 40 sites when we’re considering the fact that there’s thousands of sequencing instruments out there in the wild. So I think that again represents a tremendous amount of opportunity as we continue to look ahead.

Then the pull-through thing just gets tricky, because it’s for the same non-linear comment that I made there. So as we have — certainly, have newer users ramping up their capabilities that will suppress the number a bit. Then as they become productive and take in more demand, then it will grow those numbers a bit. But so far, again, we’re seeing consistent, sort of, high-quality customers in that space and that’s been very good for the business and on point with our strategy.

Puneet Souda

Okay. Super helpful. And then if I could follow up, a question that we’re getting this morning is your timing to reach profitability and the need to drive investment into growth. Obviously, you’re seeing a strong traction here with the kitted products and with Explore. So the question I’m getting is, given the cash position you have now, could you talk a little bit about your timing to reach profitability or need for any capital additions?

And then, last one, if I could just squeeze in, with Illumina’s lower cost per gigabase, what does that mean for your business with the new X Plus launch for Illumina? How do you think that customers will utilize that to drive proteomics and Olink experiments? Thank you.

Oskar Hjelm

Hey, Puneet, it’s Oskar here. So I’ll take the first one and then I’ll hand the second more scientific part over to Jon. So, I mean, on our cash position and, sort of, on our path to profitability, we, I think, remain, sort of, very confident and, sort of, in our plan for next year to revert to profitability.

I think if you, sort of, dissect the third quarter results you can see, sort of, quite significant leverage on the cost base, especially, on the non-commercial non-R&D side. Also, with the kit mix improving, driving margin expansion on the gross margin side that, sort of, leads into 2023 and profitability is, sort of, very much within our plan.

And then we plan to, sort of, invest a bit further into 2023 and revert to cash flow positive in 2024. So there is nothing within the current scope of our plan to raise additional capital and we’re comfortable where we are today.

Jon Heimer

Yes. And Jon here, Puneet. It’s a very good question and an important one. So as you know, we have an agnostic strategy. Our technology is unique in that sense that you could — for Explore use any sequencer out there, really, it’s counting those DNA barcodes.

And, of course, we are super excited along with our customers when you see improvements in NGS technology and also some competition, to be super transparent, driving costs down. So what it means for our customers is, that the total price of the experiments are going down, which is very good news and they could expand their projects or run more on the same budget.

So, I thought, what Illumina has recently communicated was super impressive, very, very interesting exciting developments on the technology, which will be super helpful for Olink and our customer base. So, all good news.

Puneet Souda

Great. Thanks guys for that.

Jon Heimer

Thank you, Puneet.

Operator

Our next question will come from Matt Sykes with Goldman Sachs. Your line is open.

Matt Sykes

Hi. Thanks for taking my questions. Good morning. Congrats on the on the quarter. Maybe, just some questions I’m getting from investors, just regarding the guide for this year, just the narrowing of that guide and the lowering of the top end.

You’ve kind of contemplated the FX in there with the CER results at the top end. But how should we think about your factoring in the macro headwinds in, sort of, narrowing that guide, versus, sort of, any kind of pull forward of orders into Q3 that you might have expected in Q4. Is this more about factoring in the macro headwinds in terms of the lowering the top end, or were there some change in order dynamics that we should be aware of?

Jon Heimer

Hey. Good morning, Matt, Jon here. I can start answering and then if Carl wants to fill in, he can. So — and first of all thanks right there — we’re super happy with 3Q. No, so based on the guidance, we just want to be as clear as possible to the investor community. And we’ve performed extremely well during all the macro and what goes on, on the global economy right?

But FX is truly a headwind for us and then we want to — yes, just to be very clear about that. And — so as we said in our script, right, we feel very good about where we’re at on the current currency, right? But then, when we factor in FX, we thought this was the right thing to do on the topper end of the range.

So, Carl, I don’t know, I mean, basically what we also said in the script, right, is that we feel very good about what we’re hearing from our customer base, that they continue to investing in proteomics and in particular in Olink. So, I don’t know, Carl, if you want to expand further on that.

Carl Raimond

Yes, sure. And, Matt, yes, what we’re hearing from our customers right now is that, their budgets are not affected by, at least, for their proteomic projects. So that remains largely intact. However, I mean, being cognizant and prudent regarding the macroeconomic environment. And certainly, I think something a lot of companies rely on this time of year looking at sort of budget flush. That’s to be determined still. That tends to come into focus a little bit better late-November, early-December.

So I think actually the positive sort of aspect of all of that too, as we’ve been, as we’ve gone through this transition to more of a product business we’re smoothing the quarters out a bit, which I think is something that was commented on in prior quarters about the seasonality of our business. So we see that as a positive as we shift to kits.

It smooths the quarters out just a little bit better. But overall, again, the macroeconomic environment is an item to be determined. But again as Jon noted, no — we’re not getting any specific signal though from customers right now that their budgets are affected for their proteomic work.

Matt Sykes

Great. Thanks Jon and Carl appreciate the color. And just on the installation number which I was pointing out was very strong. You’ve talked in the past about some of the recent Explore installations being more, high throughput customers.

So as evidenced by the strong pull-through numbers that you have could you maybe talk about this set of 11 installations that you had in the quarter? Is it still trending with the high throughput customers?

So should we expect that high consumable pull-through number to likely continue? Is there like a lag period of these 11, when they get ramped up and when we’ll actually see it show up in that pull-through?

Carl Raimond

Yeah. I can comment on that. So yeah, I mean, we continue to see customers yeah, who have a lot of capacity. Obviously, there’s quite a bit of variation customer-to-customer. So it’s hard to be overly generalized.

Some of them are quite high throughput. Some of them are on the lower end of throughput. But there is certainly a period I think of sort of adoption, and wrapping, and scale. And I commented on that a little bit earlier.

So I think when you look at those average pull-through numbers, as we have surges of adoption that will sort of suppress those numbers a bit. And then as they become mature that will grow those numbers again.

So we’re not predicting any significant changes there. I think it’s the best way to continue to look at it is sort of this last 12-month type of figure which helps to sort of smooth that view out a little bit.

Matt Sykes

Got it. And just last question just on low-and-mid-plex, clearly the Signature Q100 placements were also fairly strong. Could you just maybe talk about the dynamic that you’ve spoken about in previous quarters about customers particularly on the biopharma side moving across plex? And are you seeing greater adoption of those customers moving throughout the plex spectrum?

Carl Raimond

Yeah, I can comment on that one too. Yeah. So again, yeah, very similar comments to prior. I think we see about probably north now of half of our Explore customers are also mid-plex customers as well and a growing appetite for adoption.

And with the plex launch, I think we’re going to see a nice strong tailwind as we sort of move into a part of the market space that we haven’t been significantly competing in prior.

So I think that’s only going to expand that opportunity and really only strengthens the Olink story which is very unique in terms of our ability to scale from high-plex to low-plex and now to be able to do that in a very flexible way is I can tell you it’s very attractive for our customers.

Matt Sykes

Great. Thanks very much for your time.

Carl Raimond

Thanks, Matt.

Jon Heimer

Thanks, Matt.

Operator

Thank you and our next question comes from Tejas Savant with Morgan Stanley. Your line is open.

Tejas Savant

Hey guys. Good morning. I want to follow-up on some of the guidance questions earlier. Jon, you had 49% reported growth at the midpoint of your last guide. And I think you’d embedded a single-digit FX headwind so that would imply constant currency growth in the 50s. That is now 49% right?

And I know you mentioned some of these macro factors. But first of all can you clarify what was the constant currency growth in your prior guide? And help us bridge that number versus the 49% that you are now calling for in terms of these macro factors?

Oskar Hjelm

Hi Tejas, this is Oskar here. So I think in our previous guidance, I think we’ve been very clear that we viewed prior earlier in the year the guidance as largely organic. And clearly the strengthening of the dollar since has — is very different from at that point in time when we gave that guidance.

So now I think the 49% of organic growth that we point to today is very similar to how we’ve guided previously. Now it’s just fine-tuning that as we close out the year and drawing people’s attention to the FX headwinds and directing that to the reported growth rate of 45%.

Tejas Savant

Got it. Okay. Now in terms of just the impressive new Explore signings in the quarter, how are you thinking about any kit-stocking dynamic related to that? And how long do you think it will take for these new activations essentially before they start reordering kits?

Jon Heimer

Yeah. Carl, maybe you can mention — you answered that question twice here, but — maybe you can do it again.

Carl Raimond

Yeah. I think, there’s — yeah, there’s a little bit — there’s a variation. I think in that so again it’s hard to over generalize. We have some customers for sure who are taking some kits for projects. We’ll have those in stock. Others who have actually only taken a minimal amount to start their training whatever and then to move ahead through purchasing for projects that they have wind up. So I think a little bit of variation.

So I think maybe your question though is like is there overstocking that dynamic? I don’t believe so. But again there’s variation customer-to-customers. So we’ll see that I believe average out. And again I think looking at those numbers over a longer period than any single quarter is probably a little more helpful for your modeling and the way you think about it.

Tejas Savant

Got it. Okay. And then what are you doing from a derisking perspective to keep the service lab operating at full capacity given the possibility of energy shortages in Europe over the winter. And on a related note, are you able to pass on these rising energy costs to your customers in terms of just how your contracts are structured?

Oskar Hjelm

Yeah. So, yeah, I think just important to bear in mind that if you talk about Europe and energy costs, I think it’s a very different dynamic across different markets. I think we are somewhat lucky in Sweden to have not such a severe situation as you would observe on the continent. But clearly energy costs are higher than they were a year ago. But I think we made great strides in the service lab. I think there are improving efficiency on a month-by-month basis and doing a fantastic job. And also with Q4 this year not having any UK Biobank samples and that is also supportive of the margin levels.

Tejas Savant

Got it. And then one final clean-up for me Oskar. Can you just lay out what exactly your cash burn projections are for the fourth quarter here?

Oskar Hjelm

I mean, we don’t — but it’s typically relatively low in the fourth quarter. So I think given the high volume of activity a quite profitable quarter and typically relatively low in terms of CapEx. Then clearly there’s a working capital buildup as we invoice a lot at the end of the quarter, but that clearly gets collected in Q1.

Tejas Savant

Got it. Very helpful. Thanks for the color guys.

Carl Raimond

Yeah. Thanks Tejas.

Operator

Thank you. And I’m showing no further questions at this time. I’d like to turn the call back over to Jon Heimer for any closing remarks.

Jon Heimer

Thank you for joining us today and for your interest in Olink, and we look very much forward to keeping you updated on our progress. So I wish everyone a great day. Thank you so much.

Operator

This concludes today’s conference call. Thank you for participating. You may now disconnect.