Q3 2021 Champions Oncology Inc Earnings Call
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Greetings and welcome to the champions oncology third quarter 2021 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad and as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Ronnie Morris Chief Executive Officer. Thank you Sir you may begin.
Yes.
Champions oncology.
David.
Financial officer, Thank you for joining us from our quarterly earnings call before I begin.
Mind, you that we will make forward looking statements during today's call.
Actual results could differ materially from what is described in those statements additional information on factors that could cause results to differ.
Payable in our forms 10-Q, and our form 10-K.
Deletion of non-GAAP financial measures that may be discussed during the call to GAAP financial measures is available in the earnings release.
Overall this quarter's successful results reflected the execution of our strategic vision and a continuation of the positive momentum building throughout the year.
Our revenue grew to $10 8 million as we continued to successfully expand our services as well as investing for future growth opportunities.
As you know last quarter, we announced a significant achievement for champions the launch of lumen bioinformatics, our proprietary SaaS platform. As a reminder, lumen was developed by combining our unique and proprietary data with large publicly available data sets to provide a tool for biologists to leverage computational.
Analytics and their discovery and development programs.
We continue to add functionality enhanced analytic tools and visualization as well as additional data to the platform. As an example, we recently announced the addition of a proteomics module, which provide biologists with unique analytics and visualization to understand proteomics effects in relation to genomic characterization.
While alumina is still considered in the early launch stage to feedback from our customers has been extremely positive and we have successfully increased our software license sales this quarter.
It is still too early to project the potential revenue contribution of our lumen software.
We are continuing to invest in its development and we'll be looking to broaden its adoption with both our existing and new customers.
Turning to our ex vivo platform and continues to expand and contribute meaningfully to our revenue growth as we have discussed throughout the year. We have historically worked with partners to perform our solid tumor ex vivo studies with the goal of bringing this work in house at the start of the fourth quarter.
We are on track and have started performing solid tumor ex vivo work of champions, we expect to benefit from the lower costs and greater control.
Furthermore, we believe that as we continue to expand our comprehensive and unique ex vivo platform. It will contribute meaningfully to our revenue growth as we head into the next fiscal year with regard to our biomarker assays and specifically regulatory flow cytometry and histology, our bookings were in line with our expectations for the quarter.
As COVID-19 negative impact on our clinical trials receipts and our deal flow grows we remain cautiously optimistic that our regulatory clinical services will reach the levels anticipated. When we first decided to enter the market in order to expand our available market opportunities over the next several months, we will be opening a lab.
<unk> in Europe, which will enable us to bid on additional global clinical trial work being performed in Europe.
We look forward to continued expansion of our clinical biomarker business in the coming quarters on.
On the R&D front, we are investing in the development of our service offerings and enriching the data contained within our models.
As mentioned earlier, we have begun the proteome characterization of our tumors, which will only further enhance the uniqueness and value of our tumor bank.
For the coming quarters, we anticipate that we will be reinvesting some of our profit in new R&D projects that will lead to further strategic opportunities for champions as we transition towards new services and revenue streams.
In summary, we had a successful third quarter as we executed on multiple fronts continuing to grow our service business, while also investing for future revenue growth opportunities.
Now, let me turn the call over to David Miller for a more detailed review of our financial results.
Thanks Ronny our.
Full results on form 10-Q, we filed with the SEC on or before Monday March 15th.
Our third quarter revenue was a record $10 8 million compared to 9 million in the year ago period robust year over year increase of $1 8 million or 20%.
As we've noted over the years.
Quarterly revenue can fluctuate based on the timing of study completions. This quarter, we did benefit from some Q4 scheduled revenue completed early pulling into Q3.
Excluding stock based compensation and depreciation we recognized income of $1 3 million compared to income of 900000 from a year ago period, an increase of 46%.
Our non cash expenses, including stock comp and depreciation totaled 530000 per the quarter, resulting resulting in GAAP income from operations from 763000 compared to 433000 in the year ago period.
I will now focus on our results on a cash basis.
Our third quarter gross margin was 56% up from 52% from the same period last year.
Cost of sales was $4 $8 million per quarter compared to $4 3 million last year, the year over year increase from 500000 or 11%.
As discussed on our prior earnings calls we've partnered with other companies to expedite the expansion of our service.
Service offerings, specifically, our ex platform to continue to drive topline growth.
While these partnerships enabled us to accelerate our growth rate it put pressure on our margin margin as we recognize upfront cost on finding the business. While the revenue was only recognized when the work is completed.
I indicated that AD revenue was recognized we would see an improving margin, which materialized this quarter.
Highlights adjusted back to margins were higher than the 45% reported previously our margins received a lift this quarter above their traditional norm, but most importantly, as Ronnie mentioned, we are taking this work in house, which will generate higher ex vivo specific margin and our future as well as moving out the ex fuel related margin fluctuate fluctuation.
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R&D expense was $1 9 million compared to $1 4 million in the year ago period, an increase of 500000 or 35%.
The increase is due to the continued development work to expand and enhance our product offering including an investment in proteomics callison characterization of our tumor bank.
Sales and marketing expense was $1 4 million compared to $1 2 million last year, an increase of 229000 or 19% the increase in sales and marketing was mainly due to compensation related expenses as we continue to invest in expanding our sales team and marketing efforts.
G&A expense increased to $1 4 million compared to $1 2 million in the year ago period.
As a percentage of revenue G&A expense remained flat at 17% and we anticipate greater leverage as we grow.
In total our accounts are a cash based expenses were $9 5 million from <unk> for the third quarter of fiscal 2021 compared to $8 1 million in the same period last year, an increase of approximately $1 4 million consisting of a $500000 increase in R&D and modest increases in other expenses given our revenue jump.
Now turning to cash we ended the quarter with a balance of $7 4 million compared to $3 3 million free until we had last year.
For the quarter net cash from operating operating activities was near breakeven during the quarter, we reduced our accounts payable by nearly two Logan, which contributed to this result, while there can be variability in cash from operations on a quarterly basis due to the timing of receipts and disbursements and are working working capital accounts.
Actually our anticipated revenue growth should lead to an overall increase in cash generated from operations over the coming quarters.
Our balance sheet remains strong and we have no debt.
In summary, it was a very successful quarter, we hit a new record for quarterly revenue and excluding stock comp and depreciation we had net profit of $1 3 million.
Underlying strength on our core business remains solid and our new products are contributing to our revenue growth.
Overall, our long term prospects are promising as we are currently in our yearend quarter. The next earnings call will likely occur in late July.
Close any significant milestone should they occur before our next call looking forward to closing out our fiscal year 2021, and speaking with you again on our year end call. We would now like to open the call for your questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star key.
One moment, please I'll be poll for questions.
Thank you. Our first question is coming from Matt Hewitt with Craig Hallum. Please proceed with your question.
Good afternoon, congratulations on the strong quarter.
Thank you Matt.
Yes.
The first question regarding lumen.
Honestly a lot of excitement is building for that platform I'm just curious if theres any metrics that you could update us on maybe number of contracts or a number of customers.
Anything that would help us kind of.
Gardner.
<unk> seen over the past couple of quarters.
Good day.
Sure. So I think we announced on our last call that we signed a couple of dozen.
New customers and I would say that this quarter.
The sales as well so we've increased that basically.
The same amount that we did the previous quarter, but we would certainly consider it continuing to gain traction continuing to grow et cetera.
That's great and then.
Maybe an update on the flow cytometry business.
What was it a quarter or two ago, you had signed your first deal.
How is that pipeline building have you had any more success signing contracts and how should we be thinking about the cadence of those contracts as they are completed obviously given that thats when you get to recognize the revenues.
Hello.
Oh, Okay, sorry sure.
So.
Our flow has has that yes, we have that we have been what contracts this quarter and I believe that Rodney just indicated on the call and it certainly falling more in line with our expectations when we first.
Announced flow quite some time ago certainly.
Covid has been taken on the clinical trials, which I know, we've discussed and we're certainly seeing a.
Yes.
What clinical trials coming to market in our pipeline.
More robust and so it really is meeting our expectation it will contribute to revenue.
In fiscal year 2022.
And beyond.
Beyond based on the number of studies that we continue at this time.
Got it got it and then maybe two more from me and I'll hop back in the queue.
I know last quarter, you spoke about some of the investments that youre, making at least from a head count perspective, particularly with lumen and now Youre talking about the proteomics and then you also mentioned on the call earlier that you are going to be looking to expand.
By adding a facility in Europe.
From from an investment standpoint, what is your expectation as far as when you hire a new sales per store you make this expansion is is there a certain time period that you would expect.
To be generating return or how should we be thinking about that from a modeling perspective.
So from a when we hire so you take that point Yeah go ahead.
No no no just so let me take this one.
Yes, I would say, Matt that debt, there's a couple of different areas there. So.
Yes.
There is a geographic expansion because.
Some of the clinical trials that were bidding on are international.
And so it's a lot easier for us to.
When the contract if we have both the capability to take patients from Europe as well as the United States.
Sort of.
A lot of pharmaceutical companies don't want to have a different.
Supplier for the samples in the U S versus EU.
That's just an expansion of our abilities in terms of.
In terms of expanding our team.
We have a pretty well oiled machine in terms of just.
Training and getting people up to speed, we pretty much see that.
People that we bring in.
I wouldn't say immediately but pretty pretty close within the first quarter or two they're contributing.
Again, obviously, the more time, they are with us the more they contribute but.
We have a fairly quick.
The timeline between bring.
Bring bringing somebody on board.
And having them contribute.
Okay. Thank you for that and then one last one and I'll hop back in the queue.
Regarding the big pop in gross margin. This quarter I think you commented that some of that was because you are starting to bring some of these services in house, but there was also the benefit in the third quarter from completing a few contracts and no debt.
The timing of completing the contracts versus when the expenses were incurred previously when we look at Q4, given that you closed some of the business from Q4 and Q3.
Is it fair to say that gross margins likely pull back a little bit in the fourth quarter before you start to see maybe another pop in Q1 or how should we be thinking about gross margin.
I think thats, a great way of some debt.
It's made a small pullback in Q4 and then we can see expansion that we can get into other services with higher margin.
Net of higher margin, but certainly we got a boost this quarter, which as I indicated.
Okay got it. Thank you very much congratulations again on the quarter.
Thank you.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad at this time, please probably poll for any additional questions.
Gentlemen, I am not seeing any additional questions coming in at this time would you like to make an additional concluding remarks before we end today's program.
Yeah, I just wanted to thank everybody for.
Joining us for our quarterly earnings call.
As I think we have over the last several quarters in the last several years continue to make steady progress with what we laid out our vision and our strategy. We continue to be excited about.
The expansion and the evolution of what we're doing in the oncology discovery space.
First with services now expanding.
We're using our data into a SaaS platform, we look.
Forward to continuing to.
Update everybody over the next couple of quarters of next year.
And thank you everybody for joining us have a good evening.
Ladies and gentlemen. This concludes today's teleconference. We thank you for your participation and you may disconnect your lines at this time.
Okay.
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