Q4 2022 Standard BioTools Inc Earnings Call

Hello, and welcome to the standard bio tools incorporated fourth quarter and full year 2022 financial results conference call.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Peter Denardo Investor Relations.

Thank you Mr. Dinardo, you may begin.

Thank you operator, good afternoon, everyone welcome to standard buyout tools fourth quarter and full year 2022 earnings conference call at the close of the market today standard bio tools released its financial results for the quarter and fiscal year ended December 31, 2022. During this call we will review.

Our results and provide commentary on our financial and operational performance market trends strategic initiatives does that 8% of Biofuels today will be Michael alcohol, Phd Chief Executive Officer, President and Vikram jog, our CFO during the call. We will make forward looking statements about events and circumstances that have not yet occurred.

Including plans and projections for our business our outlook for 2023, and future financial results and market trends and opportunities. These statements are subject to substantial risks and uncertainties that may cause actual results or events to differ materially from current expectations forward looking statements. In this call are based on information.

Lee available to us as we disclaim any obligation to update these statements except as may be required by law.

During the call. We will also present some financial information on a non-GAAP basis, we encourage you to carefully consider our results under GAAP as well as our supplemental non-GAAP information and a reconciliation between these presentations, which are disclosed in a table accompanying our earnings release.

Please note that management will be referring to a slide presentation, including updated supplemental financial information within the webcast today and this presentation is also posted on our website.

I would also like to note that the company will not be hosting a Q&A session. Following prepared remarks during today's conference call.

I'll now turn the call over to Michael at home, our Chief Executive Officer, and President Michael.

Thank you Peter I would like to start by thanking our employees around the world for their hard work and dedication throughout 2022. It was a transformative year that brought significant change to the organization.

Men and resilience exhibited by the standard Biofuels team while we.

Navigated the leadership transitions corporate rebrand sales team rebuilds and cost cutting initiatives has been truly remarkable to say the least most of all I'm proud of the cultural transformation.

With all employees strong embraced to spend the biofuels business system or Sps.

I would also like to thank all the investors who have supported standard bio tools as we embark on our mission to re energize This company and create a leading life science tools platform building a portfolio of exciting products that went on lease will help actually breakthroughs in human health.

During the call today, I will provide a summary of our fourth quarter and full year 2022 financial performance and operating highlights as well as expectations for 2023.

I would like progress against our key strategic priorities and discuss where the business is heading which we believe is positioning us for sustainable growth and profitability.

Then turn the call over to bitcoin promote pieces little at all natural performance and guidance.

When we joined three quarters to go with the company was losing market share. Despite its innovative and differentiated products. The victim of lack of effective response to emerging competition and pool and on focused execution across the board.

Swiftly and put a strategy in place to streamline the business with a focus on our value proposition combined with stable sales enablement to ensure consistent growth of the top line and our path to profitability. We have made significant progress on our key objectives and I'm pleased with our second consecutive.

Quota of sequential revenue growth, while expanding gross margins and significantly reducing ongoing operating expenses. Although early the recent organizational changes are starting to positively impact our performance and we expect to continue to build on pace to achieve our financial goals too.

To highlight some key metrics of our financial results fourth quarter revenue was $26 8 million, representing sequential growth of about 8% and bringing full year 2022 coal revenue to $94 5 million. We have also reduced expected.

Ongoing annual operating expenses by over 30 million hit.

So we're trying to trying to treat.

As we have been saying our tweets strategic call as you saw first stabilize the core business and return to growth.

Improved operating discipline to increase productivity and drive the business to profitability and could expand our product offerings by acquiring complementary assets to leverage our infrastructure and accelerate our growth.

We have made significant progress in BC that drives our confidence to provide 'twenty to 'twenty three guidance.

Flat tomorrow, our coal revenue growth inclusive of the previously disclosed temporary with $5 million headwind in our genomics business.

<unk> expansion of our gross margins and lower operating expenses Big Quinn will provide more details on this outlook in his discussion.

As we have largely completed the heavy lifting of this turnaround will be focused on the future and subsequent quarterly calls however, I would like to detail. Some of the work we have done. So you all can appreciate the foundation upon which we are building.

Our first priority was to stabilize revenues and return to growth and we did just that revenue stop that decline rebounding from a low point in the second quarter and grew sequentially, 30% and 8% on an adjusted basis in the last two quarters respectively.

This has been our primary focus under assault so actions only just beginning to become apparent.

Additional initiatives, we undertook included reorganizing the business that Rockville cooperative Omics and genomics products, while exiting non core product lines with.

We're talking to our proteomics business to be the growth driver to enable this we have reallocated R&D. So this business should why the steady cadence of new product introductions are built upon our market leadership position, we right sized our genomics business by simplifying the product portfolio to a single instrument E X nine.

Dramatically reduced our R&D spend and shifted to a more efficient go to market approach focused on OEM partners, such as <unk> and large account opportunities on the commercial side, new senior commercial leadership.

Reconstructed our north American sales team, which has been rebuilding our sales funnel with new disciplined stay it was fun management processes and news sales enablement tools, which we expect would be the.

So an increase in revenue consistency. We're currently running the same playbook internationally to strengthen our global footprint and similar it drive ex U S sales.

Our second priority is to improve operating discipline and reduce expenses, leveraging our lean culture to optimize our cost structure.

Increased productivity and drive profitability. This is well underway and actions taken so far are expected to reduce ongoing operating expenses by over 30 million all by approximately 20% compared to 2022. Additionally, our gross margins are expanding and we.

<unk> to expect or 1000 basis points improvement by the end of this year, helping us drive to our target of positive cash flow by the end of fourth quarter of 'twenty 'twenty four.

We have reduced our head count by approximately 15%, which is something we did not take lightly streamlining the organization was a necessity I never guide us to make some very difficult decisions along the way it is.

It's important to note, it's easy to cut cost in a spreadsheet, but it is an entirely different matter to do it and not damage. The business, we believe by reducing costs in some areas Mylan best thing and others. We have made the business stronger.

The standup pouch, whose business system or Sps is now core to the way, we operate and who we all stand on work Daily management and visual project management.

Are the critical elements of SBS.

Have been embraced throughout the organization, it's been incredible to witness the cultural transformation empowering our employees to make positive impacts on the business and we believe this is just starting to be reflected in our improved performance and finally, our third priority is adding inorganic growth.

We plan to leverage our infrastructure and balance sheet to add strategic assets to our portfolio. Our thesis is that there are many innovative technologies, but few great companies that have been able to scale and build profitable businesses.

<unk> foods is well positioned especially in the current macro environment and provides an attractive avenue for consolidation.

Before I turn the call over to Vikram I would like to dive deeper into our proteomics business and why we have heightened conviction that it would be the primary driver of core organic growth in 'twenty three and beyond.

Firmly believe our mass cytometry technology should be recognized as an integral next generation tool.

Poised to take share of that growing single cell space about a few buckets.

Our technology has unique competitive advantages in high parameter analysis, which the field is increasingly recognized as required to gain insights into biology.

Our standard tool and I won't steal his fluorescence with this fundamentally limit two simultaneous detection of a few handfuls of Marcus.

There are a number of work around us, but these all compromise data integrity, all had very complex and lengthy workflows. Our mass cytometry approach is the only solution that allows for simultaneous identification.

<unk> digital Carlos in the form of a unique mass tax.

Of course at the high data quality, we win in the marketplace of Lasalle, It's a staggering 96% of the approximately.

1850 research papers published on more than 20 protein markers used our technology.

Our R&D engine has been weak nowadays and in April at AAC.

We will launch the Hyperion X T I, which is the next generation of our imaging system that scans.

Five times more flights per day, while include proving both the workflow and the ease of use and the precision that's favorable.

Key tool in the spatial biology marketplace the.

The Hyperion SDI as a platform we will build upon we now see plenty of runway ahead for advancing mass cytometry technology flex that but the number mark us speed resolution and form factor in fact, we believe it's a technology just coming out of its infancy and is not rare.

For Prime time.

It is also important to recognize the leverage available in this business why instrument revenues can be lumpy due to the high average selling prices and varying stake sales cycle times.

Current portion consumables and services.

To smooth those revenues such bickering revenues for the proteomics business was approximately two thirds of total put it all makes revenue in 2022.

And as more instrument set in stone the proportion of revenues from recurring sources with vary but continued to provide a source of steady and predictable high margin revenues.

In closing I'd like to say how much of a pleasure. It was meeting so many investors last month in San Francisco around the J P. Morgan Healthcare conference I look forward to continued talks with you and meeting more investors and analysts in the upcoming months, including the upcoming Cowen Health Care Conference in March.

To reiterate that we know our mission, we know what we work for our shareholders and I'm excited to share. This journey with you or now let me turn it over to Vikram for a review of our financial results Vikram.

Thanks, Michael and good afternoon, everyone. As Michael noted we are pleased with our results for the fourth quarter, which showed top line sequential improvement in our core revenue.

Let me begin with the review of core revenue for the fourth quarter and full year 2022.

Core revenue for the quarter was $26.8 million, an increase of 8% sequentially.

Core revenue in the fourth quarter of 2021 was $35 1 million.

Core revenue, which excludes revenues from discontinued products, including COVID-19 related product and other revenue.

Recurring revenues, which include consumables and services were 72% of core revenues.

For the full year 2020, do core revenue was 90, $594 5 million compared to 111 6 million in 2021 rigs.

Recurring revenues, including consumables and service were 71% of core revenue for the full year.

Moving now to our operating performance.

GAAP product and service margin for the quarter expanded 620 basis points to 49%.

Relative to the third quarter.

non-GAAP product and service margin, which excludes noncash charges, primarily for amortization of developed technology.

Grew by 520 basis points to 52, 9% compared to the third quarter.

For the full year 2022, GAAP product and service margin was 36, 7% versus 51, 5% in 2021, while non-GAAP product and service margin was 52% versus 62, 2% last year.

Operating expenses in the fourth quarter declined sequentially by 16% to $32 3 million on a GAAP basis and declined 9% to $30 2 million on a non-GAAP basis.

For the full year 2022, operating expenses were $153 million versus 137 million in 2021.

On a non-GAAP basis, which primarily excludes noncash charges for stock based compensation operating expenses were $133 million versus $118 million in 2021.

Our operating results in 2022 include charges related to the capital infusion transaction retention severance inventory and other write downs associated with discontinued product.

And other costs associated with the phased restructuring and strategic realignment of the business.

These charges totaled approximately $2 million in the fourth quarter, and 29 7 million for the year.

I will focus the balance of my comments, primarily on non-GAAP results, which exclude certain nonoperating and noncash items.

Please note that the reconciliation tables between our GAAP and non-GAAP measures are provided at the end of our earnings press release that was issued earlier today and in our earnings call presentation.

non-GAAP net loss for the quarter was $14 3 million compared to $20 8 million in the third quarter and 847000 in the prior year for.

For the year non-GAAP net loss was $80 5 million compared to $26 7 million in 2021.

GAAP net loss for the quarter was $20 1 million compared to $29 4 million for Q3 2022.

For the full year 2020, do GAAP net loss was $189 4 million compared to $59 2 million in 2021.

GAAP net loss in 2022 included approximately $74 million of losses.

Related to the forward sales of the series B preferred stock in bridge loan.

$14 9 million of stock based compensation.

11, 5 million of amortization of developed technology.

We had a half million related to the impairment of the eastern or intangible asset and other items.

Additional details are available in the reconciliation tables in the earnings press release issued earlier today.

Moving on now to cash flow and the balance sheet.

Our operating cash burn for the fourth quarter was $19 $2 million down from $24 6 million in the third quarter for the year operating cash burn was $89 $4 million compared to $44 1 million in 2021.

In November 2022, we announced the $20 million stock repurchase program through December 31, 2023.

Through December 31, 2022, we repurchased approximately 422000 shares for a cost of 563000.

Our repurchases were limited by our daily trading volume and applicable SEC regulations.

Cash cash equivalents and short term investments were $165 $8 million compared with $185 2 million as of September 32022.

Now turning to our business outlook for 2023.

Core revenue for 2023 is expected to be flat to moderately higher when compared to 2022.

This outlook includes an expected $5 million headwind due to a genomics partner launching that product and building inventory ahead of that launch in 2022.

I spoke orderly progression, we expect our revenues to followed the seasonal pattern typical to the lifestyle stood the industry with Q1 sequentially down compared to Q4, 2022, and Q4 being the strongest quarter of the year.

We are currently targeting product and service margin of 52% to 55% on a GAAP basis and.

65% to 68% on a non-GAAP basis for 2023.

We believe the largest variables impacting this outlook are the realization of our business improvement programs and revenue mix as instruments consumables and service revenues have significantly different margins.

Operating expenses are expected to be 118 million to 123 million on a GAAP basis.

And 102 million to one 7 million on a non-GAAP basis.

Which primarily excludes approximately 13 million of noncash stock based compensation expense.

We have completed the vast majority of our restructuring activities through January 2023, we incurred $5 4 million of restructuring expenses in 2022 and expect to incur additional charges of up to $3 million in 2023 disc.

This concludes my remarks, I'll turn the call over to Peter.

Thank you Vikram. This concludes our fourth quarter and full year 2022 financial results call, we'd like to thank everyone for attending our call today as we do not currently have any covering analysts we invite interested party to contact us directly to answer any questions. They may have a replay of this call will be available on the investors section.

Our website again, thank you for joining us today.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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