Q1 2023 NanoString Technologies Inc Earnings Call

Speaker 1: The F for R R R.

Speaker 2: Good afternoon and thank you for attending today's NanoString first quarter operating results call. My name is Jason and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star 1 on your telephone keypad.

Speaker 2: I would now like to pass the call over to our host, Doug Farrell.

Speaker 3: Thank you, operator. Welcome, everyone. Joining me on the call today is Brad Gray, our President and CEO , and Tom Bailey, our CFO . Earlier today, we released our financial results for the first quarter ended March 31, 2023. During this call, we may make statements that are forward-looking, including statements about financial and operating protections.

Speaker 3: future business growth trends and related factors, expectations regarding future operating results, cash flows, current and future instrument orders, and our manufacturing capacity, as well as prospects for expanding and penetrating our addressable markets, our strategic focus and objectives.

Speaker 3: The SOTS has developed a bad affinity for the system to increase the product offering and the impact of macroeconomic factors.

Speaker 3: Forward-looking statements are subject to risks and uncertainties, including those described in our SEC filings. Our results may differ materially from those projected, and we undertake no obligation to uptake any forward-looking statements.

Speaker 3: Later in the call, Tom will be discussing our Q1 financial results and guidance for 2023. We have prepared as a supplement to GAAP financial measures selected non-GAAP adjusted measures and calculation of which are described in detail in our press release.

Speaker 3: Throughout the call, all financial measures will be GAAP unless otherwise noted. You can find the reconciliation of GAAP to non-GAAP measures as well as the description, the limitations and the rationale for using each measure in this afternoon's press release.

Speaker 3: The ad analyst and investors in building a model, we have posted exhibits under the financial information tab, the large best relations home page that include presentation of our non-GAAP or adjusted measures and slightly other financial data.

Speaker 3: I'd like to remind everybody that we will be attending the Jeffries conference in New York City next month to look forward to having the opportunity to meet with many of you there. I know I can turn call over to Brad.

Speaker 3: Good afternoon and thank you for joining us today. I am excited to report that 2023 is off to a strong start. We throw continued momentum in the business with revenue from both spatial biology and encounter exceeding the guidance we provided on our year in poll.

Speaker 3: With strong spatial biology demand and the successful scale up of our cosmic manufacturing and installation capacity, we are raising our revenue outlook for the year.

Speaker 3: Before Tom provides details on these financial results and improved outlook later in the call, I'll provide updates on our progress towards strategic objectives for the year.

Speaker 3: Our first objective for 2023 is to increase our penetration of the spatial biology market.

Speaker 3: During the first quarter, the spatial biology demand was healthy, across both instruments and consumables.

Speaker 3: Our overall spatial biology revenue increased by more than 75% over Q1 of last year.

Speaker 3: We ended the first quarter with an installed base of 385 spatial systems.

Speaker 4: an increase of about 31% over the prior year.

Speaker 4: Our cosmic spatial molecular imager remains the primary growth driver of the distance.

Speaker 4: as we further penetrate the rapidly growing market for single-cells facial biology.

Speaker 4: as we further penetrate the rapidly growing market for single-cell spatial biology. Our rollout of cosmetics is tracking ahead of land.

Speaker 4: We are ramping our manufacturing capacity and refining the processes that our field service engineers and application scientists use to install cosmic systems and train users.

Speaker 4: We believe these efforts will accelerate uptake of pockets consumables, which are the growth engine of the company over the long term.

Speaker 4: We believe these efforts will accelerate uptake of POTM's consumables, which are the growth engine of the company over the long term. Even with our increased pace of POTM's shipments.

Speaker 4: strong demand led cosmic instrument borders to exceed shipments into one growing our backlog.

Speaker 4: About 75% of our costments orders came from new customers.

Speaker 4: and by a form of customers increased to about 25% of system orders. Oncology applications drove about 70% of the orders, followed by immunology and neuroscience.

Speaker 4: In February , we unveiled our Consumer Road map for Coffin.

Speaker 4: We've demonstrated our ability to scale the number of biological targets image by cosmic.

Speaker 4: our ability to scale the number of biological targets imaged by cosmetics, which is referred to as its planks.

Speaker 4: up to 6,000 RNAs and 120 proteins. More than 10 times the comment, the content,

Speaker 4: Our substantial advantage in Plex has resonated with our customers as an important factor in why we believe costments will remain a market leading spatial imager.

Speaker 4: parallel to ramping up cosmic shipments, we've been connecting customers to our atomics spatial informatics platform.

Speaker 4: The comics provide seamless and highly scalable storage and compute power for a fraction of the upfront cost of on-site capabilities.

Speaker 4: making the decision to move data to the cloud and easy one.

Speaker 4: Customers value the investment we've made to ensure that informatics does not become a bottleneck in spatial biology research and are excited to leverage the cloud to collaboratively analyze the massive data sets that spatial biology experiments generate.

Speaker 4: While instrument demand remained cognizant heavy in Q1, geomics placements continued and our expanded geomics installed base drove a meaningful increase in consumable revenue. The speed with which new geomics sites became active consumable customers improved from Q4.

Speaker 4: and we expect to see that trend continue over the balance of the year. In parallel, we're releasing software updates that improve the capabilities and workload of Geomics, including a recent update that enables customers to measure RNA and proteins simultaneously on the same slide.

Speaker 4: appealing capability that helps scientists increase the insights that they extract from each sample.

Speaker 4: Translational researchers remain the primary users of genomics, illustrated by the latest paper to grace the cover of the journal Cancer Research.

Speaker 4: Team of researchers at the University of Glasgow published a study that used geomics to evaluate and subgroup colorectocantra patients whose cancer has been passed the size to their liver.

Speaker 4: The study demonstrated the ability of geomics to characterize tumor heterogeneity and identify novel biomarkers associated with clinically relevant subtypes of colorectal cancer. We recently caught up with the authors of this paper that the American Association of Cancer Research for AACR and Neum meeting.

Speaker 4: where spatial biology featured prominently in the scientific agenda. Our customers had strong showings with nearly 60 abstracts for geomics and cofence, an increase of more than 40% over the prior year.

Speaker 4: Our booth was buzzing with activity and customer interest throughout the meeting and lead generation at this year's AACR more than double over the prior year. Customer interactions like these are expanding our instrument funnel and providing visibility to our growth outlook and continued leadership in this dynamic field.

Speaker 4: Our second objective is to deliver predictable revenue growth.

Speaker 4: We clearly achieved this goal during Q1 as revenue for both spatial biology and encounter exceeded our guidance for the quarter.

Speaker 4: In addition, our revenue visibility is continuing to improve, which boasts well for our ability to deliver predictable revenue to the balance of 2023 and beyond.

Speaker 4: The recurring consumable revenue streams generated by our installed base of more than 1500 instruments grew both sequentially and year on year with consumable pull-through and line with expectations. This helped our encounter business, which has a revenue mix that is now more than 90% consumables, deliver results above the high end of our guidance.

Speaker 4: even as instrument placement slowed. We also proved cosmic instrument order backlog while scaling up our manufacturing and install capacity.

Speaker 4: Since Covent's instrument revenue is the primary growth driver of 2023,

Speaker 4: These results try incremental revenue visibility. With Cosmic Demands from and scale up on track, we expect the quarterly cadence of the shipments and installs to increase at the year progresses.

Speaker 4: and we are in a position to raise our guidance for the year. Given this from demand, we expect many of the Cosmic Instrument orders we receive in the coming quarters will remain in backlog as we exit the year maintaining our high revenue visibility as we enter 2024.

Speaker 4: Our third strategic objective is to demonstrate progress towards cash flow rate even. The team remains laser focused on accelerating our path to profitability.

Speaker 4: During Q1, our adjusted operating expenses were down $2 million a year. This op-x reduction offset lower gross margins and kept our EBITDA approximately flat year on year during the first quarter. We expect our bottom line to improve each quarter to the balance of the year. We expect our bottom line to improve each quarter to the balance of the year.

Speaker 4: as our revenue growth accelerates with cognizant shipments. We exited Q1 with approximately $155 million in cash, cash equivalents, and short-term investments on hand, and believed that we are well positioned to manage our business to profitable growth with our current resources. Now I'd like to turn the call over to Tom to review the details of our financial results and provide an update.

Speaker 4: on our financial outlook for the year. Thanks, Brad, and thanks all for joining us today.

Speaker 4: For the first quarter of 2023, total revenue was $35.8 million, $1.8 million above the upper end of our Q1 guidance range, and about $3 million above Q1 consensus estimates.

Speaker 4: For a spatial biology business, Q1 revenue was 17.1 million, approximately 77% year-rear growth, 1.1 million above the upper end of our guidance range, and about 2 million above consensus estimates. Facial instrument revenue was 10.1 million.

Speaker 4: Approximately 110% year-over-year growth, reflecting acceleration of cosmic shipments. We shipped 47 spatial instruments, customers in Q1, with an average realized selling price of about $215,000.

Speaker 4: Do one ASP reflect a heavier mix of international geomagotiveness.

Speaker 4: and also the referral of a portion of Cosmic's revenue that will be recognized in the service revenue as customers use initial amounts of the Thomas Compute and data storage included with each Cosmic sale.

Speaker 4: We installed about 35 spatial instruments during Q1, growing our spatial instrument's salt base to approximately 385 instruments. Facial biology consumables revenue was $7 million approximately, 44% year-rear growth that reflected in line showing consumable sales over our growing installed base.

Speaker 4: and continued initial shipments of cosmic consumables. Q1 encounter revenue, which includes all service, was 18.7 million, about 1 million above the upper end of our Q1 guidance range and consensus estimates.

Speaker 4: And kind of an instrument revenue was 1.2 million. Consumables revenue was 12.8 million, and service revenue was 4.7 million.

Speaker 4: At the end of 21, our NKener installed base was approximately 1,130 instruments with about 10 instruments installed during the quarter.

Speaker 4: Turning to margins and expenses, I'll provide results on a non-gab or adjusted basis, which removes the impact of stock-based compensation, depreciation, and modernization at certain one-time items.

Speaker 4: Please refer to our press release as well as the exhibits we have posted to our investor relations webpage for detailed information on how our non-GAP or adjusted measures are prepared. Do you want adjusted gross margin was 43% impacted by revenue mix more heavily weighted to cosmic instruments which are currently selling at lower gross margins?

Speaker 4: to the higher unit production costs that are expected to be incurred in future periods that we scale applicants to get legal cosmetics produced.

Speaker 4: We also continued in Q1 to make investments to expand our service and manufacturing capacity, and we incurred increased cloud compute costs associated with our atomic platform.

Speaker 4: Lastly, in accordance with internal policies, you recorded a larger, that usual Q1 inventory reserve of just over 1 million that impacted Q1 gross margins by about 3 percentage points.

Speaker 4: This reserve is primarily related to our spatial biology consumable sales next shifting away from our more targeted consumable panels and toward our Geomics whole transcriptum assay and other newer spatial biology consumable products.

Speaker 4: Adjusted R&D expense was 12.7 million, a decrease of 15% year-over-year, and primarily driven by lower personnel and product development costs related to cosmic sanitomics. Adjusted SGA expense was 29.8 million, an increase of 1% year-over-year.

Speaker 4: reflecting lower personnel costs offset by Q1 trade show and other marketing-related expenses that are higher in the first quarter as compared to subsequent quarters throughout the year.

Speaker 4: Our adjusted even DA loss was 27.2 million and our cash, cash equivalent and short term investments were 154.6 million as of March 31st, 2023.

Speaker 4: As noted on our last call, we expect cash burn and EMADA loss to be heaviest in the first half of the year as we make investments in working capital to support the significant ramp in cosmic shipments. And we give it other cash expenses such as audit fees, trade show expenses, and corporate bonuses that are incurred in the first quarter.

Speaker 4: Turning to guidance for the second quarter, we expect revenue to be in the range of 42 million. This range includes 23 to 24 million of spatial biology revenue, representing a more than doubling of spatial revenue year over year and 17 to 18 million of encounter and service revenue.

Speaker 4: For the full year, we are raising our revenue guidance range, reflecting our Q1 results and the expected ramp of cosmic shipments of Q2. We now expect our full year total revenue to be in the range of 175 to 185 million, as compared to the previous range of 170 to 180 million. Our updated range includes spatial biology revenue.

Speaker 4: of 100 to 105 billion, as compared to the previous range of 95 to 100 billion, and encounter revenues, which includes all of service and other revenue, of 75 to 80 million, unchanged as compared to the previous range.

Speaker 4: We continue to expect adjusted EBITDA loss to range from 65 to 75 million unchanged from our previous guidance with EBITDA loss and cashflow improvement still expected to be more substantive. In the second half of the year, as our spatial biology revenue grows, reduced operating expense based.

Speaker 4: We also continue to expect adjusted gross margins will be temporarily lower in 2023 in the 45% to 50% range as our revenue makes shifts towards cosmic instruments for improving in 2024 beyond as these systems begin to pull through higher margined syllables.

Speaker 4: I'll turn the call back over to Brad for our closing comments. Thanks Tom. In closing, we feel great about our strong start to 2023. Momentum in our spatial business is building. This demand for cosmetics is being driven by its market leading capabilities. My fingers either left or right or left-handed on the right. Please excuse me. Please excuse me.

Speaker 4: Our revenue visibility is increasing on stable, consumable, full-proof, and increasing cost and stock log. Where well-positioned degenerates strong 2023 revenue growth, while reducing operating expenses, allowing us to make continued progress towards profitability.

Speaker 2: With that, I'll open the line for your questions. If you would like to ask a question at a Star 1 on your telephone keypad, if for any reason you'd like to remove that question, please rest star followed by two. Once again, to ask a question at a Star 1. As you can see, the question is, if you would like to ask a question at a Star 1, please rest star followed by two.

Speaker 2: Our first question is from John Sauerbeer with UBS. Your line is now open.

Speaker 5: All right. Thanks for taking the question and congrats on the quarter. You're just maybe starting off on cosmic, you know, sounds like that the, you know, the backlog there is still about that 40 million on a net basis. Just any color on, you know, the trajectory of shipments there and how you see that for the year.

Speaker 4: when you think you're going to burn through that backlog? Sure, thanks for the joining the call, John . Yeah, how's the scale-up of manufacturing and our installation and training capacity is going just ahead of our plan? As implicit in Tom's guidance for Q2, we do expect a major step up in the number of instrument shifts.

Speaker 4: from the previous guidance of 288 to 300 systems to be about at the top end or about 300 systems by the end of the year. And that means that we already have two thirds of the remaining systems that we expect to ship in 2023 in our backlog.

Speaker 4: So we have really great revenue visibility at this point in time. You know, for new customers who are coming to us today and putting in costments orders, I think there's some chance that they would get their instrument by the end of the year, but more likely than not, you know, we're going to begin pushing new orders into the first quarter of 2024. Appreciate that. And then you've raised the revenue guidance to maintain the even loss of the year.

Speaker 5: Just any additional color you can provide on the cadence of that OpEx burn maybe into the second quarter and remainder of the year.

Speaker 4: I think that the reason we maintained our e-dot guide since the gross margin was a little bit lower on the first quarter than we expected due to some of the costs that we're incurring to ramp costments manufacturing. So that's like we should decide to take a conservative approach to raise the revenue guidance while leaving the e-dot guide into the same. Underpinning that is our off-ex guidance is really unchanged. We still expect off-ex to be down.

Speaker 4: year over year. And so what that translates into is you'll see a pretty significant second half improvement in both E to D a and in cash burn. We ramp our cosmic shipments or that reduced operating expense base and as our manufacturing gets some more efficient as we make more instruments throughout the year.

Speaker 5: Thanks, Scott. And then, you know, the last one, am I in just any color on just cashburn, you know, any change in your outlook there, do you still plan to get to break even on the existing cash, you know, through 2024 or do you think you need to raise, potentially next year with that convert coming due in 2025?

Speaker 4: Our plans are still to get to cash flow break even our existing resources and we think that our internal plans that indicate that we can get there. And as we've mentioned before on the on the convert, you know, we're aware of the maturity coming in 2025. But given the trajectory of our business, we feel like we'll have a menu of options to consider. We'll do those prudently.

Speaker 4: in a timeframe that would be usual and typical for managing those types of live abilities on the balance sheets. We feel we feel still feel really good about where the balance sheet is given the trajectory of the business.

Speaker 5: Thank you for taking the questions.

Speaker 2: Now our next question is from Kyle Mixen with Canacorgenuity. Your line is now open.

Speaker 6: This is Alex, the case that I'm going to come next. So, congratulations on the quarter guys. For question about cost next consumables.

Speaker 6: what should we be expecting over the course of the year in terms of cadence of pull through for cosmics? Could it be a bumpy in the first few quarters or do you kind of expect things to grow out of relatively?

Speaker 4: I'm looking at this right into the beginning. Thanks Alex. The economists consumables will be a relatively small contributor to our growth in 2023. As we place the new systems, we do expect people to take some time before they ramp up to full utilization.

Speaker 4: So every quarter, I would expect to see some sequential growth in coffins consumables, but as a fraction of our overall spatial consumables, it's a relatively small piece. I do not expect lumpiness in terms of unpredictability, but I do expect it to be small and growing sequentially throughout the year.

Speaker 6: Thank you. And you also said that roughly 25% of new orders came from biopharma. So we have been seeing that some other companies have seen that biopharma spending could have been possibly constrained in recent months.

Speaker 4: I was just curious if you had any comments. Very honest. We really defined biopharma into two separate sub-segments. You have the large pharma companies who still remain relatively well financed and whose R&D operations are continuing its full pace.

Speaker 4: And I would say that most of the incremental demand we see for spatial biology is from those larger companies. In contrast, small biotechs who maybe had enjoyed very inexpensive capital in the last several years are now operating at a much higher cost of capital that are being much more...

Speaker 4: and has remained slow through the first quarter. You know, fortunately for us, the large biopharma is large enough to continue to drive and criminal interests. And, you know, on the spatial biology side, where cosmic initially appealed primarily to academic researchers.

Speaker 4: who were focused on discovery research and were probably following up on single cell experiments. They've done a non-spatial manner. We're starting to see bio-farmant interest in that technology.

Speaker 2: Great, thank you. Our next question is from Dan Areas with Steeple. Your line is now open. Hey guys, thanks. This is actually Evan Stamperon for Dan. I guess circling back to...

Speaker 2: Cosmics obviously you know the instruments been in the hands of your customers now for a little bit You know just be you know good to hear like you know what kind of feedback you're hearing from them And then maybe just sort of some if you have an idea of maybe a timeline for first publications Getting out there because you know when we talk to people it does seem like some people are just kind of waiting to see

Speaker 2: data and I know you have you know you obviously have some stuff with the TAP program but if you have any sense of when publication might come out that we should be on the lookout for that would be helpful and then in your prepared remarks you did talk about ASPs being at 215 and I kind of missed your

Speaker 2: The other portion of that is to why, because I'm getting the register, the rough math turns the instrument revenue for spatial divided by the instrument. So I'm getting a much higher number. And I think you try to explain that. And so if you could just repeat that, that would be helpful.

Speaker 4: Sure, I'll cover the first few portions that I'll let Tom cover the piece on the ASP. So feedback on cosmetics has been extremely positive. You know, many of the initial cosmetics shipments went to customers who already had geomics. So they were able to very directly contrast their experience and having their cosmetics installed.

Speaker 4: and they're training to what they experience with geomics. And I think that the sense is that it's gone much more smoothly. And the confidence is actually easier to use and easier to learn system than geomage was. And that's largely because you know, cofnics does not need a region of interest selection that rather can typically scan the whole slide.

Speaker 4: So feedback's been very positive so far. It's early days for those customers. That being said, our Technology Access Program and our data set that we put out in the public domain are already beginning to yield peer-reviewed papers. So there are nine peer-reviewed papers that have been published so far. Most of them published on data that we posted.

Speaker 4: you know, for free of charge, for researchers to play with, and to get to understand cosmic datasets. We have at least 18 in the peer-reviewed papers that have been submitted for publication. And most of those coming out of our Technology Access Program. And our Technology Access Program.

Speaker 4: have now completed 140 cost-mix projects rather. So, you know, we think there will be a really nice stream of tribute papers coming out of our technology access program, and that will help the community really see more of what cost-mix is capable of.

Speaker 4: and gain the confidence to adopt. Tom, do you want to take the question on ASP? Yes, Evan, just as a reminder, we recognize revenue on instruments when we ship instruments to customers. So sometimes there are some confusion that folks have when they look at the increase in our install base compared to the instrument to a ship. Because those two numbers tend to be...

Speaker 4: for the first quarter of 2015 that I mentioned in the prepared remarks.

Gotcha, super helpful. And then follow up. You know, you did talk about a lot of the initial placements for cosmetics being with

and then the past you have talked about bundling and the opportunity set there. I'm just kind of curious, when you go to a customer and you present a new customer that has a new Geomics and you say, all right, well.

If you, you know, you present them with with the bundle opportunity and the customers that actually say no, I'm good I just want to cause next like what what are the kind of biggest things that they're telling you that as to why they're choosing that the individual individual instrument versus Getting the two together

Well, thanks for the question. Cosmics and NGOMics are both geared towards different types of experiments. So Cosmics is an ideal system for following up traditional non-spatial single cell experiments that may have taken place in the past based on droplet-based approaches. So many customers have been doing that type of science and have identified.

different cell types that are within the tissue, but they don't know where those cell types are. So COSMEX is an ideal system for following up on single cell and determining the location of the rare cell types and how they're interacting with other cells.

So that is a very easy type of experiment for many discovery researchers to imagine, and that's part of what's drive driven our mixte shift from geomics towards cosmetics over the last 12 months. Geomics in contrast is a high throughput system that has the advantage of being able to look at the whole transcriptome across multi cellular regions of interest. And it's best employed.

and biomarker research that compares gene expression over a large number of samples. And that is appealing to towards translational researchers who are really hunting for predictive biomarkers. So when our sales reps walk into an account, they try to understand the science that that scientist is, that lab is doing and match them.

to one system or the other. Some labs have, we think in the long term, most labs will have utility for both types of systems, but very few have the capital available to purchase both at the same time. So those situations where a lab is well funded and they have tremendous demand and they're scaling up their spatial capabilities.

very quickly those are the situations where we could successfully sell bundles the other situations would be you know we would sell a cosmic first and hope to come back and sell a geomix later in a future funding period or vice versa.

That makes sense. If I can just follow it up with just one kind of modeling question, and I know you're talking about a segment, you know, just spatial combining geomics and cosmetics. Is there anything you guys can just give us some breakdown between those two, whether it's placements, ASP, pull through or whatever? And that's my last question. Thanks. Thank you.

Thanks for the question. The good news for the simplification of modeling is that the ASPs and the pull-through are expected to be very similar for geomics and cosmics. To simplify matters both in terms of our reporting and in terms of your modeling, we've chosen to simply report spatial instruments and spatial consumables. As Tom indicated, the average ASP across the mix is 215,000 in Q1, which is not that far off from where it has been when we were only recognizing geomics. And if you do the calculations on the pull-through, it was right around the same consumable pull-through on an annualized basis.

at the presentation, a spatial pull-through is 66,000, not an 80, which was I guess down. I'm sure what section of the presentation you're looking at, but if you do just to do the math or a consumable, seven million, well, we can, that is probably something we could hit in the after. I'll give you a little detail, but if you do the seven million of revenue divided by the install base at the end of 2022, which would be 350 that could shoot about the $80,000 number of that Pratt had mentioned. Okay. Cool. Thanks.

Sure, yeah, so there is a capacity constraint on how many instruments be to install at the MIM power based capacity constraint. We have been hiring additional field service engineers and field application scientists. And we don't believe that can spring is a major challenge at this point in time.

But just to remind you, installation requires more than our own capacity. It requires the cooperation of the customer and many of them look to schedule their installations and trainings around their own schedules. And that is another determinant for how many instruments are installed in any given form.

In addition, in situations where the pace of instrument shipment increases throughout the quarter, as with the case in Q1, as we skilled up our cost of manufacturing, you can often have more instruments that were installed in the latter half, or sorry, more instruments that were shipped, and the latter weeks of a quarter that naturally remain uninstalled at the end of the quarter.

I mean, excuse me, 2024. Thank you.

I think probably by the end of this year we'll be installing and shipping systems at the same pace as our manufacturing capacity levels off and our installations become more continuous throughout the quarter rather than back and loaded within the quarter. Got it. And then just one more for me. You maintained the end counter guide. What's the visibility on the pull through for end counter for the remainder of the year? How far out is the visibility there? I think relative to what we were expecting pull through is a little bit better. Is that business sort of stabilizing here? That business is stabilizing. We've made some work. Yeah, just a little bit more.

Awesome. Thank you. Our next question is from Catherine Schulte with Baird. Your line is now open. Hey, everyone. Thanks for the question. This is Tom Peterson on for Catherine. I was just curious, obviously, the demand and backlog on COSMX has been impressive, but I'm curious if any updates on what you're seeing within the broader imager category from a competitive standpoint. To the extent that you can quantify this, the current backlog, how many instruments would you move toward to try it out yet along a

other vendors. I think we feel really great about our competitive positioning of Cosmix, the primary dimension where we distinguish ourselves is on Plex. And we think, in many customers, agree that Plex is the most important specification, because it directly correlates.

to the amount of information a researcher can get from their precious samples. So we can look at 6,000 R&As in a sample compared to the 4 or 500 that our competitors can offer. We're providing 10 times as much potential data as they are getting out of that same sample. So that is really the reason that we had such a successful...

track record of winning business on cost.

Got it. That's helpful. And then, you know, get to hear that the funnel, you know, looks good, the commentary from AACR seems positive, but it was just kind of serious given some of the comments around cash management. You know, are you seeing any broader lengthings of instrument sales cycles or changes in customer purchasing, purchasing behavior associated associated with some of this kind of more constrained capital environment?

Got it. Very helpful. Thanks.

Our next question is from Julia Chin with JP Morgan. Your line is now open.

Thank you for taking the question. This is Marta on Prejulia. I was forward to ask, you know, now that you've begun shipping cosmetics and have early customer skill up their experiments, did you maybe discuss the similarities and differences in the cosmetics versus steel most product cycle and brands? Thank you. Well, the...

the geomics instrument launch by a factor of I think 2 plus. Now of course we're in a different state of the market today where spatial biology is much more well-known and well appreciated than it was at the time of our geomics launch. And the market is being conditioned for excitement about spatial imagers not just by nanostring but by several other.

actual consumable polarization is happening faster for cosmetics than a dip with geomics, but we believe it will because the system is actually easier and more intuitive to use than geomics. And I think, honestly, Nanus-Prayn has learned a lot about how to support customers in external design and ramp up.

through our experience, commercializing geomics. So I have a sense of optimism that cosmetics will become productive faster than geomics has. That's helpful. And then on encounter, really quick. Could you put a more color on the instrument placement of leavesy 1910, giving the quarter, what kind of cut?

focused on translational biology.

primarily in the fields of oncology and immunology, and the instrument that we sold in the quarter went into those types of laboratories. We don't have tremendous real-time visibility into instrument and activation. You know, it's something we can fur from customer behavior over time.

But I would expect that the pace of new instrument placement and the pace of instrument and activation are about the same at this stage, which is why our consumable revenue would be expected to be similar throughout the sequential quarters of this year.

Our next question is from Tejas Savant with Morgan Stanley . Your line is now open. Hey, guys, this is Edmund. Thank you for taking my questions.

Brad, you previously mentioned about 7,000 labs in the world that could have both a pro filer and an imager. I was just wondering, what percent of these labs would you consider earlier adopters? Are there about 500 of them or more like 1,500 of them? I was just hoping to get a better sense of the composition here as it could potentially impact decision making timelines, multi-unit purchases and even consumable posters.

Yeah, it's a good question. You know, I think it's a hard one to answer. You know, I'd say the easiest way to think about it perhaps is what fraction of any market would you consider life to be really adopters? You know, if it were the first 15% or so, that'd be the first 1000 out of that 7000 last, right? So.

installed bases, you know, 385 spatial instruments, you know, slightly fewer than 385 total laboratories, but you know that's largely within that early adopter sector. You know, these these revolutions in life single cell biology and spatial biology, they play out over the course of...

majority and kind of mass market segments.

Got it, that's helpful. And Brad, you previously mentioned that when you guys first started offering Cosmos through your TAP program with the 1000-plex offering and 100-plex offering, most of your customers, actually all of them chose the 1000-plex option. And I was just wondering, with your Cosmos currently offering five panel options today with two of them being about 1000.

cosmic sensible demand remains at the highest flex that we can offer. So today we're shipping up to a thousand flex and that accounts for the vast majority of both our technology access program demand and our consumables that we're shipping into those early sites.

Based on my customer field visits over the past weeks, I expect that that demand is very likely to shift upward towards our 6,000-plex RNA panels once those become available in the first quarter of next year. There's tremendous excitement about the broad coverage that we can offer in 6,000-plex panels.

Got it, thank you. And then one more from me. In terms of your geo-mix demand trends, have you seen any changes in the pattern of your spatial demands between your profiler and imager recently? And if there's any way to provide more color on the unit shift for COSMIX and geo-mix for the quarter, that'd be much appreciated.

Sure. So, I think the only color we can provide is that demand has continued to shift from profilers to imagers. And it's for the reason I described in one of my earlier answers that –

the spatial imagers, which have single-cell resolution, are so easy to use for researchers who have been doing single-cell biology in a non-spatial manner that it becomes a very natural first instrument to acquire in spatial biology. Q1 was no exception. We had a very cosmic, heavy order book, and we would expect that to continue throughout 2023. We're just fine with that. We're excited about what COSMX will continue to do.

closing remarks. Thanks very much everybody for joining us today. If you didn't miss any portion of the call, the replace should be available within the next two hours or so. Access that please dial 866-813-9403. International callers please use 929-458.

The conference call ID number is the same for both 573-494. So thanks again. That concludes our call.