Q2 2024 Champions Oncology Inc Earnings Call
Greetings. Welcome to the Champions on College's second quarter fiscal year 2024 earnings call. At this time, all participants are on all this and only move.
Greetings and welcome to the champions oncology second quarter fiscal year 2024 earnings call. At this time, all participants are in a listen only mode.
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Please note this conference is being recorded. I will now turn the conference over to your host, Ronnie Morris CEO . You may begin.
Speaker Change: Please note. This conference is being recorded I will now turn the conference over to your host.
Speaker Change: Johnny Morris CEO you may begin.
Johnny Morris: Good afternoon, Hi, Ronnie Morris Champions oncology, joining me today is David Miller, our Chief Financial Officer. Thank.
Good afternoon, I am Ronnie Moore, CEO of Champions on College. Joining me today is David Miller, our Chief Financial Officer. Thank you for joining us.
David Miller: Thank you for joining us for our quarterly earnings call before I begin I will remind you though.
Before I begin, I will remind you that we make informed statements during today's call that actual results could differ materially from what is described in those statements.
David Miller: Statements during today's call and that actual.
David Miller: Actual results could differ materially from what is described in those statements additional information on factors that could cause results to differ is available in our forms 10-Q and Form 10-K.
Additional information on factors that could cause results to differ is available in our forms 10Q and form 10K.
David Miller: A reconciliation of non-GAAP financial measures that may be discussed during the call.
I reconcilation of non-GAT financial measures that may be discussed during the call if you GAT financial measures is available in the earnings relief.
David Miller: GAAP financial measures is available in the earnings release.
Overall, our second quarters results were mixed as we continue to navigate through some of the challenges we've been highlighting over the past several quarters.
David Miller: Our second quarter's results were mixed as we continue to navigate through some of the challenges we've been highlighting over the past several quarters.
Our financial results were weaker than we have been accustomed to delivering. However, there were several positive, foundational developments in our core business that have us well positioned for the future.
David Miller: Our financial results were weaker than we have been accustomed to delivering however, there were several positive foundational developments in our core business.
David Miller: It's well positioned for the future.
As we have discussed in the past, approximately one year ago, we encountered business headwinds on multiple fronts.
David Miller: As we have discussed in the past approximately one year ago, we encountered business headwinds on multiple fronts, the economic environment, specifically in our sector turn markedly negative which impacted our customers and ultimately champions oncology.
The economic environment, specifically in our sector, turned markedly negative, which impacted our customers and ultimately champions on college. As our customers' R&D budgets were reduced, we encountered longer sales cycles and fewer studies signed.
David Miller: As our customers R&D budgets were reduced.
David Miller: Countered longer sales cycles, and fewer studies signed additionally.
Additionally, cutter is having a much higher propensity to cancel all or part of the studies they had recently signed.
David Miller: Additionally, customers had a much higher propensity to cancel.
David Miller: Part of the studies they had recently signed.
The resulting lower net bookings was a precursor to the anticipated revenue decline we are currently experiencing.
David Miller: The resulting lower net bookings was the precursor to the anticipated revenue decline we are currently experiencing.
Additionally, in conjunction with the external factors, we identified some operational issues that led to slower revenue conversion, creating further downward pressure on our operating results.
David Miller: Additionally, in conjunction with the external factors.
<unk> had some operational issues that led to slower revenue conversion.
Waiting further downward pressure on our operating results.
I remain optimistic that we have made significant progress towards reversing these trends and we see a light at the end of the tunnel as positive trends are emerging.
David Miller: I remain optimistic that we have made significant progress towards reversing these trends and we see a light at the end of the tunnel as positive trends are emerging.
We have made the necessary operational changes with some key hires and internal restructuring that we are confident will lead to greater efficiencies and improvement in our overall operation.
David Miller: We have made the necessary operational changes with some key hires and internal restructuring.
David Miller: We are confident will lead to greater efficiencies and improvement in our overall operations cancer.
Cancelations have receded back to historical levels. Our bookings, which are the fundamental foundation for building long-term success, are strong, and we are anticipating continued acceleration for the second half of this fiscal year. As these higher bookings convert to revenue over the coming quarters, we will see a return to quarterly revenue growth and profitability.
David Miller: Cancellations have receded back to historical levels, our bookings, which are the fundamental foundation for building long term success are strong and we are anticipating continued acceleration for the second half of this fiscal year as these higher bookings convert to revenue over the coming quarters, we will see a return to quarterly revenue grow.
And profitability.
With regard to specific services, we have increased our clinical biomarker's pipeline with an uptick in booking.
David Miller: With regard to specific services, we have increased our clinical biomarkers pipeline with an uptick in bookings.
This has been an area that has lagged behind our internal expectations, but we are feeling more confident that our clinical work can finally become a more meaningful contributor to our long-term revenue growth as it ramps up in accordance with our initial expectations. Similarly, we continue to expand our Ex-Viva offering, adding additional models to our platform, which leads to increasing Ex-Viva revenue in the coming quarters.
David Miller: This has been an area that has lagged behind our internal expectations, but we are feeling more confident that our clinical work and finally become a more meaningful contributor to our long term revenue growth as it ramps up in accordance with our initial expectations.
David Miller: Thirdly, we continue to expand our ex vivo offering adding additional models to our platform, which should lead to increasing ex vivo revenue in the coming quarters.
With regards to Corelia, our Holy Own Drug Development Sustardiary, our lead discovery programs are progressing well through therapeutic discovery stages with our two lead programs exhibiting promising results.
David Miller: With regard to <unk>, our wholly owned drug development subsidiary, our lead discovery programs are progressing well through its therapeutic discovery stages with our two lead programs exhibiting promising results. We continue to be actively engaged with investors in an effort to raise capital to support and accelerate our growth.
We continue to be actively engaged with investors in an effort to raise capital to support and accelerate our growth. Although we anticipate a return to revenue growth and profitability, given some of the recent weakness in our revenue, in the short term, we are reducing our quarterly investment in the subsidiary.
David Miller: Although we anticipate a return to revenue growth and profitability given some of the recent weakness in our revenue in the short term, we are reducing our quarterly investment in the subsidiary.
We do not anticipate this short term reduction spend will have a material effect on our progress.
David Miller: We do not anticipate this short term reduction in spend will have any material effect on our progress.
In summary, the quarter's performance was as expected. We anticipate that improvements will slowly take hold and put it back on our targeted trajectory. Despite the slowdown, we continue to have robust bookings, a comprehensive platform, a stellar reputation, and a strong team that is poised for the next stage of growth.
David Miller: In summary, the quarter's performance was as expected we anticipate that improvements will slowly take hold and put us back on our targeted trajectory.
David Miller: Despite this slowdown we continue to have robust bookings a comprehensive platform is stellar reputation and a strong team that is poised for the next stage of growth. We are confident that we will emerge with stronger revenue and profitability over the long term now.
We are confident that we will emerge with stronger revenue and profitability over the long term.
Now let me turn the call over to David Miller for a more detailed review of the financial result.
Speaker Change: Now, let me turn the call over to David Miller for him for a more detailed review of the financial results.
Speaker Change: Thanks Marty.
Thanks, Ronnie. Our full results are from 10Q with all of the SEC on and before December .
Speaker Change: Full results on Form 10-Q will be filed with the SEC on or before December 15.
Speaker Change: Second quarter revenue was $11 6 million, let's say 19.
Our second quarter revenue was $11.6 million, a decline of 19% from the second quarter of fiscal 2020.
Speaker Change: 19% from the second quarter of fiscal 2023.
As we've been guiding over the last several quarters, the challenges encountered last year, specifically the customer cancellation, led to the decline in prior quarter networking, and would lead to lower revenue in the first half of 2024. We believe Q2 was the low point in a gradual improvement or follow over the coming quarter.
Speaker Change: As we've been guiding over the last several quarters the challenges encountered last year, specifically the customer cancellation led to a decline in quiet quarter net bookings and would lead to lower revenue in the first half of 2024.
Speaker Change: Believe Q2 was the low point.
Speaker Change: Actual improvement will follow over the coming quarter.
On the gas basis, our loss for the second quarter of 2024 was approximately 2 million compared to a gain of 8,000 in the prior year.
Speaker Change: On a GAAP basis, our loss for the second quarter of 2024 was approximately $2 million compared to a gain of 8000 in the prior year.
food in the 2 million dollar lot where non cash expenses of stock hump and depreciation totaling approximately 600,000.
Included in the $2 million loss were non cash expenses for stock comp and.
Speaker Change: Depreciation totaling approximately 600000.
excluding these non-cash items, our adjusted EBITDA law with approximately 1.4 million for the quarter compared to an adjusted EBITDA profit of $686,000 in a year ago period. Turning the focus.
Speaker Change: Putting these noncash items, our adjusted EBITDA loss was approximately $1 4 million for the quarter compared to an adjusted EBITDA profit of 686000 in the year ago period.
Speaker Change: Turning to focus our cash based results.
Speaker Change: The total cost of sales was $6 6 million compared to $7 2 million in the second quarter of last year, a decline of 9%.
The total cost of sales was 6.6 million compared to 7.2 million in our second quarter last year. Other prime of 9%.
The decrease relative to the same period last year, which primarily due to a reduction in outsourced lab services and supply expense.
Speaker Change: The decrease relative to the same period last year was primarily due to a reduction in our.
Speaker Change: Lab services and supply expenses.
Despite the decline in cost of sales as a result of our lower topline revenue our gross margin for the quarter was 43% compared to 49% from the same period last year.
Despite the decline in cost of sales, as a result of our lower top line revenue, our gross margin for the quarter was 43% compared to 49% for the same period last year.
Our margins should begin to improve over the coming quarters as our revenue expands, and we leverage against the fixed cost component of cost of sales, along with our variable costs increasing at a slower pace.
Speaker Change: Our margin should begin to improve over the coming quarters as our revenue expand and we leverage against the fixed cost component of cost of sales along with our variable cost increasing at a slower pace.
Speaker Change: For the quarter R&D expense was approximately $2 5 million compared to $2 6 million in the year ago period.
For the quarter, R&D expense was approximately 2.5 million compared to 2.6 million in the year ago period.
Speaker Change: Our R&D spend is split between our traditional R&D supporting our core business services and investing in our drug discovery platform.
Our R&D spend is split between our traditional R&D, supporting our core business services, and investing in our drug discovery platform.
Approximately 1.2 million was invested towards our drug discovery efforts during this corner.
Speaker Change: Approximately $1 2 million was invested towards that drug discovery efforts during this quarter.
Speaker Change: For the quarter sales and marketing expense was relatively flat $1 8 million compared to $1 7 million in the year ago period.
For the quarter, sales and marketing expense was a relatively flat 1.8 million compared to 1.7 million in the year of low-period.
Our GNA expense was also unchanged at $2.1 million for the quarters ended October 31st, 2023 and 2022.
Speaker Change: Our G&A G&A expense was also unchanged at $2 1 million for the quarters ended October 31, 2023 and 2022.
Speaker Change: Now turning to cash.
We ended the quarter with 5.5 million of cash on the balance sheet and no debt. For the quarter, cash generated from operating activities was approximately 600,000, resulting from an increase in receivable collections and an uptake in deferred revenues.
Speaker Change: We ended the quarter with $5 $5 million of cash on the balance sheet and no debt for the quarter cash generated from operating activities was approximately 600000, resulting from an increase in receivable collection and an uptick in deferred revenue.
The change in these working capital accounts was in the order request of business.
Speaker Change: The change in these working capital accounts within the ordinary course of business.
Investment in new lab equipment was a modest $150,000, and cash generated from financing activities was approximately $200,000, primarily from stock option exercises.
Speaker Change: That's what a new lab equipment was a modest 150000 and cash generated from tightening financing activities was approximately 200000, primarily from stock option exercises.
We anticipate remaining in a generally cash nuke position for the next quarter or two, with a gradual acceleration towards the end of fiscal 2024 and until next year.
Speaker Change: We anticipate remaining in a generally cash neutral position for the next quarter or two with a gradual acceleration towards the end of fiscal 2024 and into next year.
As our operational results are expected to improve, we believe our task position remains sound.
Speaker Change: Our operational results are expected to improve we believe our cash position remains sound.
Information, directionally, are a second quarter financial results from mostly as expected. However, revenue was a bit below our expectations. This is mostly due to timing uncertainty on Fuddy Completion, the bookings to revenue conversion bus.
Speaker Change: Information.
Speaker Change: Actually our second quarter financial results were mostly as expected. However revenue was a bit below our expectation. This is mostly due to timing uncertainty on study completion, the bookings to revenue conversion process.
As a result, the spicy anticipation of revenue re-acceleration in the second half of this year's 2020-24, we are revising our full year revenue guidance and expect that revenue growth will be generally flat compared to last year.
Speaker Change: As a result, despite the anticipation of a revenue reacceleration in the second half of fiscal 2024, we are revising our full year revenue guidance and expect that revenue growth will be generally flat compared to last year.
However, with continued strength and ab-booking, which are leading in the Cano Arvineu, with the operational corrections in aid beginning to take effect, and with reduction cancellation, we are confident that despite the short-term obstacles, our long-term prospects are positive.
Speaker Change: With continued strength in our bookings, which are a leading indicator of our revenue with the operational corrections made beginning to take effect and with the reduction in cancellations. We are confident that despite these short term obstacles. Our long term prospects are positive, we anticipate a slow but steady improvement in our operational results, including revenue growth.
We anticipate a slow but steady improvement in our operational results, including revenue growth and ultimately profitability within the next couple of quarters.
Speaker Change: Ultimately profitability within the next couple of quarters.
We'll explore it to our next update in mid-March when we report our third quarter results. We'll now open the call to questions.
Speaker Change: We look forward to our next update in mid March when we report our third quarter results. We will now open the call to questions.
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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The confirmation tunnel indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please.
Speaker Change: One moment, please while we poll for questions. Once again, please press star one if you have a question or a comment. The first question comes from Matt Hewitt with Craig Hallum. Matt. Please proceed.
Once again, please press star 1 if you have a question or a comment.
The first question comes from Matt Hewitt with Greg Hellum. Matt, please proceed.
Speaker Change: Hi, guys. This is Jack on for Matt as you commented in your prepared remarks, you spoke to elevated cancellations is it broad based or is there a one or two large cancellations that representative of the Delta and then how are things looking so far this quarter, where you're hearing from others. We're hearing from other industries that the rate of cancellations or declining or curious if that's consistent with what you're hearing and then a follow up as well.
I got this jack on from Matt. As you come to me and prepared remarks, you're supposed to elevate.
or is there one or two large cancellations that represent the Delta? And then how are things looking so far this quarter? Were you hearing from other industries that the rate of cancellations are declining? Over curious if that's consistent to what you're hearing and then I will fall up as well.
Speaker Change: Yeah.
Yeah, so I would say that it's pretty much a broad-based effect that started a couple of quarters ago that's washing out now. And we don't see it from necessarily one or two customers. We saw it as a kind of a broad-based industry-wide exercise. We were just a lot of cancellations. Your second question was what, again, sorry, remind me.
Speaker Change: Yeah, So I would say that it's pretty much a broad based.
Speaker Change: Effect that started a couple of quarters ago, that's washing out now.
Speaker Change: And we don't see it from necessarily one or two customers. We see it we saw it as a kind of a broad based industry wide exercise. We were just a lot of cancellations. Your second question was what again sorry.
Speaker Change: And your second question.
Speaker Change: Hum.
How are things looking so far this quarter? We're just hearing from others in the industry that the rate of cancellations are declining. But we're curious if that's gonna be something that's what you're hearing.
Speaker Change: How are things looking so far this quarter, we're just hearing from others in the industry that the rate of cancellations are declining or curious if that's yes, that's why you're hearing.
Yeah, yeah, totally consistent with what we're seeing, the cancellations have come back down to what we call our historical norms, you know, the way it was before.
Speaker Change: Yeah, Yeah, it's totally consistent with what we're seeing the cancellations have come back down to what we call our historical norms.
Speaker Change: It was before.
I would say it started about a year, maybe a little over a year ago. So, we are seeing that the bookings remain consistently strong with cancellations coming down, which gives us the optimism that we think things are going to get back to the way they were and back to normal profitability and growth in the short term.
Speaker Change: I would say it started about a year or maybe a little over a year ago.
Speaker Change: So we are seeing that were seeing the bookings remained consistently strong with cancellations coming down which gives us the optimism that we think things are going to get back to the way they were and back to normal profitability and growth in the short term.
And then for my fallout, a lot of far-run biotech companies are in a midst of budget planning. What are you hearing from them as far as expectations for next year and how do you think they'll impact your business?
And then for my follow up a lot of pharma and biotech companies in the midst of budget planning what are you hearing from them as far as expectations for next year and how do you think that will impact your business.
Speaker Change: Yes.
Yeah, so we're hearing some mixed feelings, you know.
Speaker Change: Yeah. So we're hearing.
Speaker Change: Mixed feelings you know.
I think we're generally optimistic, certainly a lot of the larger.
I think we're generally optimistic certainly a whole lot of the larger.
pharmaceutical companies as opposed to some of the smaller biotech companies. We feel very confident that their budgets are healthy and we've been in discussions with them about.
Speaker Change: Pharmaceutical companies as opposed to some of the smaller biotech companies, we feel very confident that their budgets are healthy and we've been in discussions with them about.
planning for next year. So I think it's a mixed bag still. I don't think we're back to the way things were a couple years ago where there was...
Speaker Change: Planning for next year. So I think it's a mixed bag still I don't think we're back to the way things were a couple of years ago, where there was a tremendous amount of investment in biotech, but I don't think it's as bad as it was a year year and a half ago, where nobody knew what to do with everyone's hoarding cash and was worried about where theyre going to be able to.
tremendous amount of investment in biotech but i don't think it's as bad as it was a year and a half ago where nobody knew what to do and everyone's hoarding cash and was worried about
where they're going to be able to raise money and holding onto budgets really tightly so so I think we're better than we were I don't think we're back to the way things were a couple years ago uh... but there's certainly different strategies in one of our strategies is to focus more on the large farm uh... and uh... who i think have more
Speaker Change: To raise money and holding onto budgets really tightly. So so I think we're better than we were.
Speaker Change: I think we're back to the way things were a couple of years ago, but there's certainly different strategies. You know one of our strategies is to focus more on the large pharma and and who I think have more.
Speaker Change: Yeah.
more visibility into their R&D budgets than some of the smaller biotechs.
Speaker Change: More visibility into their R&D budgets than some of the smaller biotechs.
That's helpful. Thank you.
If there are any remaining questions, please indicate so by pressing star 1.
Speaker Change: If there are any remaining questions. Please indicate so by pressing star one.
Speaker Change: Okay.
Speaker Change: Okay. We have no further questions in queue I'd now like to turn the call back over to management for closing remarks.
Okay, we have no further questions in queue. I'd now like to turn the call back over to management for a closing remarks.
Thank you everybody for joining us for a quarterly call. Clearly, clearly not the quarter we expected. Certainly the quarter we expected, you know, a quarter ago, but certainly not something that we have generally expected over the last couple of years with a lot of growth. We're looking forward based on all the information that we see in front of us to getting back to the continued growth. We're excited about the drug development. I mean, um, um, um,
Speaker Change: Thank you everybody for joining us for our quarterly call clearly clearly not the quarter, we expected a certain suddenly the quarter. We expected a you know a quarter ago, but certainly not something that that we have generally expected over the last couple of years with a lot of growth.
Speaker Change: We're looking forward based on all the information that we see in front of us to getting back to the continued growth. We're excited about the drug development Hum.
effort and the subsidiary that we have carved out in terms of that endeavor were also excited about some of our newer service lines including
Speaker Change: Effort and the subsidiary that we've carved out.
Speaker Change: In terms of that endeavor. We're also excited about some of our newer service lines, including.
clinical biomarkers and our XCVOT platform. So a lot of promising news to come and we look forward to.
Speaker Change: Clinical biomarkers and our ex vivo platform. So a lot of promising news to come.
And we look forward to.
Updating everybody on our next quarterly call in a couple of months. Thank you everybody for joining. Bye.
Speaker Change: Updating everybody on our next quarterly call and a couple of months. Thank you everybody for joining bye.
Speaker Change: Hi.
Speaker Change: This concludes today's conference and you may disconnect your lines at this time. Thank you.
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