Q4 2023 Akoya Biosciences Inc Earnings Call

March 4, 2024

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Thank you operator, and thank you to everyone who is joining us today on this call I'm <unk> Shah head of Investor Relations at acquire Biosciences.

On the call today, we have Brian Mcelligott, Chief Executive Officer, and Johnny Act Chief Financial Officer.

Earlier today acquire released financial results for the fourth quarter ended December 31, 2023, a copy of the press release is available on the company's website.

Okay.

Good day, and thank you for standing by and welcome to the Korea Biosciences fourth quarter 2023 earnings Conference call.

Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

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For a list and description of the risks and uncertainties associated with the Cortez business. Please refer to the risks identified in our filings with the U S Securities and Exchange Commission, including in the risk factors section of annual report on Form 10-K for the year ended December 31, 2023 to be filed today March.

Thank you operator, and thank you to everyone who's joining us today on this call I'm <unk> Shah head of Investor Relations at acquire Biosciences.

On the call today, we have Brian Mcelligott, and Chief Executive Officer, and John <unk>, Chief Financial Officer.

Earlier today <unk> released financial results for the fourth quarter ended December 31, 2023, a copy of the press release is available on the company's website.

For 2024.

We urge you to consider these factors and you should be aware that these statements are considered estimates only and are not a guarantee of future performance.

This conference call contains time sensitive information and is accurate only as of the live broadcast today March four 2024 acquired disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise the audio.

A portion of this call will be archived on the investors section of our website later today or the heading events.

Oh that I'll now turn the call over to Brian.

For a list and description of the risks and uncertainties associated with the clients' business. Please refer to the risks identified in our filings with the U S Securities and Exchange Commission, including in the risk factors section of annual report on Form 10-K for the year ended December 31, 2023 to be filed today March.

Thank you Brian.

And good afternoon or evening to everyone. We appreciate you joining us today.

During today's conference call I will begin by giving a broad overview of our performance in the fourth quarter and full year 2023.

I will review our business advancements and provide insights into the latest developments in our product offerings.

For 2024.

Knowing that Johnny will go deeper into our financials and key trends and provide an outlook for the future of the business.

We urge you to consider these factors and you should be aware that these statements are considered estimates only and are not a guarantee of future performance.

As pre announced at the Jpmorgan Healthcare conference in January our Korea had a strong fourth quarter in 2023.

With record breaking revenue of $26 $5 million and full year 2023 revenue of $96 $6 million.

Representing a 29% annual growth from prior year.

The audio portion of this call will be archived on the investors section of our website later today or the heading events.

We exited the year with gross margin of 62, 7% in the fourth quarter.

I'll now turn the call over to Brian.

Thank you Brian and.

In parallel to our strong top line growth and margin expansion throughout the year.

Hey, good afternoon or evening to everyone. We appreciate you joining us today.

During today's conference call I will begin by giving a broad overview of our performance in the fourth quarter and full year 2023.

We made efforts to leverage our cost structure limiting our 2023 operating expenses to only a 4% growth from prior year, enabling a more substantial portion of our revenue growth to fall to our bottom line.

I will review our business advancements and provide insights into the latest developments in our product offerings.

Knowing that Johnny will go deeper into it.

Within our 2024 forecast, we expect both strong top line growth and margin expansion, while we continue to manage our costs.

And we are projecting operating cash flow breakeven by the end of this year.

Johnny will touch upon this in greater detail later in the call.

Our cumulative installed base now stands at nearly 200 instruments the largest in the field and covers the entire spectrum of spatial biology markets from discovery to translational and ultimately to clinical.

Throughout 2023, we invested in key strategic areas, including reagent menu expansion throughput and workflow simplification and improved software capabilities collectively contributing to meaningful reason revenue expansion and increases in the pull through across our platforms.

In the fourth quarter. We saw continued signs of the return on these investments as reason revenue grew 52% from the prior year period.

We are pleased to report that we now have over 1160 peer reviewed peer reviewed publications.

<unk> technologies as of year end 2023.

A 50% growth from the prior year period.

Demonstrating the widening adoption and utility of our <unk> solutions by our customers.

<unk> has achieved important milestones in a short period of time that has solidified our market leadership position and we will continue to pay dividends.

As noted <unk> has the largest and and actively publishing customer base that will continue to highlight and scientifically promote the current and future capabilities of our offerings.

Next we provide complete end to end solutions with high throughput workflows that deliver high quality special phenotyping at any level of multiplexing.

And finally, our solutions span the entire continuum from discovery to clinical applications.

The result, as noted is a clear path to operating cash flow breakeven by year's end.

Our R&D and operational efforts have been optimized to deliver enhancements and workflow efficiencies and drive and expanding menu of high value applications.

Let me briefly review our key recent product line improvements and two additional high value partnerships.

First the recent rollout of the fetus act with user to Plano represents a noteworthy milestone setting a new industry standard and capacity multiplexing and data quality.

Customers can now process twice as many samples per week compared to previous capabilities, establishing the <unk> refused to Plano is the highest throughput space with discovery platforms available in the market.

<unk> multiplexing across a broad range from just a few proteins to up to 100.

In parallel we released our Pheno imager HG, two <unk> upgrade for our translational and clinical research customers.

Like the fuse a 2.0 this upgrade similarly represents a transformative enhancement, resulting in a fivefold increase in workflow speed.

More than half of our customers have received a two point or fuel upgrade across both platforms as of year end 2023.

These upgrades and the ongoing expansion of Korea's <unk> content menu were the main drivers the increases in consumable revenue in the fourth quarter.

We also recently announced two groundbreaking partnerships.

First we announced our partnership with Thermo Fisher to deliver advanced spatial multi ohmic workflows by combining the Thermo Fisher review RNA technology with a coyote spatial biology solutions.

Second.

Along with our partners at enabled medicine, we announced the release of Mac skews and AI and reinforced learning driven multimodal data integration algorithm on the enable medicine cloud platform.

This next generation analytical methodology allows our customers to directly integrate into one analysis.

<unk> special Proteonomic data.

With single cell RNA data.

As a result, our customers single cell RNA seek data, which is not spatial.

Is mapped.

To acquire spatial proteomics data.

Creating an informatics derive special multi omics datasets.

This transformative solution allows customers using our core platforms.

And single cell RNA seek platforms to leverage and integrate these independent datasets from different platforms to drive profound new multi gnomic discoveries.

This is likely the first of many such AI based analytical approaches to come.

Our platform improvements and partnerships further strengthen our position to lead the market in offering powerful new space Phenotyping solutions, and we remain committed to continuing to lead the market, providing the industry's best end to end solutions across multiple market segments.

While these new solutions, certainly expand our discovery horizons.

<unk>. We are also witnessing a continued expansion and acceleration.

The clinical utility of spatial technologies.

Special Phenotyping is becoming central to emerging clinical biomarker efforts in immuno oncology and the rapidly growing antibody drug conjugate market.

Our 78% growth in our services revenue compared to the prior year is a clear indication of this as we secure additional late stage clinical trial partnerships.

Our demonstrated organization of clinical expertise.

The capabilities of the Pheno imager HD platform.

Our co marketing partnership with Avalon and our companion diagnostic partnership with Aker. One are all key drivers of the expansion of this part of our business.

Now importantly, active on also received.

Breakthrough device designation on the ACR 306, eight uncle signature assay.

One on our HD platform through our CLIA lab and.

Fast track designation for their therapeutic ACR 368, and we look forward to their phase III clinical trial interim results in the near future.

We continued to expand our qualified service provider network that includes the industry's top contract research organizations.

A clear quantified these partners and provides ongoing white glove to support to help ensure their success and offering lab services on our <unk> platforms.

The network serves as a valuable commercial amplifier and.

And helps advance the adoption of our platforms and translational studies and clinical trials.

We are humbled and appreciative.

These successes and ongoing efforts have attracted pre eminent global thought leaders in immuno biology to join our newly established scientific Advisory Board.

Dr. Gary Nolan equate a cylinder and the inventor of the penis eichler and Coinventor of Maxis.

Has transitioned from his role on the board of directors to serve as the new chair of the scientific Advisory Board.

Accompanying him will be Dr. James Allison.

Provider network that includes the industry's top contract research organizations.

2018, Nobel Laureate and the father of the immuno oncology Revolution as well as Dr. Probably Sharma visionary physician scientists in the field of immuno oncology and immunotherapy. Both currently at MD Anderson.

A clear quantified these partners and provides ongoing white glove to support.

Help ensure their success and offering lab services on our <unk> platforms.

The network serves as a valuable commercial amplifier and.

These three initial members of <unk> scientific Advisory Board.

And helps advance the adoption of our platforms and translational studies and clinical trials.

We will inform acquire street strategic direction and provide expertise in translational clinical and diagnostic applications of <unk> spatial biology solutions.

We are humbled and appreciative.

These successes and ongoing efforts have attracted pre eminent global thought leaders in immuno biology to join our newly established scientific Advisory Board.

Lastly, like others in the industry, we observed some ongoing macro pressures impacting capital equipment purchases prolong instrument sales cycles and continued under performance in our business in China.

Dr. Gary Nolan acquire cylinder and the inventor of the penis eichler and Coinventor of Maxis.

We anticipate these challenges to persist at least through the first quarter of 2024.

Has transitioned from his role on the board of directors to serve as the new chair of the scientific Advisory Board.

In summary, our focus for 2024 revolves around three key initiatives.

Accompanying him will be Dr. James Allison.

First.

To expand applications and implement continued workflow efficiency improvements on the venous leg with Doosan and the piano Imager Ht.

To drive the continued high growth of our recent revenue, resulting in increases in system pull through.

These three initial members of <unk> scientific Advisory Board.

Second achieve operating cash flow breakeven by year end 2024 by focusing on improving efficiencies cost effectiveness and gross margin expansion.

We will inform acquire street strategic direction and provide expertise in translational clinical and diagnostic applications of <unk> spatial biology solutions.

Third continue to drive our clinical partnerships to achieve our goal of delivering a menu of high value companion diagnostics to advance patient care.

With that I will now turn the call over to Gianni to discuss our financial results Johnny.

Thanks, Brian.

We anticipate these challenges to persist at least through the first quarter of 2024.

As Brian highlighted total revenue for the fourth quarter of 2023 was $26 5, million% to 25% growth compared to the same period in 2022.

In summary, our focus for 2024 revolves around three key initiatives.

First.

Full year 2023 revenue was $96 $6 million.

Expand applications and implement continued workflow efficiency improvements on the venous leg with fusion and the piano Imager Ht.

Representing a 29% growth from the prior year.

Our robust year over year growth was seen globally across our diversified revenue channel and strong portfolio of products and services.

To drive the continued high growth of our reagent revenue, resulting in increases in system pull through.

Second achieve operating cash flow breakeven by year end 2024 by focusing on improving efficiencies cost effectiveness and gross margin expansion.

Product revenue, including instruments reagents, and software totaled $16 7 million for the fourth quarter.

And third continue to drive our clinical partnerships to achieve our goal of delivering a menu of high value companion diagnostics to advance patient care.

We sold 51 instruments of which 15 orfield cyclists at 36 were from the phenol image our portfolio generating total instrument revenue of $9 $2 million for the quarter.

With that I will now turn the call over to Gianni to discuss our financial results Johnny.

As Brian noted earlier continued macro pressures and underperformance in China impacted our results and we expect this trend to continue in the near term.

Thanks, Brian.

As Brian highlighted total revenue for the fourth quarter of 2023 was $26 5, million% to 25% growth compared to the same period in 2022.

Our global installed base now comprises 1183 instruments.

Including 342, Fino cyclists and 841 phenyl imagers.

Full year 2023 revenue was $96 6 million.

Representing a 29% growth from the prior year.

A total of 230 fusion instruments have ship since the full commercial launch at the start of 2022, and we now have a total installed base of 205 for the combined <unk> Sigler fusion system.

Our robust year over year growth was seen globally across our diversified revenue channel and strong portfolio of products and services.

Product revenue, including instruments reagents, and software totaled $16 7 million for the fourth quarter.

The majority of female cyclists are being sold in combination with the fusion and we expect this combination could driving increased reagent pull through with an expanding menu of panels and faster workflows from the ongoing 2.0 field upgrades.

We sold 51 instruments of which 15 orfield cyclists at 36 were from the phenol image our portfolio generating total instrument revenue of $9 2 million for the quarter.

Approximately half of the installed base of Pheno Sigler fusion, then HTS in the field have been upgraded to two point our model as of year end 2023, and we expect the majority of the remaining instruments in the field to upgrade throughout the remainder of 2024.

As Brian noted earlier continued macro pressures and underperformance in China impacted our results and we expect this trend to continue in the near term.

Our global installed base now comprises 1183 instruments.

All new phenotype of our fusion and HTS systems are being sold directly as a 2.0 model as of the start of 2024.

Including 342, Fino cyclists and 841 female imagers.

A total of 230 fusion instruments have ship since the full commercial launch at the start of 2022, and we now have a total installed base of 205 for the combined female cycle fusion system.

We delivered $6 $9 million and reagent revenue in the fourth quarter, reflecting a 52% increase from the prior year period.

The annualized fourth quarter reagent pull through applicable to both <unk> and <unk> is now in the high $30000 range.

The majority of phenyl cyclists are being sold in combination with the fusion and we expect this combination could driving increased reagent pull through with an expanding menu of panels and faster workflows from the ongoing 2.0 field upgrades.

This is a notable improvement compared to the annualized pull through per instrument in 2022, which was in the high $20 range to the low $30000 range for both the Pheno cycle, there and the HG.

Approximately half of the installed base of Pheno cyclic fusion then HTS in the field have been upgraded to two point our model as of year end 2023, and we expect the majority of the remaining instruments in the field to upgrade throughout the remainder of 2024.

This growth can be attributed to the increased utilization of phenyl sigler is paired with a fusion faster workflows and a growing utility of penal code panels across the <unk> portfolio.

We are strategically positioning reagents to play a more significant role in our revenue mix with customers, increasing our utility and pull through across our platforms as we pair morphine recyclers with fusion in the field enhance.

All new phenotype of fusion and HTS systems are being sold directly as a 2.0 model as of the start of 2024.

We delivered $6 $9 million in reagent revenue in the fourth quarter, reflecting a 52% increase from the prior year period.

Instrument portfolio through the two point out upgrades and refine our reagent manufacturing operations planning and supply chain efforts.

The annualized fourth quarter reagent pull through applicable to both phenyl cycle, there and Ht is now in the high $30000 range.

Services and other revenue totaled $9 8 million for the fourth quarter, an increase of 78% over the prior year period.

This is a notable improvement compared to the annualized pull through per instrument in 2022, which was in the high $20 range to the low $30000 range for both the Pheno cyclic and the HD.

Services have been a substantial growth segment for us as our instrument warranty and field service revenue have rapidly expanded in addition to our lab services business continuing to drive higher value studies through new and existing Biopharma partnerships.

This growth can be attributed to the increased utilization of phenyl sigler is paired with our fusion faster workflows and a growing utility of cleanup code panels across the <unk> portfolio.

Gross profit was $16 $6 million in the fourth quarter, representing a 38% growth over the prior year period and gross margin was 62, 7% for the fourth quarter versus 56, 8% in the prior year period.

We are strategically positioning reagents to play a more significant role in our revenue mix with customers, increasing their utility and pull through across our platforms as we pair morphine recyclers with fusion in the field enhance.

The timing and contribution of revenue from our lab services business contributed approximately 250 basis points of margin to the strong fourth quarter gross margin results.

Instrument portfolio through the two point out upgrades and refine our reagent manufacturing operations planning and supply chain efforts.

As we drive increases in our reagent revenue mix execute on our identified operation optimization efforts for reagents.

Services and other revenue totaled $9 8 million for the fourth quarter, an increase of 78% over the prior year period.

And leverage recent manufacturing investment we expect to further drive the expansion of our gross margin in 2024 and beyond in the range of a couple of hundred basis points annually.

Operating expense for the quarter totaled $26 1 million as compared to $29 6 million in the prior year period indicative of a reduced spend pattern throughout 2023, while we continued our meaningful top line growth.

Gross profit was $16 6 million in the fourth quarter, representing a 38% growth over the prior year period and gross margin was 62, 7% for the fourth quarter versus 56, 8% in the prior year period.

Total Opex for 2023 grew only 4% while top line revenue grew 29% from the prior year and gross margin expanded further indicating that our efforts to leverage our cost structure have been very impactful throughout 2023.

The timing and contribution of revenue from our lab services business contributed approximately 250 basis points of margin to the strong fourth quarter gross margin results.

Through ongoing strategic efforts, we expect to further lower our operating costs. This year, helping us achieve projected operating cash flow breakeven as we exit 2024.

As we drive increases in our reagent revenue mix execute on our identified operation optimization efforts for reagents.

And leverage recent manufacturing investments, we expect to further drive the expansion of our gross margin in 2024 and beyond in the range of a couple of hundred basis points annually.

We ended the quarter with approximately $83 $1 million of.

Cash and cash equivalents.

Common shares outstanding and fully diluted shares, including the impact of outstanding options and Unvested restricted stock awards are $49 1 million as of December 31, 2023.

In summary, we are pleased to report another exceptional quarter with record breaking revenue of $26 5 million and full year 2023 revenue of $96 6, million% to 29% growth over the prior year.

Total opex for 2023 grew only 4% while topline revenue grew 29% from the prior year and gross margin expanded further indicating that our efforts to leverage our cost structure have been very impactful throughout 2023.

<unk> installed base has now reached nearly 200 instruments solidifying our position as an industry leader in spatial biology.

Our strategic focus for 2024 remains on driving our reagent revenue growth and increasing pull through across our growing installed base to realize the scalability of spatial biology.

Through ongoing strategic efforts, we expect to further lower our operating cost this year, helping us achieve projected operating cash flow breakeven as we exit 2024.

We ended the quarter with approximately $83 $1 million of cash and cash equivalents.

We've also implemented important operational changes to enhance efficiency drive gross margin improvement and achieve cost advantages all while maintaining strong top line growth.

Common shares outstanding and fully diluted shares, including the impact of outstanding options and Unvested restricted stock awards are $49 1 million as of December 31, 2023.

As such we are confident in our ability to sustain strong growth throughout 2024, and beyond and we project, reaching our very important goal of operating cash flow breakeven as we exit 2024.

In summary.

We are pleased to report another exceptional quarter with record breaking revenue of $26 5 million and full year 2023 revenue of $96 6 million.

At this time, we are providing a revenue guidance range of $114 million to $118 million for 2024 and.

29% growth over the prior year.

And back to you Brian.

<unk> installed base has now reached nearly 200 instruments solidifying our position as an industry leader in spatial biology.

Thank you Johnny we're pleased to report a strong quarter and announced multiple exciting new developments across our product portfolio.

Our strategic focus for 2024 remains on driving reagent revenue growth and increasing pull through across our growing installed base to realize the scalability of spatial biology.

We look forward to executing on our strategic objectives throughout the remainder of the year as we drive the business towards positive cash flow.

We're thankful for the hard work of our fellow dedicated Queens as well as with the support of our customers and shareholders.

We've also implemented important operational changes to enhance efficiency drive gross margin improvement and achieve cost advantages all while maintaining strong top line growth.

Korea remains very well positioned for growth and we're excited about the opportunities that lie ahead, as we deliver new space solutions from discovery to the clinical markets.

As such we are confident in our ability to sustain strong growth throughout 2024, and beyond and we project, reaching our very important goal of operating cash flow breakeven as we exit 2024.

At this point, we will open the call for questions operator.

Thank you and as a reminder to ask a question in unique press star one on your telephone and wait for name to be announced to withdraw. Your question. Please press star one again.

At this time, we are providing a revenue guidance range of $114 million to $118 million for 2024 and.

Please send violet compile the Q&A roster.

One moment for our first question.

And back to you Brian.

Thank you Johnny we're pleased to report a strong quarter.

<unk> multiple exciting new developments across our product portfolio.

Our first question comes from the line of <unk> from Guggenheim. Your line is open.

We look forward to executing on our strategic objectives throughout the remainder of the year as we drive the business towards positive cash flow.

Hey, guys. Thank you for taking my question.

First I think I wanted to cover this gross margins how should we think about quarterly pacing for gross margin throughout the year.

We are thankful for the hard work of our fellow dedicated Queens as well as with the support of our customers and shareholders.

As you think about puts and takes a big one is youll progress towards bringing a lot of these reagents manufacturing in house in the long term how does this benefit gross margins in the near term does this being transitory pressure and then I have one follow up.

<unk> remains very well positioned for growth and we're excited about the opportunities that lie ahead, as we deliver new space solutions from discovery to the clinical markets.

At this point, we will open the call for questions operator.

Yes. This is Brian I'll, let thank you suitable for your question I'll, let Johnny maybe dig into some of the details.

Thank you and as a reminder to ask a question press star one on your telephone and wait for name to be announced to withdraw. Your question. Please press star one again.

Largely speaking.

The.

Positive gross margins for the quarter are really a function of two things number one is the mix.

Please standby, we compile the Q&A roster.

You saw the reagent revenue number was was we had a significant expansion of our reagent revenue in the fourth quarter.

One moment for our first question.

As a result of a lot of the efforts that we've been putting in over the last year or so that was one large contributor contributor and obviously those regions are much higher than they are in their margins in the second one is our service revenue with.

Our first question comes from the line of Subaru Namby from Guggenheim. Your line is open.

Hey, guys. Thank you for taking my question.

First I think I want to cover this gross margins how should we think about quarterly pacing for gross margins throughout the year and as you think about puts and takes a big one is your progress towards bringing a lot of these reagents manufacturing in house in the long term how does this benefit gross margins in the near term does this being transitory pressure and then I.

With the advancements of our a lot of our clinical programs also took a significant step up and now we're really at a place where we're able to leverage that infrastructure and that cost basis. So as that revenue grows it does start to contribute to the bottom line in terms of bringing the manufacturing in house facilities are built out personnel are there.

One follow up.

And we really are just now beginning to.

Yes. This is Brian I'll, let thank you suitable for your question I'll, let Johnny maybe dig into some of the details.

<unk> put on the shelf reagents that were manufactured internally and that that.

Largely speaking.

That is really the other driver for longer term gross margin contribution and then I'll let.

The.

Positive gross margins for the quarter are really a function of two things number one is the mix.

Ill, let Johnny maybe give some give some color on the specifics of the gross margin throughout the year, yes.

You saw the reagent revenue number was was we had a significant expansion of our reagent revenue in the fourth quarter.

Thanks, Sue and thanks, Brian.

As Brian mentioned, we had a couple of hundred basis point contribution in Q4 from.

So milestones achieved in the avs business, which as you can see them in Q4 lift of that margin to a healthy 63%.

Our sort of operating if you exclude that ABS in the operating.

Gross margin really the exit was sort of in the 60% to 61% and so we expect that to sort of move ratably through the year it'll be a bit lumpy as as events happened certainly from any of the avs revenue may move up but from an operating gross margin as Brian highlighted we have begun the operation the menu some of the.

And we really are just now beginning to.

Put on the shelf reagents that were manufactured internally and that.

Actually in house, and it's really a factor of how much of that transitions in house over time, as we also scale and start to achieve more and more efficiencies through the year, which is so I would look at it as a pretty linear pacing.

That is really the other driver for longer term gross margin contribution and then I'll let <unk>.

I'll, let Johnny maybe give some give some color on the specifics of the gross margin throughout.

It will be impacted by mix of course as mix happens through the year. If we happen to have a quarter, where reagents are stronger than instruments et cetera, maybe yes, it'll move but generally it's a it's a relatively linear pacing to kind of get through our exit which allows for.

Movement of a couple of hundred basis points from our baseline that we've that we've established exiting 'twenty three.

Super helpful. Thank you both.

Again, the reagents, which is largely you see nickel at signature and discussing panels I'm guessing.

First what is the expected contribution you embedded in the full year guidance and then secondly, what point of the year would you expect contributions to become more material and lastly, do you expect an increase in penetration of these reagents and Youll see auto and large pharma alcon steps here yeah. It's a good question I think we're beginning to realize.

<unk> to some of the benefits of our content strategy. So.

So I think it's I think it's going to be.

It's going to continue to be.

An accelerant for us throughout the year, we're now at a point, where we're beginning to realize some of those benefits.

With respect to your question on our on our content expansion efforts. Your question on <unk> and Biopharma, Yes, I do think our specifically our targeted signature panels that are really on to be run on the Ht more within the field of immuno oncology and those those ready made panels I think we really start to get this.

Scaled studies.

Subaru in around the second half, we're going to be doing some very large scale studies.

That is one of the contributors why we while we expect to see continued regional expansion throughout the year one clarification one.

It may get lost when we say ABS, we're referring there to our CLIA lab services, our advanced Biopharma solutions group. So ABS really as lab services are synonymous so thank you sue.

Yes.

Thank you so much guys.

Thank you one moment our next question.

Yes.

Our next question is from flying.

Nixon from Canaccord Your line is open.

Hey, Thanks, guys. Congrats on the year in the quarter, when I kind of break down the guidance a little more.

Brian Johnny.

So some of the assumptions here could placement slow down this year given the recent launches and the upgrades and then on pull through could that increase by another like $10000 by the end of this year, even though most of the tailwind seem to be in 'twenty, three or at least the inflection points seem to be that year.

I was asked what the communications team today, and then on services like it sounds like a great great backlog that Eric just talk about visibility that you have at.

At this point and then of course like China legislation, obviously <unk> to <unk>, but maybe how are you thinking about that in the second half of the year.

Yes.

So I think I got all of those and if I don't Kyle Let me know.

So.

The $2 two point out isn't going to slow down placements. Those are field upgrades I think theyre, just theyre just going to make those installs even more.

Powerful in terms of their pull through and it is those upgrades that was it.

A contributor to the reagent acceleration that we saw in the second half and we do think as we as we course of the year, we do think.

Quarter over quarter, we'll see that reagent number continue to climb.

The services business is growing for your question solely because of the nature of the partnerships that we're securing.

There are much later stage there are much higher value.

The 70 plus percent bump you saw in that portion of our business is probably the strongest indicator that one can see externally of the type of projects that we're taking on of being later stage higher value projects that really give us a lot of confidence that we will we will realize.

Our clinical strategy of securing additional clinical trial assays and companion diagnostic deals and we will achieve.

We will achieve our goal of having CTX products in the queue contributing a significant portion of our revenue in the near future. So.

That's that's sort of the commentary I think on everything I think I got everything you you asked about com.

Yes, just on China also if you have any signs on the back half of the year. Thanks.

Yes look I think I think consistent with many of our peers, we're going to assume that the first half is still pretty challenging and if there is recovery, it's going to be incremental and.

And second half is just not something you can count on and as we look at our aim of achieving operating cash flow breakeven, we've got to do that within the context of a revenue goal.

And it takes it takes advantage of our diversified portfolio from from certain lab services to reagents and instruments, but it's not so aspirational that we put that that profitability goal at risk. So we're trying to be very balanced and having a top line goal on a margin goal that doesn't require.

Significant changes in the current business environment.

Okay that was great Brian. Thanks, So much just a quick one on next year's algorithm with enable.

A differentiator from a clinical perspective, I heard Gary no one's talking about that could you just maybe walk through that a bit more just double click on the preclinical side of that and then.

Yes.

Sorry, Jim.

Just wondering if that's like the first of many kind of like unique one off software solutions for the ecosystem that you're kind of rollout, which other partners to like just in addition to enabling of other partners right. So just curious about that we do look the way I look at that with Mike sort of simple, Brian If you play with Chad GPT year, if some of those <unk> creators I think you have.

At least a qualitative sense of the kind of power that these sorts of approaches can bring I would largely say trial in the near term. This is really a tool for your drug discovery researchers and effectively as I noted on the call. What it allows you to do and allows you to take single cell RNA seek data.

And leveraging the <unk> algorithm and and Athena secular fusion high Plex protein data, new informatic, we make that non spatial data spatial by using the Mcafee as our algorithm. So this allows our customers not to do.

Our multi omics study one at a time.

But rather leveraging the large large datasets that exists for single cell, whether it's an internally or with third parties.

<unk> leverage that dataset and your request <unk> using data to make it special.

I'd encourage everybody to go read the two nature papers that the Doctor Nolan has known on this really is quite astounding and they validated it to a pretty deep extent. So I do think this is many of additional approaches to common and we'll continue to look at partners like enable or others as vehicles.

To implement these in a user friendly manner, knowing that our skilled implementation can do get help github type approaches regardless.

Okay. That's helpful. Thanks, guys I appreciate it thanks Tom.

Thank you one moment for your next question.

Yes.

Our next question comes from the line of Savant from Morgan Stanley. Your line is open Hey, guys. Good evening how are you.

Yeah, Brian just to kick things off with we are placed.

Placements came in a little bit light in the fourth quarter, even on a sequential basis I think in the third quarter, you've done almost I think it was in the high 60% if I remember right.

Can you just walk us through sort of that dynamic was it entirely driven by macro and some of those elongated purchase decision cycles that you called out in China, as well or was there any shift in the competitive landscape here, specifically I mean, the one that we've been getting questions on as Luna for so just curious as to.

Any if you could parse out that dynamic and the sequential step down in placements, yes change I. Thank you for the question. It's certainly the former that's driving it I mean, what we saw in Q3 and Q4 was <unk>.

Quarters, we're becoming increasingly.

Backloaded in month three.

Thats largely that is the largest dynamic with the largest driver there I think the visibility.

Luna for.

The question is I think is largely a result of of them sort of being integrated with biotech knee and having a lot more.

Visibility and marketing power and we will see how that competitive dynamic shakes.

Shakes out over the coming quarters, because I think it really just getting going.

Got it fair enough.

And then in terms of just the academic budget environment in the last couple of weeks.

Is that a few inbounds and just cracks over in Europe, and horizon and some questions around the continuing resolution here in the U S as well.

You guys are obviously over indexed there like a lot of geospatial peers. So just curious as to what Youre baking into the guide and what Youre hearing from your academic customers at the moment, yes.

Yes, I would say hey, Josh I think similar to my prior commentary on the Kyle what we've tried to bake into our guide.

<unk> is really a continuation of the existing market pressures that we were all feeling in Q3, and certainly Q4 on the capital side.

So I think that that's going to be our approach we feels.

It feels like we've been living in continuing resolutions and questions on the NIH budget for for over a decade, it's just perhaps a little bit more acute now and so thats kind of how we're looking at it what is in our control and I think we're realizing some successes.

Is in areas that are less prone to being impacted by macros, which is the recent utilization on our platform and the advancing of our clinical opportunities, which are in the well funded arenas.

Oncology as I noted on the call. So we're going to continue to focus on those areas.

Again less prone to some of these macro dynamics and the Rois are significant for us so that'll be our aerie, our key areas of focus to mitigate any instrument pressures.

Got it and then one final one one for you Brian and one for Johnny.

Brian I know, you've sort of like shifted the focus a little bit in 'twenty three.

Two optimizing existing solutions, driving consumables growth et cetera, but how should we think about the product development roadmap, perhaps not in 'twenty four but over the next couple of years here and Johnny.

Obviously people are pretty happy to see operating cash flow breakeven by year end, but is it fair to assume that 2025 will be the first full year of cash flow breakeven for you guys.

So I'll take the first part first and then John the second.

So you can think of our product development priorities focused on workflow simplifications throughout this year and getting over the clinical.

Finish line and getting additional partnerships, whether or not we speak to those publicly is to be determined. So that is the priority now, but youre correct longer term in terms of platforms. There are really two areas that I think are opportunities for the company number one is <unk>.

Ensuring that we have in IBD great system, because we will have a menu of products. So it's ensuring that that roadmap is solidified on the other extreme in the upstream discovery market, we are going to.

We're already in a place where spatial biology is going to be done at scale.

Large scale studies large scale database studies.

So getting the instruments to a place where they can do that having the reagents at a place where they can support that and algorithms like Mac skus to be able to leverage. These large datasets spatial is going to go the direction that we've seen all other powerful life Sciences tools go which is studies are getting larger and larger in scale.

And there is true sample elasticity in this market you make the systems faster easier and more affordable to us and there will be more samples so longer term CAGR off those are the two avenues of additional platform development opportunities for us.

And Jay just to your question on 2025, certainly we Havent guided obviously, the 25, but we don't expect to move.

Top line or margin those can we expect those to continue to be strong continue to grow and really it's about maintaining them.

A reasonable opex, which we absolutely expect to be able to do which drives a full year sort of a cash flow from ops, a good full year caf of mops and 25 is positive so.

And the building blocks sort of build themselves that we continue to execute and maintain that opex, where we expect it to.

That's our target absolutely.

Got it thanks, guys I appreciate the time thanks guys.

Thank you for a moment for our next question.

Your next question comes from the line of Jon <unk> from UBS. Your line is open.

Good evening and thanks for taking my question I was wondering if you just talk a little bit more on the announcement with thermo and <unk> RNA assays I guess any initial feedback from customers there and what is the demand you're seeing on a multi omics capabilities.

Yes, I think for us in kind of in reverse order John. Thank you for the question and for your time, we look at RNA is something that's complementary to.

Two our high Plex protein technology platform on a phenotype confusion.

So we really are focused on.

Integrating an RNA solution that is at a flex level thats consistent with that theme.

And the view on technology is perfectly suited to do that.

It's a it's really a high resolution.

Amplified sink.

<unk> resolution platform and so.

We're just beginning to integrate enroll that stuff out we just announced it so a lot of the hard work is happening right now I think we'll probably be talking more about some of those details at ACR.

And the demand for from our customers to have a complementary RNA technology.

As strong and I think both the view RNA implementation, but equally important perhaps John and we'll see how it plays out I think algorithmic approaches like Max fuse.

Or do represent a transformative addition on how how people leverage not just their own data, but publicly available data to get informatica derived multi omics solution. So I think both are important.

Thanks, and as a follow up you have customers that started adopting infusion 22 now I guess you are 50% at the 2.0 upgrade.

What does the runway you think here that you have for some of these users to hit full utilization and just talk about longer term, where you think the.

The pull through of ago I realize no Kyle asked a little bit about specifics on pull through so we have right now John about two thirds of all Athena cyclists are sitting with the fusion.

And we'll probably get through most of those those upgrades kind of throughout this year.

And as we as we look at pull through on that system like as Jonny noted kind of in the high <unk>.

As we exited the year, we exited last year somewhere around the high Twenty's yourself.

So I think that I think that trend line continues.

Throughout 2024 and into 2025 doing $40 $50 <unk> I think we can easily get to that realm.

Many of our high end users are operating.

At five X plus that average pull through number. So I think there is an opportunity for us to really raise the curve on all of them, what we're seeing particularly with the two O John.

As a real a real pressing need amongst our Athena cyclic using users to really start to press duplex level, even more so you're at 50, 60, 70 plaques and they are doing that with more samples and thats why the <unk> fusion two point all users are the highest pull through users. So it's about moving all of those customers up.

To that to point out.

Thanks for taking the questions. Thanks John.

Thank you.

Our next question.

Our next question comes from the line of Mark Massaro from <unk>. Your line is open.

Hey, guys. Thanks for taking the questions and congratulations on a strong 2023.

I guess my first one is on the guidance $1 14 to $1 18, I think it calls for 18% to 22%.

And your pre announced in January you talked about 20% plus so obviously you are in line with that I'm just curious if.

If the 18% somehow might be factoring in.

Pressures related to macro or China, or elongated sales cycles, and then maybe can you just give us a sense for the demand environment in the U S.

Obviously, that's been a stronger territory for you.

With respect to other geographic regions or just give us a sense for.

Perhaps anything you have on geographic growth and.

And how we should think about that this year, yeah I'll do those thanks, Mark I appreciate your question and your time.

So if you go through and look at our growth across the regions.

North America as you noted was the strongest and we think it will continue to be the strongest it was in the sort of high 30% Roe.

I think we'll probably it will probably stay there and I don't think these geographic <unk>.

Trends change meaningfully in 2000 and for EMEA was kind of in the low twenties Mark in terms of its year over year growth in 'twenty three.

And then APAC was like high single digits and most of that was because the team was able to pivot.

To other regions.

Japan, Australia et cetera Korea.

South Korea to get to compensate from the contraction in APAC I think those trends continue.

24.

I think youre right in terms of the low end of the range is really intended.

To account for.

Those pressures being even more pronounced.

One thing though.

If and when we do mark secure more partnerships like Acheron.

Those are largely additive to our guide.

There may be a portion of those that's embedded within our expectations for continued growth of our services business.

But additional large scale CTX deals.

Like in other acro bond with a large biopharma that would be additive to that range and and.

And certainly if and when those do occur we will clarify that so hopefully that answers your questions.

Yes, that's helpful. And then my last question could you maybe zero in a little bit about what youre seeing in terms of customer demand for finocchiaro discovery.

And signature panels and then.

Any any wave two.

It's worth tuning up our models how should we think about reagent growth. Obviously this is a year, where you are coming into the year with about 1200 systems.

Just give us a sense for how you think reagent growth might track relative to prior years.

Yes ill, let Johnny speak to how much detail, we want again, because we don't guide on a product basis, but I would I would say mark.

That reagents is going to be in terms of dollars.

Our probably our largest growth driver because because it's moving so quickly as you saw from I think it was a $5 seven in Q3 and a 6 million in Q4. So you can see we're beginning to realize the benefits of many of the workflow solutions that we put on the market and we think those trends maybe not linear literally continue throughout.

The year.

So that's how I would look at that look at that and John I know if you want to add any more color in terms of the specifics on reagents now only to say to highlight sort of what you said, which I think look back to 'twenty. Two obviously it was sort of in that $4 million range moved into the five plus million or <unk> 23 in and really exited 23 in that.

It's $7 million per quarter, and we expect that to continue its sort of natural taking these steps and.

Certainly we'll will be an important focus that will help to drive the margin goals that we have as well.

24.

Okay actually if I can sneak one more in.

Great progress on <unk>.

Getting to that operating.

Cash flow breakeven by year end 'twenty four.

Certainly a year ahead of expectations from recent comments.

There's been a decent amount of M&A.

Some of it's been larger some of its been smaller but as as you're about to turn the corner to cash flow breakeven are there certain assets out there even if they are of the tuck in variety of that.

That might be enticing to you and maybe just speak.

If you will about the M&A environment.

Broadly, yes, I think <unk> got a couple of buckets of M&A, Mark I think you've got you've got some some activity that's really driven around.

Company is trying to find synergies as a way to.

Continue to capitalize the business and then you've got these larger deals like like the OLED deal I think theyre kind of falling into those two buckets I think for US Mark are our number one priority for 24, we.

We have everything that we need in our technology stack.

And it's really just delivering on what we need to in terms of growth with the reagents at the center of that and then and then securing additional.

And then continue to expand our Biopharma business. So there is there is nothing that is of immediate need that that would be.

Better John with an M&A that said, we are always keeping our head on a swivel.

And looking at opportunities that are trying to do that any kind of reasonable resource method.

Okay. Thanks for the time, thanks Mark.

Thank you one moment for our next question.

Okay.

And our next question comes from the line of Rachel and install from J P. Morgan Your line is open.

Perfect. Good afternoon. Thanks for taking the question. So I wanted to follow up on some of the earlier questions. Around please can you just kind of walk us through what are your base case assumptions for placements. This year and 2024 in the past you've talked about a run rate of a few hundred instrument clear shows should we model that for this year as well and then what are the potential sources of upside.

Downside on that this year.

Yes. Thank you Rachel your numbers are right I think a couple of hundred is there and we probably wouldn't get more specific than that.

And then I think the upsides I think we still have upsides certainly on the reagents as as we expand our content as we get the <unk> fully utilized in the field with their increased capacity.

Software solutions like <unk> become more prominent in.

And our panels continue to rollout so I <unk>.

There is certainly upside there I also feel like.

We have opportunities to continue to advance.

Our clinical partnership portfolio.

Hopefully to secure additional significant.

<unk> partnerships in that realm and.

Much of that would be additive to our top line whether its this year or next year. We we try not to we have not baked into our in our base financial fundamentals.

Fundamentals and assumption around additional significant CTX deals, but when they do come as I noted earlier that would be a source of upside.

Great and then I just wanted to push on the macro backdrop, a little bit more are you talking about as far as <unk> continued to have some of those macro pressures impacting capital equipment purchases.

Can you talk about how that trend has continued into January and February.

As customers have kind of had some of the budgets. We sat on Jan one and then you highlighted the China was an area of weakness from some of this capital purchase spending but were there any other geographies that were notably impacted by the macro backdrop as well.

Obviously, you can have exchange rate issues that effectively drives up your ASP, but that's not to the point I think we're.

Beyond the macros, it's really impacting our.

Our top line and I think as I noted earlier, it's really Rachel just about.

Some budget tightening, but also a an increase in diligence and.

An approval circles around many capital purchase purchases just like we do internally with our own capital purchases. So those are the those are the large scale dynamics at play.

Great and then just on January February trends can you walk us through some of those conversations trended in January and February so far.

I'm hesitant to give any specific guidance on Q1 other other than to say, we have as an expectation.

In our full year guide that the market trends that we saw in second half into Q4 will continue into Q1 and the rest of the year.

Okay. Thank you Richard.

Thank you I'm not showing any further questions in the queue I'd like to turn the call back over to Brian Mcelligott for any closing remarks.

Well, thank you Victor for hosting us thank you.

Thank you to everybody for your time I think for acquire we have and will continue to demonstrate in and realize the benefits of our strategy.

Clearly Rachel just about.

Some budget tightening, but also a and increased in diligence and approval circles around many capital purchase purchases just like we do internally with our own capital purchases. So those are the those are the large scale dynamics at play.

With ultimately that being as we noted hitting operating cash flow breakeven by the end of the year with with our reagent growth and the margin expansion along with that being core contributors, but again as I noted, we're also seeing real significant movement and opportunities for us to take that next leap as a company and continue to advance our portfolio.

Great and then just on January February trends could you walk us through some of those conversations trended in January and February so far.

Yes.

From a research based product to additionally, a clinical based product and we'll we'll continue to.

I'm hesitant to give any specific guidance on Q1 other other than to say we have.

Sure those successes with all of you as part of future costs. So.

As an expectation.

In our full year guide.

Thank you for your time and I look forward to following up with each of you soon.

The market trends that we saw in second half and in Q4 will continue into Q1.

Thank you for participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.

And the rest of the year.

Okay. Thank you Richard.

Thank you I'm not showing any further questions in the queue I'd like to turn the call back over to Brian Mcelligott for any closing remarks.

Well, thank you Victor for hosting us thank you.

Thank you to everybody for your time I think for acquire we have and will continue to demonstrate in and realize the benefits of our strategy.

From a research based product to additionally, a clinical based product and we will we will continue to.

Sure those successes with all of you as part of future costs. So.

I. Thank you for your time and I look forward to following up with each of you soon.

Thank you for participation in today's conference. This does conclude the program you may now disconnect everyone have a great day alright. Thank you.

[music].

Good day, and thank you for standing by and welcome to the Korea Biosciences fourth quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

<unk> message advising you Dennis race to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like turn the conference over to your first speaker today.

Shah head of Investor Relations. Please go ahead.

Thank you operator, and thank you to everyone who is joining us today on this call I'm <unk> Shah head of Investor Relations at acquire Biosciences.

On the call today, we have Brian Mcelligott, and Chief Executive Officer, and John <unk>, Chief Financial Officer.

Earlier today <unk> released financial results for the fourth quarter ended December 31, 2023, a copy of the press release is available on the company's website.

Before we begin I would like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act 1995.

For a list and description of the risks and uncertainties associated with the <unk> business. Please refer to the risks identified in our filings with the U S Securities and Exchange Commission, including in the risk factors section annual report on Form 10-K for the year ended December 31, 2023 to be filed today March.

For 2024.

We urge you to consider these factors and you should be aware that these statements are considered estimates only and are not a guarantee of future performance.

This conference call contains time sensitive information and is accurate only as of the live broadcast today March four 2024.

<unk> disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

Audio portion of this call will be archived on the investors section of our website later today or the heading events.

With that I'll now turn the call over to Brian.

Thank you Brian.

Good afternoon or evening to everyone. We appreciate you joining us today.

During today's conference call I will begin by giving a broad overview of our performance in the fourth quarter and full year 2023.

I will review our business advancements and provide insights into the latest developments on our product offerings.

Having that Johnny will go deeper into our financials key trends and provide an outlook for the future of the business.

As pre announced at the Jpmorgan Healthcare conference in January our Korea had a strong fourth quarter in 2023 with.

With record breaking revenue of $26 5 million and full year 2023 revenue of $96 $6 million.

Representing a 29% annual growth from prior year.

We exited the year with gross margin of 62, 7% in the fourth quarter.

In parallel to our strong top line growth and margin expansion throughout the year.

Within our 2024 forecast, we expect both strong top line growth and margin expansion, while we continue to manage our costs.

And we are projecting operating cash flow breakeven by the end of this year.

Johnny will touch upon this in greater detail later in the call.

Throughout 2023, we invested in key strategic areas, including reagent menu expansion throughput and workflow simplification and improved software capabilities collectively contributing to meaningful region revenue expansion and increases in the pull through across our platforms.

In the fourth quarter. We saw continued signs of the return on these investments as reason revenue grew 52% from the prior year period.

We are pleased to report that we now have over 1160 peer reviewed peer reviewed publications, citing a coyote technologies as of year end 2023.