Q1 2024 Akoya Biosciences Inc Earnings Call

Okay.

Speaker Change: Good day and thank you for standing by welcome to the acquire Biosciences first quarter 2024 earnings Conference call. At this time, all participants are in a listen only.

Operator: Good day, and thank you for standing by. Welcome to the Akoya Biosciences first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Operator: 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 11 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: Speaker's presentation, there will be a question and answer session.

Priyam Shah: Ask a question during the session you will need to press star one on your telephone you will then hear an automated message advising that your hand is raised to withdraw. Your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to turn the conference over to your Speaker premium Shah head of Investor Relations. Please go ahead.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker, Priyam Shah, head of investor relations. Please go ahead.

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

Priyam Shah: Thank you, operator. Thank you to everyone who's joining us today on this call. I'm Priyam Shah, head of investor relations at Akoya Bioscience. On the call today are Brian McKelligan, Chief Executive Officer, and John Ek, Chief Financial Officer. Earlier today, Akoya released financial results for the first quarter ended March 31, 2020. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that are 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.

Priyam Shah: Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in these forward-looking statements due to a variety of factors. For a list and description of the risks and uncertainties associated with Akoya's business, please refer to the risks identified in our filings with the U.S. Securities and Exchange Commission, including in the risk factor section of our annual report on Form 10-K for the year ended December 31st, 2023, filed on March 5th, 2024, and Form 10-Q, filed today, May 13th, 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.

Priyam Shah: On the call today, we have Brian Mcelligott, Chief Executive Officer, and Johnny Yack, Chief Financial Officer.

Priyam Shah: Earlier today acquire released financial results for the first quarter ended March 31 2024.

Priyam Shah: A copy of the press release is available on the company's web site.

Priyam Shah: We'll be referring to non-GAAP measures on this call, including non-GAAP-adjusted gross profit, non-GAAP-adjusted gross margin, non-GAAP operating expense, and non-GAAP loss from operation. Akoya defines non-GAAP-adjusted gross profit as gross profit margin adjusted for certain excesses and obsolete inventory charges. Akoya defines non-gap-adjusted gross margin as non-gap-adjusted gross profit divided by total revenue.

Priyam Shah: 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 of 1095.

Priyam Shah: Akoya defines non-GAAP operating expense as operating expense adjusted for impairment and restructuring charges. Lastly, Akoya defines non-GAAP loss from operations as loss from operations adjusted for certain excess and obsolete inventory charges, impairment, and restructuring charges. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles.

Priyam Shah: Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.

Priyam Shah: Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors for a list and description of the risks and uncertainties associated with the quest 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 our App.

Priyam Shah: <unk> report on Form 10-K for the year ended December 31, 2023 filed on March five 2024, and 10-Q filed today May 13, 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 performed.

Priyam Shah: <unk>.

Priyam Shah: We'll be referring to non-GAAP measures on this call, including non-GAAP adjusted gross profit non-GAAP adjusted gross margin non-GAAP operating expense and non-GAAP loss from operations.

Priyam Shah: <unk> defines non-GAAP adjusted gross profit as gross profit margin adjusted for certain excessive and obsolete inventory charges acquire defines non-GAAP adjusted gross margin non-GAAP adjusted gross profit divided by total revenue.

Priyam Shah: <unk> non-GAAP operating expense is operating expense adjusted for impairment and restructuring charges Lastly acquired non-GAAP loss from operations is loss from operations adjusted for certain excess and obsolete inventory charges impairment and restructuring charges.

Priyam Shah: non-GAAP measures are not prepared in accordance with generally accepted accounting principles reconcile.

Priyam Shah: A reconciliation to the most directly comparable GAAP financial measures are provided in the table in the press release.

Priyam Shah: Reconciliation to the most directly comparable gap financial measures is provided in the table in the press room. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 13, 2024. Akoya 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 portion of this call will be archived on the investor section of our website later today under the heading event. And with that, I will now turn the call over to Brian. Thank you, Priyam, and good afternoon or evening to everyone.

Priyam Shah: This conference call contains time sensitive information and is accurate only as of the live broadcast today May 13 2024.

Priyam Shah: <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 the audio portion of this call will be archived on the investors section of our website later today under the heading events and with that I will now.

Priyam Shah: I'll turn the call over to Brian.

Priyam Shah: Thank you, Brian and good afternoon or evening to everyone. We appreciate you joining us today.

Brian McKelligon: We appreciate you joining us today. During today's conference call, I will begin by giving a broad overview of our performance in the first quarter, review our business advancements, and highlight a few of our recent partners. Following that, Johnny will go deeper into our financials, key trends, and provide an outlook for the future of the business, while we make meaningful progress advancing both our operational and clinical objectives. However, our first quarter results fell short of expectations.

Brian McKelligon: During today's conference call I will begin by giving a broad overview of our performance in the first quarter review, our business advancements and highlight a few of our recent partnerships following that Johnny will go deeper into our financials key trends and provide an outlook for the future of the business.

While we made meaningful progress in advancing both our operational and clinical objectives, our first quarter results fell short of expectations.

Brian McKelligon: We achieved $18.4 million in total revenue, driven primarily by strong sales of reagents and growing lab services. Reagent revenue totaled $7 million, a 23% increase from the prior year, bolstered by our industry-leading installed base of 1,213 instruments as of the first quarter of 2024. The annualized pull-through is now $53,000 on the PhenoCycler Fusion and $40,000 on the PhenoImager HQ. With approximately two-thirds of our phenocyclers now paired with the fusion, and with strong incentives in place for the remaining units to upgrade, we are strategically aligning our application breadth and workflow development efforts to capitalize on the phenocycler fusion system pull.

Brian McKelligon: We achieved $18 4 million in total revenue driven primarily by strong sales of reagents and a growing lab services business.

Brian McKelligon: Reagent revenue totaled $7 million, a 23% increase from the prior year.

Brian McKelligon: Bolstered by our industry, leading installed base of 1213 instruments as of the first quarter 2024.

Brian McKelligon: The annualized pull through is now $53000 on the FEMA cycle infusion and 40000 on the imager Ht.

Brian McKelligon: With approximately two thirds of our feed recyclers now paired with a fusion.

Brian McKelligon: And with strong incentives in place for the remaining units to upgrade we are strategically aligning our application breadth and workflow development efforts to capitalize on our FEMA cycle infusion system pull through.

Brian McKelligon: The continued increase in pull through can largely be attributed to our enhanced system capabilities realized with our Phoenix like refusing an HG two <unk> releases and our customers' desire for high Plex panels.

Brian McKelligon: The continued increase in pull-through can largely be attributed to our enhanced system capabilities realized with our PhenoCycler Fusion and HT 2.0 releases and our customers' desire for high-plex panels. Additionally, services revenue reached $6.2 million, a 5% growth from the prior year. Additionally, we placed 30 instruments in the first quarter, contributing $4.9 million in instrument revenue.

Brian McKelligon: Additionally services revenue reached $6 2, million% to 5% growth from the prior year, we placed 30 instruments in the first quarter contributing $4 $9 million in instrument revenue.

Brian McKelligon: Despite the strength and reach of Conservative services. The revenue shortfall was primarily driven by weakness in instrument placements in the quarter.

Brian McKelligon: Despite the strength in reagents and services, the revenue shortfall was primarily driven by weakness in instrument placements in the quarter. Three main factors contributed to our revenue underperformance. First,

Brian McKelligon: Three main factors contributed to our revenue underperformance.

Brian McKelligon: First.

Brian McKelligon: Systemic pressure on capital expenditures persisted throughout the quarter. The key drivers include elongation of sales cycles, increased scrutiny on and reassessments of incremental capital purchases, delays in labs expanding their capacity, NIH budget uncertainty, and inflationary pressure. We expect this downward pressure to ease as we progress through 2024. Second, as previously announced, we recently completed the launch of our new Manufacturing Center of Excellence in Marlborough, Massachusetts. The primary focus of this facility is the manufacturing of our molecular barcoded antibody catalog and accompanying reagents.

Brian McKelligon: Systemic pressure on capital expenditures persisted throughout the quarter.

Brian McKelligon: Key drivers include elongation of sales cycles.

Brian McKelligon: Increased scrutiny on and reassessment of incremental capital purchases.

Brian McKelligon: Ladies and lab is expanding their capacity NIH budget uncertainty and inflationary pressures.

Brian McKelligon: We expect this downward pressure to ease as we progress through 2024.

Brian McKelligon: Second as previously announced we recently completed the launch of our New manufacturing Center of excellence in Marlborough, Massachusetts. The primary focus of this facility is the manufacturing of our molecular barcoding antibody catalogue and accompanying regions.

Brian McKelligon: This facility is now fully operational and poised to meet the growing demands for our reagents, supporting our goal to drive increased margins and expand the available applications on our platform. Our transition away from third-party outsourced suppliers to internally manufactured material temporarily impacted reagent fulfillment times and delayed instrument purchase.

Brian McKelligon: This facility is now fully operational and poised to meet the growing demands for our reagents supporting our goal to drive increased margins and expand the available applications on our platforms.

Brian McKelligon: Our transition away from third party outsourced suppliers to internally manufactured material temporarily impacted region fulfillment times and delayed instrument purchases.

Brian McKelligon: This was most acutely felt in reference-driven opportunities, core labs, and CROs. With these ramp-up activities now complete, we believe we have resolved our product availability issue. We took this strategic step, aiming to ensure reagent quality and availability for the foreseeable future, and are excited to provide an enhanced customer experience while also realizing cost reduction benefits throughout the year, positively impacting our gross market. Third, certain pharmaceutical partner lab services revenue recognition was deferred to the second half of 2024 due to a shift in clinical trial milestone time. We are well on track to complete these milestones this year, but the revenue recognition is now deferred to the second half of 2020.

Brian McKelligon: This was most acutely felt in reference driven opportunities core labs and Crs.

Brian McKelligon: With these ramp up activity is now complete we believe we have resolved our product availability challenges.

We took the strategic sense aiming to ensure reason quality and availability for the foreseeable future and are excited to provide an enhanced customer experience. While also realizing cost reduction benefits throughout the year positively impacting our gross margin.

Third certain pharmaceutical partner lab services revenue recognition was deferred to the second half of 2024 due to a shift in clinical trial milestone timelines, we are well on track to complete these milestones this year, but the revenue recognition is now deferred to the second half of 2024.

Brian McKelligon: With this shift in clinical trial service revenue to the second half, resolution of our Temporary Reagent Availability Issues through our new Manufacturing Center of Excellence, and growing optimism for improvement in the macro environment in the latter part of the year, we are confident that our foundational initiatives will lead us back to solid top-line growth and achievement of our profitability objectives. Our first quarter results also highlight several important initiatives that we have implemented aimed at enhancing our core financial fundamentals. Let me briefly walk you through these.

Brian McKelligon: With this shift in clinical trial service revenue to the second half.

Brian McKelligon: Resolution of our temporary reagent availability issues through our new manufacturing center of excellence and grow.

Brian McKelligon: Growing optimism for improvement in the macro environment in the latter part of the year. We are confident that our foundational initiatives will lead us back to solid top line growth and achievement of our profitability objectives.

Brian McKelligon: Our first quarter results also highlight several important initiatives, we have implemented aimed at enhancing our core financial fundamentals let.

Speaker Change: Let me briefly walk through these.

Brian McKelligon: Turning to our margins and expense reductions, in the quarter, we completed a $2 million inventory write-off from discontinued legacy institutions. These instruments were earlier versions of the Phenoimager HT that were part of the historical instrument portfolio we acquired with the Phenoptics Division from Perkin Elmore, now Revity, in 2018. For the first quarter of 2024, reported gross margin was 46%. However, when excluding this write-off, our non-GAAP-adjusted gross margin was 57%.

Speaker Change: Turning to our margins and expense reductions in the quarter, we completed a $2 million inventory write off from discontinued legacy instruments. These instruments were earlier versions of the piano imager Ht that were part of historical instrument portfolio, we acquired with an optics division from <unk> home are now revenue in 2018.

Speaker Change: For the first quarter of 2024 reported gross margin was 46%.

Speaker Change: When excluding this write off our non-GAAP aggressive adjusted gross margin was 57%.

Brian McKelligon: This compares to our GAAP and non-GAAP adjusted gross margin of 57% in the prior year period. Taking this step now will help simplify our inventory management and clean up our balance sheet going forward, to drive further cost controls and efficiency. We completed a facility consolidation into our new manufacturing center of excellence in Marlborough, in addition to a 15% reduction in force in the first quarter.

Speaker Change: This compares.

Speaker Change: Two our GAAP and non-GAAP adjusted gross margin of 57% in the prior year period.

Speaker Change: Taking this step now will help simplify our inventory management and clean up our balance sheet going forward.

Speaker Change: To drive further cost controls and efficiency, we completed a facility consolidation into our new manufacturing center of excellence in Marlboro. In addition to a 15% reduction in force in the first quarter.

Brian McKelligon: This resulted in an impairment charge and a restructuring expense totaling $4.4 million. reported operating expenses were $30 million in the first quarter of 2024, while non-GAAP operating expenses were $25.6 million, with these impairment and restricting charges excluded. In the first quarter of 2023, our GAAP and non-GAAP operating expenses were $29.7 million. Excluding the $4.4 million impairment and restructuring charges, we had a 14% decrease in our operating expenses on a non-gap basis compared to the prior year period.

Speaker Change: This resulted in an impairment charge and restructuring expense totaling $4 4 million rip.

Speaker Change: We reported operating expenses were $30 million in the first quarter of 2024, while non-GAAP operating expenses were $25 $6 million with these impairment and restructuring charges excluded.

Speaker Change: In the first quarter of 2023, our GAAP and non-GAAP operating expenses were $29 7 million.

Speaker Change: Excluding the $4 4 million impairment and restructuring charges, we had a 14% decrease in our operating expenses on a non-GAAP basis compared to the prior year period.

Speaker Change: In summary by effectively addressing the primary drivers behind our revenue shortfall and simultaneously implementing targeted strategies to enhance operational efficiency and improve profitability.

Brian McKelligon: In summary, by effectively addressing the primary drivers behind our revenue shortfall and simultaneously implementing targeted strategies to enhance operational efficiency and improve profitability, we believe we have the ability to return to solid top-blend growth and are committed to meeting our goal of achieving operating cash flow break-even by the end of the year. I would now like to pivot to provide an update on our advancing companion diagnostic partnership with Ackerman Therapeutics and review two exciting recently announced new partnerships with Shanghai KR PharmTech and NeraCare.

Speaker Change: We believe we have the ability to return to solid top line growth and are committed to meeting our goal of achieving operating cash flow breakeven by the end of the year.

Speaker Change: I would now like to pivot to provide an update on our advancing companion diagnostic partnership with <unk> Therapeutics and review two exciting recently announced new partnerships with Shanghai K R Pharm Tech and narrow care.

Speaker Change: First an update on <unk>.

Brian McKelligon: First, an update on Akura. On April 24th, at their virtual corporate R&D event, Akravan presented initial positive phase 2B clinical data for their therapeutic agent ACR368 and patients positive for the ACR368 oncosignature assay in ovarian and endometrial cancer. This assay is run on Akoya's Phenol Imager HT platform out of our CLIA lab in Marlborough, Massachusetts. More specifically, initial prospective validation of ACROBON's ACR368 onclo-signature assay demonstrated its ability to identify ovarian and endometrial patients sensitive to ACR368 monotherapy in the ongoing clinical trial with 50% confirmed objective response rate in onclo-signature positive patients versus 0% in the onclo-signature negative patients at a P value of 0.0038.

Brian McKelligon: This statistically significant prospective validation of the patient selection approach via the ACR368 aqua signature assay demonstrates the ability to effectively identify cancer patients whose tumors are likely to respond to ACR368 monotherapy treatment. Building on the significant progress, including fast-track designation for ACR368 therapy for ovarian and endometrial indications, along with breakthrough device designation for the ACR368 oncosignature assay in ovarian cancer. We and our dedicated companion diagnostic team are excited to continue advancing this exclusive partnership with Akron to bring a precision diagnostic to the market with the potential to address significant unmet treatment needs for a broad range of tumors in over 200,000 patients with limited treatment options diagnosed in the US and Europe.

Speaker Change: On April 24th at the virtual corporate R&D event accurate presented initial positive phase two b clinical data.

Speaker Change: For their therapeutic agent ACR 306, eight and patients positive for the ACR 306, eight aqua signature assay in ovarian and endometrial cancer.

Speaker Change: This assay is run on a <unk> imager Ht platform out of our CLIA lab in Marlborough, Massachusetts.

Speaker Change: More specifically initial prospective validation of <unk> ACR 368, encore signature assay demonstrated its ability to identify ovarian and endometrial patients sensitive to ACR <unk> monotherapy and the ongoing clinical trial with 50% confirmed objective response rate in <unk>.

Speaker Change: Signature positive patients versus zero percent in the Aqua signature negative patients at a P value of 0.0038%.

Speaker Change: This statistically significant prospective validation of the patient selection approach via the ACR 306, eight Aqua signature assay demonstrates the ability to effectively identify cancer patients, whose tumors are likely to respond to <unk> hundred six eight monotherapy treatment.

Speaker Change: Building on the significant progress, including fast track designation for the ACR 306 week therapy for ovarian and endometrial indications along with breakthrough device designation for the ACR through 360, <unk> uncle signature assay in ovarian cancer.

Speaker Change: And our dedicated companion diagnostic team are excited to continue advancing this exclusive partnership with <unk> to bring a precision diagnostics to the market with the potential to address significant unmet treatment needs against a broad range of tumors and over 200000 patients with limited treatment option diagnosed in the U S and Europe.

Brian McKelligon: Akoya also recently announced a partnership with Shanghai KR PharmTech and the pre-market approval from China's National Medical Products Administration, also known as NMPA, for the KRHT5 Institute. Akoya co-developed KRHT5 with Kara PharmTech, utilizing the InnoImager HT as its foundation.

Speaker Change: <unk> also recently announced a partnership with Shanghai K R. Pharm Tech and a pre market approval from China's National Medical products Administration also known as MPA for.

Brian McKelligon: This platform will serve as the core technology to deliver next-generation pathology solutions and multiplex biomarker workflows within hospital settings across China. The NMPA approval has a class 2 designation, and KR PharmTech, along with Akoya, will be working with a network of key opinion leaders in China to establish clinical validation and secure class 3 approval for specific assets. KF PharmTech is an experienced clinical partner that we believe has the scientific, strategic, and regulatory capabilities to usher Akoya's technology into an entirely new and significant clinical market.

Speaker Change: The <unk> instrument.

Speaker Change: A quick co developed care HD five with tariff armtec utilizing the imager Ht as its foundation and this platform will serve as the core technology to deliver next generation pathology solutions and multiplex biomarker workflows within a hospital settings across China.

The NFPA approval as a class II designation.

Speaker Change: <unk> along with the quota will be working with a network of key opinion leaders in China to establish clinical validation and secure class III approval for specific assays.

Speaker Change: <unk> is an experienced clinical partner that we believe has the scientific strategic and regulatory capabilities to usher requires technology into entirely new and significant clinical markets.

Speaker Change: Finally last Thursday, we announced our partnership with <unk>, a developer of laboratory tests for individualized survival protection of melanoma patients with offices in Germany, and the United States.

Brian McKelligon: Last Thursday, we announced our partnership with NaraCare, a developer of laboratory tests for individualized survival protection of melanoma patients. With offices in Germany and the United States, we have entered into an exclusive agreement to enable personalized therapy selection for early stage melanoma patients. The aim is to leverage the PhenoImager HT, our CLIA lab, and NiroCare's immunoprint test and its best-in-class clinical data to focus on increasing access to life-saving therapies for early-stage melanoma patients.

Speaker Change: We have entered into an exclusive agreement to enable personalized therapy selection for early stage melanoma patients.

Speaker Change: Aim is to leverage the Pheno imager Ht, our CLIA lab and nearer cares immuno print test and is best in class clinical data to focus on increasing access to life saving therapies for early stage melanoma patients.

Brian McKelligon: Melanoma is the leading cause of skin cancer-related deaths, with over 235,000 new diagnoses globally every year. Recent approvals of immune and targeted therapies have greatly expanded the available treatment options for adjuvant therapy, but primarily for late-stage disease.

Speaker Change: Melanoma is the leading cause of skin cancer related deaths with over 235000, new diagnoses globally every year.

Speaker Change: Recent approvals of immune and targeted therapies have greatly expanded the available treatment options for adjuvant therapy, but primarily for late stage disease.

Brian McKelligon: The challenge is that a significant number of early stage melanoma patients remain at high risk of relapse and mortality without access to such. As the majority of melanoma patients are diagnosed with early stage disease, there is a critical unmet need to identify those at-risk patients to potentially enable earlier access to life-saving therapeutic aid. NeroCare's immunoprint assay has demonstrated robust clinical performance in identifying early-stage melanoma patients at high risk of relapse in multiple independent, prospective, and retrospective clinical studies.

Speaker Change: The challenge is that a significant number of early stage melanoma patients remain at high risk of relapse and mortality.

Speaker Change: Without access to such therapies.

Speaker Change: As the majority of melanoma patients are diagnosed with early stage disease. There is a critical unmet need to identify those at at risk patients to potentially enable earlier access to life saving therapeutic agents.

<unk> immuno print assay has demonstrated robust clinical performance in identifying early stage melanoma patients at risk at high risk of relapse through multiple independent prospective and retrospective clinical studies.

Brian McKelligon: The data demonstrates that the immunoprint high-risk patient group is ideally suited to potentially benefit from therapeutic options that would usually only be administered in later stages. Akoya and Narekar will focus on developing partnerships with leading biopharmaceutical companies to enable patient stratification and therapy selection in early-stage melanoma patients, preferentially for those treatments already approved in late-stage melanoma. In closing, historically, Akoya has demonstrated consistent above-plan performance since our IPO in April 2021, and we are confident that we have addressed the underlying issues driving this quarter's performance. The market opportunity for spatial biology to emerge as the primary methodology for tissue analysis from discovery to clinical is unequivocal.

Speaker Change: The data demonstrates that the immuno print high risk patient group is ideally suited to potentially benefit from therapeutic options that would usually only be administered in later stages.

Speaker Change: Accordingly, <unk> will focus on developing partnerships with leading biopharmaceutical companies to enable patient stratification and therapy selection and early stage melanoma patients preferentially for those treatments already approved in late stage melanoma.

Speaker Change: In closing.

Speaker Change: <unk> historically acquired.

Speaker Change: <unk> has demonstrated.

Speaker Change: Insistent above planned performance since our IPO in April 2021, and we are confident that we have addressed the underlying issues driving this quarter's performance the.

Speaker Change: The market opportunity for spatial biology to emerge as the primary methodologies for tissue analysis from discovery to clinical is unequivocal and the momentum in market and the market awareness continues to grow exponentially.

Brian McKelligon: And the momentum in the market for spatial biology continues to grow exponentially. As evidenced by our industry-leading installed base, we believe Akoya has the systems, new operational efficiencies and capabilities, and scalability to meet the growing demand for spatial biology from discovery to the clinic. We also believe that Akoya will drive considerable shareholder value with our newly enhanced and efficient manufacturing capabilities, best-in-class product portfolio, strong commercial team, and accelerating realization of the significant clinical opportunities in a substantial total addressable market. We thank you for your time and support. And with that, I will now turn the call over to Johnny to discuss our financial results.

Speaker Change: As evidenced by our industry, leading installed base, we believe our core systems, new operational efficiencies and capabilities and scalability to meet the growing demand for spatial biology from discovery to the clinic.

Speaker Change: We also believe that our Coyote will drive considerable shareholder value with our newly enhanced and efficient manufacturing capabilities.

Best in class product portfolio strong commercial team and accelerating realization of the significant clinical opportunities and a substantial total addressable market.

Speaker Change: We thank you for your time and support.

Speaker Change: And with that I will now turn the call over to Johnny to discuss our financial results Johnny.

Johnny: Thanks, Brian. As Brian highlighted, total revenue for the first quarter of 2024 was $18.4 million, a 14% decline compared to the prior year period. Product revenue, including instruments, reagents, and software, totaled $12.1 million for the first quarter. Total instrument revenue was $4.9 million, and our industry-leading installed base now totals 1,213 instruments, including 354 phenocyclers and 859 phenoimagers. We delivered $7 million in reagent revenue in the first quarter, reflecting a 23% increase from the prior year period.

John Frederick Ek: Thanks, Brian as.

John Frederick Ek: As Brian highlighted total revenue for the first quarter of 2024 was $18 4 million.

John Frederick Ek: A 14% decline compared to the prior year period.

John Frederick Ek: Product revenue, including instruments reagents and software totaled $12 1 million for the first quarter.

John Frederick Ek: Total instrument revenue was $4 9 million and our industry, leading installed base now totals 1213 instruments, including 354, <unk> and 859 phenol Imagers.

John Frederick Ek: We delivered $7 million and reagent revenue in the first quarter, reflecting a 23% increase from the prior year period the.

Johnny: The annualized reagent pull-through continues to climb across our instrument portfolio, of which the Phenocycler Fusion and the Phenol Imager HT are the primary contributors. The phenocycler-fusion, the combination of phenocycler and effusion, now totals 215 in the field and, as of the first quarter, has an average annualized pull-through of $53,000 per combined instrument pair. The Fino Imager HT, of which there are now 359 in the field as of the first quarter, has an average annualized pull-through of $40,000 per image.

John Frederick Ek: The annualized reagent pull through continues to climb across our instrument portfolio of which the phenotype of the fusion and the phenol H <unk> imager Ht are the primary contributors.

John Frederick Ek: The pheno cycle fusion, the combination of Peanuts, Sigler and infusion now totals 215 in the field and as of the first quarter had an average annualized pull through of $53000 per combined instrument payer.

John Frederick Ek: The female image, our Ht of which there are now 359 in the field as of the first quarter had an average annualized pull through of $40000 per instrument.

John Frederick Ek: Going forward, we expect the majority of Pheno cycles to be paired with our fusion in the field and we have discontinued the mantra in Vectra line under the phenol imager portfolio.

Johnny: Going forward, we expect the majority of phenocyclers to be paired with a fusion in the field, and we have discontinued the mantra and vector lines under the phenoimager portfolio. Based on these dynamics, we will focus only on reporting pull-through metrics for the phenocycler fusion and the phenoimager HT moving forward. We will continue to maintain service support for those legacy systems in the field, but we'll focus instrument sales efforts only on the phenocycler, fusion, and HVAC.

John Frederick Ek: Based on these dynamics, we will focus only on reporting pull through metrics for the Pheno cycle fusion in the phenol image or H T moving forward.

John Frederick Ek: We will continue to maintain service support for those legacy those existing legacy systems in the field, but we'll focus instrument sales efforts only on the Pheno seidler fusion and Ht.

John Frederick Ek: Services and other revenue totaled $6 2 million for the first quarter, an increase of 5% over the prior year period.

Johnny: Services and other revenue totaled $6.2 million for the first quarter, an increase of 5% over the prior year period. Services have been a growth segment for us as our instrument warranty and field service revenue have rapidly expanded, coupled to our large installed base, in addition to our lab services business driving higher-value studies through new and existing biopharma partners. As Brian noted, a portion of contracted pharma partner service revenue shifted from the first quarter and is expected to be recognized in the second half of the year.

John Frederick Ek: Services have been a growth segment for us as our instrument warranty and field service revenue has rapidly expanded coupled to our large installed base. In addition to our lab services business driving higher value studies through new and existing Biopharma partnerships.

John Frederick Ek: As Brian noted a portion of contracted pharma partner service revenue shifted from the first quarter and is expected to be recognized in the second half of the year.

John Frederick Ek: Gross margin was 46% in the first quarter of 2024, while non-GAAP adjusted gross margin was 57% compared to 57% GAAP and non-GAAP gross margin in the prior year period.

Johnny: Gross margin was 46% in the first quarter of 2024, while non-GAAP-adjusted gross margin was 57%, compared to 57% gap and non-gap gross margin in the prior year period. The discontinuation of the Mantra and Vector line drove a non-cash inventory write-down of $2 million, which impacted our cost of goods in the first quarter. As we drive increases in our reagent revenue mix, execute on our identified operations optimization efforts for reagents, and leverage the capacity of our recent manufacturing investments, we expect to further propel the expansion of our gross margin through 2024 and beyond in the range of a couple of hundred basis points annually.

John Frederick Ek: The discontinuation of the mantra in Vectra line drove a noncash inventory write down of $2 million, which impacted our cost of goods in the first quarter.

John Frederick Ek: As we drive increases in our reagent revenue mix execute on our identified operations optimization efforts for reagents.

John Frederick Ek: And leverage the capacity of our recent manufacturing investments, we expect to further propel the expansion of our gross margin through 2024 and beyond in the range of a couple of hundred basis points annually.

John Frederick Ek: Operating expenses were $30 million in the first quarter of 2024, while non-GAAP operating expenses were $25 $6 million.

Johnny: Operating expenses were $30 million in the first quarter of 2024, while non-GAAP operating expenses were $25.6 million, compared to $29.7 million GAAP and non-GAAP operating expenses in the prior year period, a decrease of 14% on a non-GAAP basis.

John Frederick Ek: Compared to $29 $7 million GAAP and non-GAAP operating expenses in the prior year period, a decrease of 14% on a non-GAAP basis.

Johnny: As Brian noted, we took actions in the first quarter to reduce operating expenses in pursuit of our goal of achieving operating cash flow breakeven as we exit 2024. This included the consolidation of our manufacturing, quality, and R&D operations into our Manufacturing Center of Excellence in Marlborough. As a result, we recorded an impairment charge of $3 million related to the facility exiting activity.

John Frederick Ek: As Brian noted, we took actions in the first quarter to reduce operating expenses in pursuit of our goal of achieving operating cash flow breakeven as we exit 2024.

John Frederick Ek: This included the consolidation of our manufacturing quality and R&D operations into our manufacturing center of excellence in Marlborough.

John Frederick Ek: As a result, we recorded an impairment charge of $3 million related to the facility exiting activities.

John Frederick Ek: In addition, we recorded a $1 $4 million restructuring charge, resulting from a 15% head count reduction completed in January of this year.

Johnny: In addition, we recorded a $1.4 million restructuring charge resulting from a 15% headcount reduction completed in January. This charge is also excluded from our non-GAAP operating expenses. Through these and similar ongoing strategic efforts, we expect to further streamline our operating costs for the balance of this year and focus our balance sheet investments on delivering improvements in gross margins, supporting our goal to achieve operating cash flow break-even as we exit 2025. We ended the quarter with approximately $61.6 million of cash, cash equivalents, and marketable security.

John Frederick Ek: This charge is also excluded in our non-GAAP operating expenses.

John Frederick Ek: Through these and similar ongoing strategic efforts, we expect to further streamline our operating costs for the balance of this year and focus our balance sheet investments on delivering improvements in gross margins supporting our goal to achieve operating cash flow breakeven as we exit 2024.

John Frederick Ek: We ended the quarter with approximately $61 6 million of cash cash equivalents and marketable securities.

Johnny: Common Shares outstanding and Fully Diluted Shares, including the impact of outstanding options and Uninvested Restricted Stock Awards, are $49.3 million as of March 31, 2024. In summary, Akoya has implemented important business and operational changes to enhance efficiency, drive gross margin improvement, and achieve cost advantages. We have also proactively addressed the drivers of our revenue shortfall in the first quarter. As such, we anticipate a measured recovery to sustained growth throughout 2024 and beyond, and we continue to focus on our very important goal of operating cash flow breakeven as we exit 2024.

John Frederick Ek: Common shares outstanding and fully diluted shares, including the impact of outstanding options and Unvested restricted stock awards are $49 3 million as of March 31 2024.

John Frederick Ek: In summary, our Korea has implemented important business and operational changes to enhance efficiency drive gross margin improvement and achieve cost advantages. We have also proactively address the drivers of our revenue shortfall in the first quarter.

John Frederick Ek: As such we anticipate a measured recovery to sustained growth throughout 2024 and beyond and we continue to focus on our very important goal of operating cash flow breakeven as we exit 2024.

Johnny: At this time, Akoya is updating its revenue outlook for the full year 2024 while maintaining its commitment to achieving operating cash flow break-even by year-end. The company now expects full year 2024 revenue to be in the range of $104 to $112 million. Back to you, Brian. Thank you, Johnny.

John Frederick Ek: At this time acquire is updating its revenue outlook for the full year 2024, while maintaining its commitment to achieving operating cash flow breakeven by year end.

John Frederick Ek: Company now expects full year 2020 for revenue to be in the range of $104 million to $112 million.

Brian: Back to you Brian.

Brian: Thank you Johnny we look forward to executing our strategic objectives and partnerships throughout the remainder of the year as we drive the business forward.

Brian McKelligon: We look forward to executing our strategic objectives and partnerships throughout the remainder of the year as we drive the business forward. We are thankful for the hard work of our fellow dedicated Akoyans, as well as for the continued support from our customers and shareholders. Akoya remains well-positioned for growth, and we're excited about the opportunities that lie ahead as we deliver new spatial solutions from the discovery to clinical market. We thank you all for your time and support. At this point, we'll open up the call for questions. Operator? As a reminder, to ask... Press 1-1 on your telephone and wait for your name to be announced. For a question, please press star 11 again.

Brian: We are thankful for the hard work of our fellow dedicated to clients as well as for the continued support from our customers and shareholders.

Brian: <unk> remains well positioned for growth and we're excited about the opportunities that lie ahead, as we deliver new space solutions from the discovery to clinical markets. We thank you all for your time and support.

Speaker Change: And at this point, we will open up the call for questions operator.

Speaker Change: Certainly as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced with question. Please press star one again, please standby, while we compile our Q&A roster.

Operator: Please stand by while we compile our Q&A roster, and in one moment for our first question. And our first question will be coming from... Jacob Karambol of Stevens. Your line is open. And again, Jacob, your line is open.

Speaker Change: And one moment for our first question.

Speaker Change: And our first question will be coming from.

Speaker Change: Excuse me Jacob crime Campbell of Stephens. Your line is open.

Jacob Campbell: And again Jacob your line is open.

Jacob Campbell: And one moment moving forward to our next question.

Operator: And one moment, moving forward to our next question. Our next question will be coming from Kyle Mikson of Canaccord. Your line is open.

Jacob Campbell: Our next question will be coming from Kyle Mixon of Canaccord. Your line is open.

Kyle Alexander Mikson: Hey, guys. Thanks for the questions Chad.

Kyle Alexander Mikson: Hey, guys, thanks for the questions. Good chat. Hey, um, so, you know, first some questions about the financials I wanted to ask. If you could quantify or at least qualitatively help us think about the biopharma revenue that was shifted to the second half of the year, and you know, I think it's important to understand that in the context of this 25% year over year growth for the second half, that's basically remaining in place, it seems, but I assume that the second quarter outlook is, You know, not terribly impacted by maybe NIRS-CoV-2, so it sounds like there's a lot of one-timers in the first quarter.

Kyle Mixon: Hey.

Kyle Mixon: So.

Kyle Alexander Mikson: First some questions about.

Kyle Alexander Mikson: The financials I wanted to ask.

Kyle Alexander Mikson: If you could quantify or at least qualitatively help us think about the biopharma revenue that was shifted to the second half of the year and I think it's important to understand that in the context of this 25% year over year growth for the second half that's basically remaining in place it seems like I assume that the second quarter outlook.

Kyle Alexander Mikson: Not terribly impacted by maybe near term to so it sounds like Theres a lot of one timers in the first quarter, maybe you can kind of parse that out but just wanted to understand whats shifting and how we should sort of think about like run rate growth and how that accelerates towards the end of the year.

Kyle Alexander Mikson: Maybe you can kind of parse that out, but just wanted to understand, you know, what's shifting and how we should sort of think about, like, run rate growth and how that accelerates towards the end of the year. Yeah, so maybe a lot to unpack there.

Speaker Change: Yes, so maybe a lot to unpack there so first on <unk>.

Johnny: So first of all, the CDX revenue shift, I think as we noted on the call, it was really a byproduct of a slight shift in the clinical trial partner milestones, resulting in a shift in revenue recognition in the second half. And the impact of that was sort of a low single digit, in terms of millions shifting into the second. So that's basically the contribution of that. And on the instrument side, I think similarly, to give you some color on that, as we looked at the impact of the manufacturing gap and the ability of third parties to provide the necessary reagents and the timing of us getting fully operational towards the end of the quarter.

Speaker Change: The CTX revenue shift I think as we noted on the call. It was really a byproduct.

Speaker Change: A slight shift in the clinical trial partner milestones, resulting a shift in our revenue recognition into the second half.

Speaker Change: And the impact of that was sort of low single digits.

Speaker Change: In terms of millions shifting into the second half so that that's basically the contribution of that.

Speaker Change: The instrument side I think similarly to give you some color on that as we looked at.

Speaker Change: The impact of the manufacturing gap and the ability of third parties to provide the necessary reagents and the timing of us getting fully up offer fully operational towards the end of the quarter.

Johnny: You know, the relative impact of that, Kyle, in terms of instrument placements, for example, on the PCF, phenocyte perfusion, was probably around high single digits. So that can kind of give you a sense of the contributors between those two in terms of the revenue push. And as we look to the remainder of the year, I think we'll look to kind of sequentially continue to return to our expected growth that you saw historically for both instruments and reagents.

Speaker Change: Relative impact of Agco in terms of.

Speaker Change: Instrument placements for example on on the Tcf.

It was probably around high single digits. So that can kind of give you a sense of the contributors between those two in terms of the revenue push and as we look to the remainder of the year I think we will look to kind of sequentially continue to return to our expected growth that you saw historically for both instruments and reagents.

Speaker Change: Got it and maybe if you could talk about why.

Brian McKelligon: And maybe you could talk about why the phenoImager line kind of underperformed, at least compared to what we had, and PhenoCycler did much better. Maybe that's obvious because the PCF is just, you know, more, maybe you're pushing that a little bit harder. But can you just talk about maybe if there's something in the marketplace that, you know, PhenoImager HT is not as in demand as it once was?

Speaker Change: <unk>.

Speaker Change: Your line cut out on underperformed at least compared to what we had.

Speaker Change: And feels like they are doing.

Speaker Change: Much better maybe thats obvious because the PCF is just more maybe you're pushing that a little bit harder, but can you just talk about maybe if there's something in the marketplace that.

Speaker Change: Imager Ht is not is.

Speaker Change: And demand as it once was.

Brian McKelligon: I think it's I think it's more of a dynamic of focus or focus on serving those PCS PCF customers, you know, through the transitions and the challenges that we had in Q1. So I think you can see a kind of more balanced commercial focus as we go into the remainder of the year where the focus could be more on external commercial execution, you know, rather than supporting our customers through. Okay, and then let me just give you just a quick one before I go off on the clinical partnerships. You have a few of them now. Yeah,

Speaker Change: I think it's I think it's more about dynamics, our focus our focus on serving those pcf's PCF customers through the transitions and the challenges that we had in Q1. So I think you can see a kind of a more balanced commercial focus as we go on to the remainder of the year, where their focus to be more on external commercial execution.

Speaker Change: Rather than supporting our customers through the transition.

Speaker Change: Okay and then let me just a quick one for <unk> on the clinical partnerships you have a few of them now yes is there any way you could.

Brian McKelligon: Is there any way you could, again, help us think about or quantify maybe the TAM or the mark opportunity or revenue opportunity for these, you know, three plus partnerships that you have? What could that look like maybe in 20, five, six, seven, that sort of timeframe? Well, I think there are two ways to parse that qualitatively. One is, each of these individually kind of provides different contributions for us in the near term on the top line and longer term in terms of the clinical deliverables.

Speaker Change: Again like help us think about or quantify maybe be the tam without it the market opportunity the revenue opportunity for these.

Speaker Change: Three plus partnerships that you have.

Speaker Change: That looked like maybe in 2000.

Speaker Change: 567, that's sort of a timeframe.

Speaker Change: I think theres two ways to parse that quantitatively kind of one is.

Speaker Change: As each of these individually kind of provides different contributions for us in the near term on the topline and longer term in terms of the clinical deliverables accurate, Brian as a company I would encourage you to go listen to their R&D day to get a sense for the pace and <unk> of their clinical.

Brian McKelligon: You know, Acrobon as a company, I would encourage you to go listen to their R&D day to get a sense for the pace and veracity of their clinical progress. You know, that opportunity for Koya is largely transitioning from the latter stages of our CDX development work to what is a hopeful, continued, solid progress on their clinical progress as they potentially progress to OnMarket, which will be for Akoya a very significant

Speaker Change: <unk> that opportunity for Coy is largely transitioning from the ladder at later stages of our CTX development work to what is a hope for continued solid progress on our clinical progress as they potentially progress.

Speaker Change: Two two on market, which will be for a quite a very significant event. So that dynamic in terms of its impact is very different than that.

Brian McKelligon: So that dynamic, in terms of its impact, is very different in that. The mid- to near-term upsides, provided their continued success, would be a real catalyst for Akoya to have a potential on-market clinical test tied to a therapeutic. NarraCare is a very different dynamic in that they have identified a patient population of several hundred thousand patients that are diagnosed with early stage melanoma and are at high risk of recurrence or mortality.

Speaker Change: The mid to near term upsides provided their continued success would be a real catalyst for a call yet to have a potential on market clinical tests tied to a therapeutic nearer care is a very different dynamic in that they have they have identified a patient population that's several hundred thousand.

Speaker Change: Patients that are diagnosed with early stage melanoma.

Speaker Change: Where that are at high risk of.

Speaker Change: Occurrence or mortality and there is no effective way for the current on markets therapeutics to be applied to this patient population need they need they essentially have to wait so the market opportunity with meritor is leveraging their established clinical data along with them to.

Brian McKelligon: And there's no effective way for the current on-market therapeutics to be applied to this patient population in need; they essentially have to wait. So the market opportunity with NarraCure is leveraging their established clinical data along with them to capitalize on the growing and intense interest in that and that panel to serve existing therapeutics that are serving late stage melanoma and initiate clinical studies so those can be transitioned to early, a much larger market opportunity. So, for Koya,

Speaker Change: To capitalize off of the growing an intense interest in that.

Speaker Change: That panel to serve existing therapeutics that are serving late stage melanoma and initiate clinical studies. So those that can be transitioned to early stage.

Speaker Change: A much larger market opportunity so for Korea.

Speaker Change: What that means for us is an ability to.

Brian McKelligon: What that means for us is an ability to, with clinically validated data and an assay, attract existing biopharma that have on-market melanoma therapeutics and catalyze large-scale companion diagnostic partner development projects, which are significant in terms of revenue, to buttress the existing CDX revenue that we have. Care PharmTech is powerful in that it represents, for us, an entirely new, not just clinical, market but an entirely new market opportunity within China, which we all know is struggling a bit.

Speaker Change: With clinically validated data in an assay attracts.

Speaker Change: Existing.

Speaker Change: Biopharma that have on market melanoma therapeutics.

Speaker Change: And catalyze large scale companion diagnostics partners development projects, which are significant in terms of revenue.

To buttress the existing CGS revenue that we have.

Speaker Change: K R. Pharm check again is powerful and that it represents for us an entirely new not just clinical market, but an entirely new.

Speaker Change: <unk> opportunity within China, which we all know is struggling a bit and for us what we have now with the class II <unk> system.

Brian McKelligon: And for us, what we have now with the Class II-approved system is working with them and their KOL network to now establish the clinical validity of class 3 assays, and that, over time, will leverage that KL network to place HT systems in that market to establish that clinical utility. So you can see that all of them individually.

Speaker Change: Is working with them and their cable network to now establish the clinical validity of class III assays and that over time, we'll leverage that cable network took place HD systems in that market and that market to establish that clinic utility. So you can see that all of them individually.

Speaker Change: Contribute to the advancement of our clinical opportunity, but in the case of <unk>. Much later stage potentially a commercial test <unk> is really expanding the opportunity. We have we have with biopharma clinically validated test to secure new partners expeditiously and then finally KR is giving us a headwind.

Brian McKelligon: [inaudible] and then finally, KR is giving us a headway into the Chinese market again to balance against those headwinds, but it gives us an entirely new clinical market vein. Got it. Helpful, Brian.

Speaker Change: Into the China market again to balance against those headwinds, but give us entirely new clinical market vein to serve.

Speaker Change: Got it helpful. Brian Thanks.

Operator: Thanks. One moment for our next question, and our next question will be coming from David Westenberg of Pepper Sandler. Your line is open, Dave.

Speaker Change: One moment for our next question.

Speaker Change: Okay.

Speaker Change: And our next question will be coming from David Westenburg of Piper Sandler Your line is open David.

David Michael Westenberg: Hi, thank you for taking the question. Could we talk about the reiteration of being cash flow breakeven this year? Can you remind us where you made some of the cost cuts last year? Can you assure us that if you are matching some of the cost cuts with the lower guidance, you're not maybe impacting growth? And I get maybe some of this is just plan as usual, and it just so happens that you're just kind of subtracting out some of the Q1 impact.

David Michael Westenberg: Hi, Thank you for taking the question.

David Michael Westenberg: Just if could we talk about the the reiteration of being cash flow breakeven. This year can you remind us where you made some of the cost cuts last year can you ensure us that if you are matching kind of the cost cuts with the lower guidance that youre, not maybe impacting growth and I guess, maybe some of this is just plan is huge.

David Michael Westenberg: And it just so happens that you are just kind of subtracting out some of what Q1 impact, but just kind of wanted to the reminder of.

David Michael Westenberg: But, you know, I just kind of wanted a reminder of why this cash flow breakeven target by the end of the year still seems reasonable in light of the lower guide. Thanks. It's a great question, Dave, and I think I'll pass to Johnny to give, you know, at least some hypothetical scenarios on what Akoya would have to deliver, for example, in Q4 to reach that point as compared to, for example, prior years. So, Johnny, maybe walk through that scenario a little bit to provide some hypothetical color.

David Michael Westenberg: Kind of why.

David Michael Westenberg: This cash flow breakeven target by the end of the year still seems reasonable in light of the lower guide. Thanks.

David Michael Westenberg: Great question, Dave and I think I'll pass to John to give at.

John: At least some.

John: Michael scenarios on on what a quarter it would have to deliver.

John: For example in Q4.

John: To reach that point as compared to for example to prior year, So Johnny maybe walk through a little bit that scenario to provide some hypothetical color sure sure. Thanks, David Yes. It's important to note. This is sort of how we see the exit of the year and if we plug in our Q4 that looks.

Johnny: Sure, sure. Thanks, David. Yeah, it's important to note this is sort of how we see the end of the year. And if we plug in a Q4, that looks, similar to our normal kind of 20. 20 mid 20% growth rate over the Q4 of last year, that'll give you a number for revenue that you could use as a hypothetical at 62% margin, let's say, and the real driver is the OPEX. We are OPEX was in the 2930 million for Q1, but there were, you know, three and a half, four and a half million of kind of one-time items that flow through.

John Frederick Ek: Similar to our normal kind of 'twenty.

John Frederick Ek: Mid 20% growth rate over the Q4 of last year that'll that'll give you a number for a revenue that you could use as a hypothetical at 62% margin, let's say and the real driver of the Opex.

John Frederick Ek: Our Opex was in the 29 to 30 million for Q1, but there were $3 five $4 5 million of kind of one time items that flow through so truly that run rate in Q1 was sort of that $25 million Opex range. So if you take that revenue in Q4 at this at this gross margin rate.

Johnny: So, truly, that run rate in Q1 was sort of that $25 million OPEX range. So, if you take that revenue in Q4 at this, and then you take a call it $25 million in OPEX, remove 5 million of non-cash, you get to that break-even.

John Frederick Ek: We've sort of highlighted and then you take a call. It 25 million Opex remove 5 million of noncash you get to that breakeven. So its all of those are our scenarios and assumptions that are reasonable based on our our average growth rates and our gross margin trajectory in our current run rate of Opex. So.

Johnny: So all of those are scenarios and assumptions that are reasonable based on our average growth rates and our gross margin trajectory and our current run rate of OPEX. So with those, we get to that cash flow break-even. And to go back to sort of another question you asked about what actions we've taken. And so, as you know, we took in Q1 an action to reduce headcount, and that fully flows through in Q4. And importantly, you know, we avoided cutting revenue-generating commercial headcount and manufacturing employees.

John Frederick Ek: With those we get to that cash flow breakeven and to go back to sort of another question you asked on what actions. We've taken so as you know we took in Q1 and action.

John Frederick Ek: To reduce head count and that fully flow through in Q4 and importantly.

John Frederick Ek: We avoided cutting revenue generating commercial head count and manufacturing employees.

Johnny: It's really a broad-based cut that we did in Q1 that really provides the benefit through the year, and you'll start to see that OPEX at a run rate that is similar to the non-gap view of Q1. Got it. That's great color.

John Frederick Ek: Really it was a broad based cut that we did in Q1 that really provides the benefit through the year and you'll start to see that opex on a run rate that that is similar to the non-GAAP view of Q1.

Speaker Change: Got it that's great color.

David Michael Westenberg: Just in terms of the talk about the opening up of the manufacturing facility and the second order impact on instruments, do you get the sense that all the customers were just kind of temporarily lost rather than, you know, lost for good? And then, you know, in addition to that, just any more context in terms of what customer attrition might have been on that, if you, you know, maybe had a sense that some of you lost some customers that were already on, you're already using your system.

Speaker Change: Just in terms of the talk about the opening up of the manufacturing facility in the second order impact on instruments do you get the sense that all the customers were just kind of temporarily lost rather than lost for good and then.

Speaker Change: In addition to that just any more context in terms of what customer attrition might've been on that if you maybe had a sense that some of you lost some customers that were already on.

David Michael Westenberg: But, you know, I don't know any kind of metrics there to ensure us that, you know, this is not lost forever. This was just a temporary situation. It's a great question, and it's a fair question.

Speaker Change: Are you using your system, but.

Speaker Change: I don't know of any kind of metrics there to ensure us that.

Speaker Change: These are not this is not loss forever. This was just a <unk>.

Speaker Change: Barry situations, it's a great. It's a great question.

Brian McKelligon: I think as we look at the bounded horizons within which that occurred, Q4 to Q1, late Q4 and early Q1, we saw, you know, continued incremental reagent revenue growth up to 7 million or so. And I think, as I noted on the call, you know, this was mostly acutely felt in CROs and core labs that have a real strong desire, David, to move to a much higher plexus and routinely run those at 50 or 60 plexuses.

Speaker Change: And it's a fair question I think as we look at.

Speaker Change: At the bounded horizons within which that occurred to Q4 to Q1 late Q4 and early Q1, we saw continued incremental a reagent revenue growth up to $7 million or so and I think as I noted on the call. This was mostly acutely felt in <unk>.

Speaker Change: That have a real strong desire David to move to a much higher <unk> and routinely running those that at $50 or 60, flexes and so when we originate when we alerted them of this temporary gap of the reagent fulfillment and their desire to around $50 to 60 pluses and scale. Those those are the kinds of scenarios, where there was a bit of a P.

Brian McKelligon: And so, you know, when we alerted them of this temporary gap in reagent fulfillment and their desire to run 50 to 60 plexus and scale those, you know, those are the kinds of scenarios where there was a bit of a pause. We communicated back to them when things were back in inventory as they are now and sort of began to resurge and recover. So, that's an example of the kinds of customers that we were dealing with that drove that temporary pause.

Cause we communicated back then when things were back in inventory as they are now and sort of begin to research and recover. So those are those thats. An example of the kinds of customers customers that we were we were dealing with dealing with that that drove that temporary pause in and a lot of our customers are David I really referenced driven opportunities given the size of our installed base.

Brian McKelligon: And a lot of our customers, David, are really reference-driven opportunities given the size of our install base. So, this isn't really about customer attrition as much as it is about shifting these opportunities into Q2, Q3, and then proving to those customers that we've got the full supply to meet their needs. Appreciate it.

So this isn't really about customer attrition as much as it is about.

Speaker Change: Shifting these opportunities.

Speaker Change: Q2, Q3, and then proving to those customers that we've got the full supply to meet their needs, which we do.

Speaker Change: I appreciate it thank you.

Speaker Change: Thank you one moment for our next question.

Operator: Thank you. One moment for our next question, and our next question will come from Mark Massaro of BTIG. Your line is open.

Speaker Change: And our next question will come from Mark Massaro of BT AIG. Your line is open Mark.

Mark Anthony Massaro: Hey, guys. Thank you for taking the questions maybe.

Mark Anthony Massaro: Hey, guys. Thank you for taking the questions. Maybe the first one is just on the revenue pacing throughout the year. I know that, obviously, any time you have macro issues and inflationary pressures in capital budgets, Q1, you know, Q1 is typically your lowest quarter of the year anyway. But I just ask for this year.

Mark Anthony Massaro: Maybe the first one is just on the revenue pacing throughout the year I know that obviously anytime you have.

Mark Anthony Massaro: Macro issues.

Mark Anthony Massaro: Inflationary pressures in capital budgets Q1, Q1 is typically your lowest quarter of the year anyway, but.

Mark Anthony Massaro: But I'd just ask for this year I think your revenue.

Brian McKelligon: I think your revenue at the midpoint of your lowered guidance would imply that Q1 is 17% of your revenue for the year. Just help me think of how you can get back to sort of your ordinary run rate. And as I think about the year, is this shaping up potentially as a 40-60, you know, first half, second half, or do you think it's more like 45-55? Maybe just help a little bit with some of the buckets.

Mark Anthony Massaro: The midpoint of your lowered guidance would imply that Q1 is 17% of your revenue for the year.

Mark Anthony Massaro: Just help me think of how you can get back to sort of your ordinary run rate and as I think about the year is this shaping up potentially as a 40 61st half second half or do you think it's more like $45 55, maybe just help a little bit with some of the buckets.

Brian McKelligon: Yeah, I think, you know, not to get into the details of sort of quarterly guidance, but I think, kind of directionally, as you think about the Q1 miss and, you know, kind of sequential recoveries from Q1 to Q2 to Q3 to Q4, you know, as we think about the continued unlocking of the reagent opportunity and recovery on instruments, think about the Clinical Revenue that's been deferred for the second half. All of those point to a seasonality that's a little bit more magnified in the second half relative to historical.

Speaker Change: I think not to get into the details of sort of quarterly guide, but I think kind of Directionally as you think about the Q1 Miss.

Speaker Change: Kind of sequential recoveries from Q1 to Q2 to Q3 to Q4.

Speaker Change: As we as we think about the continued unlocking of the reagent opportunity in recovery on instruments as we think about the <unk>.

Speaker Change: Clinical revenue that's been deferred to second half all of those point to.

Speaker Change: Ah seasonality, that's a little bit more magnified in second half relative to historical.

Speaker Change: I think right now we saw the reagent revenues in Q1 sort of a 23% year over year growth I think we'll get back to our historical growth numbers of that 30% to 40%.

Brian McKelligon: You know, I think right now we saw the reagent revenues in Q1 at sort of a 23% year-over-year growth. You know, I think we'll get back to our historical growth numbers of that 30 to 40%, and I think we'll get back to our historical unit sales on the instruments as well. So hopefully, that gives you enough color.

Speaker Change: We will get and we'll get back to our historical unit sales on the instruments as well. So hopefully that gives you enough color. We could we can certainly talk in more detail, but John I don't know if you have anything to add on that.

Johnny: We can certainly talk in more detail, but Johnny, I don't know if you have anything to add to that. Now, only to remember that the contracted pharma revenue that we have with our partners is still in our full year. It's truly moved from Q1 back.

John: No only to remember.

John: That the contracted pharma revenue that we have with our partners is still in our full year. It's truly move from Q1 back and so important to note. There is a there's a portion of that that shifts back so that youre not saying simply on the instrument reagent run we've got some.

Johnny: And so important to note, there's a portion of that that shifts back so that you're not thinking of it simply on the instrument and reagent run. We've got some additional support in the back half that's driven by the shift in those milestones. Okay, and that's super helpful. And then, you know, the update from Acrobon in April was certainly exciting. You know, I know that you're part of the partnership, but can you just give us a sense for how we should think about timing for a potential CDX and regulatory approval for a companion diagnostic? That's a really great question.

John: Some additional support in the back half thats driven by that the shift in those milestones.

John: Okay.

Speaker Change: That's super helpful and then.

Speaker Change: The update from acrobat on in April is certainly exciting.

Speaker Change: I know that.

Speaker Change: You are part of the partnership but can you just give us a sense for how we should think about timing on a potential CTX and regulatory approval.

Speaker Change: For our companion diagnostic that's a really great question and I think one that.

Brian McKelligon: And I think one that everybody's kind of yearning to know more details about, you know, again, sort of like I said to Kyle, I would encourage you to listen to their virtual corporate R&D event that was recorded on the 24th and just perhaps sort of suggest that their enthusiasm for the data presented could give you an indication of their optimism. And I think that's probably the most that I can say with respect to timing because, you know, in terms of Koya's.

Speaker Change: Everybody's kind of yearning to know more details about.

Speaker Change: Sort of like I said to Kyle I would encourage you.

Speaker Change: So listen to there.

Speaker Change: Our virtual corporate R&D event that was recorded on the 24th.

Speaker Change: And just perhaps sort of suggests that their enthusiasm for the data presented.

Speaker Change: I think can gives you an indication of their optimism.

Speaker Change: And I think thats, probably the most that I can say with respect to timing because.

In terms of Korea's <unk>.

Brian McKelligon: Communication on timing, markets, and forecasts. We sort of take their lead in that regard because it is their drug candidate that leads. It's sort of powerful and significant to hear the progress that they have made and the results of the confirmed objective response rates for signature positive versus those that are negative. So pretty powerful data. Okay, great.

Speaker Change: Communication on timing markets forecasts.

Speaker Change: Sort of take their lead in that regard because it is their drug candidate that leads that.

Speaker Change: Said, it's sort of <unk>.

Speaker Change: Powerful and stitch and.

Speaker Change: Significant to hear the progress that they made.

Speaker Change: And the results of the confirmed objective response rates for signature positive versus those that are negative so pretty powerful dataset.

Speaker Change: Okay, Great and last one for me, obviously anytime you can bring your reagent manufacturing in house. It's typically hit good thing can you just remind us long term, what the margin opportunity or gross margin incremental gross margin opportunity is.

Mark Anthony Massaro: And last one for me, obviously, you know, anytime you can bring your reagent manufacturing in-house, it's typically a good thing. Can you just remind us, long term, what the margin opportunity or gross margin, the incremental gross margin opportunity is, even if we think out like five years, what type of benefit you might be able to achieve long term? And then I think I heard you guys say that you did resolve the product availability issue, just confirming that that is on the reagent. Yeah, so just to, take that in reverse order.

Speaker Change: Even if we think out like five years, what type of benefit you might be able to achieve long term and then I think I heard you guys say that you did resolve the product availability just confirming that that is on the reagents.

Speaker Change: Yes, so just to yes, so take that in reverse order yes.

Brian McKelligon: Yes, to fully confirm that the product availability gaps that our customers suffered through in Q1 are completely resolved, and everything is in-house and manufactured ready to go. And long-term margins, I'll let Johnny speak to that, but we do expect and expect to see really continued high reagent revenue growth. So that couple, to bring in that manufacturing internally, getting improved margins, and all those are really a key driver for gross margin improvements. And maybe Johnny can speak in more color about how we're kind of guiding and quantifying. Yeah.

Fully confirmed that the product availability.

Speaker Change: Gaps that our customers softer suffered in Q1 are completely resolved and everything is in house and manufactured ready to go.

Speaker Change: And long term margins I'll, let John speak to that but we do we do expect.

John: We expect to see really continued.

John: Hi, reagent revenue growth, so that coupled to bringing that manufacturing internally getting improved margins. All of those is really a key driver for gross margin improvements and maybe John can speak more color.

John: How were kind of guiding and quantifying it.

Johnny: And while we don't break out instrument margin and reagent margin, I can say they're really performing with this move in-house as we hoped they would. So, we're seeing good results on margin from instruments and reagents. As you can imagine, in Q1, with revenue lower than we would have wanted, it naturally doesn't cover these new costs that we incurred to set the facility up in that first quarter.

John: And while we don't breakout instrument margin and reagent margin I can say, they're really performing with this move in house, where we hope they would so we're seeing good results on margin from instruments and reagents as you can imagine.

John: In Q1 with revenue lower than we would have wanted it naturally doesn't cover these new.

John: New costs that we incurred to set to set the facility up in that first quarter and so that puts a little bit of pressure on the Q1 margin. After you take out the non-GAAP item.

Johnny: And so, that puts a little bit of pressure on the Q1 margin after you take out the non-GAAP item. But we're excited and confident about the changes we've made and then bringing that facility in-house. It really helps product availability in the long run because we're not looking into the supply chain to ensure we have all of the components. We've got them in-house. We control our destiny a lot more, which we really like.

John: So we're excited and confident about the changes we've made and then bringing that facility in house it really helps.

John: It really helps product availability in the long run because we're not looking into the supply chain to ensure we have all of the components. We've got them in house, we control our destiny a lot more what you really we really like so I would say from a long term perspective.

Johnny: So, I would say from a long-term perspective, again, while we don't guide specifically on these, but we can expect meaningful expansion of margin as reagent revenue becomes a greater portion of total revenue over the four- to five-year horizon, as you're mentioning. So, I think we're seeing what we expected to see, which is good on the reagent and instrument margin. Okay, thanks guys, and our next question will be coming from Tejas Savant of Morgan Stanley. Your line is open. Hey guys. Good evening, and thanks for your time here.

John: Again, while we're not we don't guide specifically on these but we can expect.

John: Meaningful expansion of margin as reagent revenue becomes a greater portion of total revenue in the four to five year horizon like Youre mentioning.

John: So I think we're seeing what we expected to see which is good.

John: On the reagent and instrument margins.

Speaker Change: Okay. Thanks, Scott Thanks, Mark.

Speaker Change: One moment for our next question.

Speaker Change: And our next question will be coming from Tejas Savant of Morgan Stanley. Your line is open.

Tejas Rajeev Savant: So, Brian, maybe to kick things off on the cut to the guide here, I just want to get one thing clear. Is it right to interpret sort of the macro backdrop here being the same or maybe even modestly better versus the fourth quarter earnings call, and then the COE-related disruption to instruments and the lab services contract essentially being the detractors of the miss? And if so, can you share any color on just trends in the first six weeks of the second quarter, you know, particularly on those instrument placements you missed out on due to the COE opening?

Tejas Rajeev Savant: Hey, guys good evening and thanks for the time here.

Tejas Rajeev Savant: So Brian maybe to kick things off on the on the cut to the guide here I just wanted to get one thing clear.

Tejas Savant: Sure.

Tejas Rajeev Savant: Is it right to interpret sort of the macro backdrop here being.

Tejas Rajeev Savant: At the same or maybe even modestly better versus the fourth quarter earnings call and then the Coa related disruption to instruments and.

Tejas Rajeev Savant: The lab services contract essentially being the detractors off the myths and if so can you share any color on just trends in the first six weeks of the second quarter, particularly on those instrument placements you missed out on due to the opening because it sounds like that was the bulk of the instrument shortfall.

Tejas Rajeev Savant: Because it sounds like that was the bulk of the instrument shortfall. Yeah, I would be hesitant, Tejas, to say that there was a material change and Macro Contributions to Instruments. You know, I would say that the majority of the impact of the instrument myths as we think about sort of high single digits of phenocycle effusion.

Speaker Change: I wouldn't I would be hesitant change us to say that there was a material change.

Speaker Change: In macro contributions to instruments.

Speaker Change: I would say that the majority of the impact of the instrument Miss as we think about sort of high single digits as <unk> fusions.

Brian McKelligon: The majority of the instrument mess was really driven by... And then if you add in the total revenue miss, add in, as we spoke about in the last questions, kind of low single digits in terms of the deferred clinical revenue, then that sort of helps you see, kind of the total. Don't the total drivers of the gap. You know, in terms of the second quarter, I think, as we already spoke, we expect to continue to see, kind of, the incremental return to the reagents and instruments, the kind of normalized numbers we expect. Now that we're through these reagent issues, I think we'll get to a quarterization that's similar to what we saw yesterday. Got it, that's helpful.

Speaker Change: The majority of the instrument Miss was really driven by that.

Speaker Change: And and then if you add in the total revenue Miss add in is as we spoke about on the last questions.

Speaker Change: Low single digits in terms of the deferred clinical revenue.

Then that sort of helps you see.

Speaker Change: Kind of a total.

Speaker Change: The total drivers to the gap.

In terms of in terms of second quarter I think.

Speaker Change: We already spoke to we expect to continue to see.

Speaker Change: The incremental return.

Speaker Change: Two kind of reagents and instruments kind of normalized numbers, we expect.

Speaker Change: Now that we're through these these region issues. So I think we'll get to.

A quarter of <unk> is similar to what we saw historically.

Speaker Change: Got it that's helpful.

Speaker Change:

Tejas Rajeev Savant: Any color you can share and just the macro piece, you know, creating any hurdles or incremental friction on the customer end in terms of your field upgrade efforts, or are those still on track to wrap up by year end? And then, on a related note, any plans to revisit the pricing structure or perhaps, you know, consider a reagent rental model, especially as you think about helping customers get over the hump here and maybe even deal with the evolving competition, right, especially with Lunafor being part of Techni, making a more aggressive marketing push, etc. ? Yeah, those are good questions.

Speaker Change: But any any color you can share in gist.

Speaker Change: The macro piece, creating any hurdles or incremental friction on the customer and in terms of your field upgrade efforts.

Speaker Change: We're still on track to wrap up by year end and then.

Speaker Change: I guess on a related note.

Speaker Change: Any plans to revisit the pricing structure, perhaps considering a reagent rental model, especially.

Speaker Change: Especially as you think about helping customers get over the hump here.

Speaker Change: And maybe even deal with evolving competition, right, especially with Luna for being part of <unk>, making a more aggressive marketing push et cetera.

Speaker Change: Yes, that's a good question I think in terms of.

Brian McKelligon: You know, I think in terms of... You know, the macro, if your question on the macro with respect to the field upgrades had an impact, the answer is no, it didn't. I think as you think about these field upgrades, you sort of get the sense that you've got a very quick acceleration of those conversions like we saw in Q3 and Q4 with, you know, the first 50% plus of those instruments.

Speaker Change: The macro if youre question on the macro with respect to the field upgrades if that had an impact the answer is no. It didn't I think as you think about these field upgrades you sort of get the sense that you've got.

Brian McKelligon: And then that continues sort of at a pace that becomes asymptotic as you progress through the year. But I don't think we really saw a macro impact specifically on the field upgrades, if that was your question. Yes, that's right, Brian. And then on the second piece, yeah, on revisiting pricing with respect to reagent rentals. Classically, in life sciences, reagent rentals are tough and not routine. It's sort of more common in the diagnostic arena, where you've got sort of Committed Instrumentalists revenue as part of, you know, Nambi, Kyle Mikson, Niro Ramachandran, Akoya Bioscience Nambi, Kyle Mikson, Niro Ramachandran, rather than relying on references and publications.

Speaker Change: A very quick acceleration of those conversions like we saw in Q3 and Q4 with.

First 50% plus of those instruments, and then that continue sort of at a pace that's that becomes asymptotic as you progressed through the year.

Speaker Change: I don't think we really saw a macro impact specifically on the field upgrades. If that was your question to confirm.

Speaker Change: Yes, Thats right Bryan and then on the second piece on the.

Speaker Change: Revisiting pricing with respect to the reagent rentals.

Speaker Change: Secondly in life Sciences reagent rentals are are tough and not routine it's sort of more common in the diagnostic arena, where you've got sort of.

Speaker Change: Committed instrument <unk>.

Speaker Change: Revenue as part of <unk>.

Speaker Change: A clinical supply agreement most of these things are project driven that said youre communist there around the evolving competitive landscape, particularly as we see an increased prevalence of placements of demo systems as a competitive strategy.

Speaker Change: Rather than relying on references and.

Speaker Change: And and publication. So I think that's that's kind of the dawn of a new age that we've got it we have to respond to what we're seeing in the marketplace.

Brian McKelligon: So, I think that's kind of the dawn of a new age that we have to respond to what we're seeing in the marketplace, a growing prevalence of placing demo units and using those as placements to drive sales. And we're gonna have to participate in some of that to be, you know, effectively competing. Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. He is a licensed financial professional in both the U.S. and Israel. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered in the U.S. and Israel.

Speaker Change: A growing prevalence of placing demo units and using those as placements to drive sales and we're going to have to participate in some of that.

To be effectively competing.

Speaker Change: Got it that's fair.

Brian McKelligon: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. In terms of their year-over-year change, whether it's from Q4 or full year 23 or Q1. So it's been fairly consistent, but with respect to your green shoots... We did sort of qualitatively see a pretty reasonable surge in the desire for support for grant applications under the expectation that the stimulus monies would be forthcoming.

And then Brian on <unk>.

Speaker Change: On China.

Speaker Change: You talked about.

Speaker Change: Capex pressure that elongated sales cycles in China in the last quarter.

Speaker Change: Any color you can share on how trends evolved on the ground over the course of the first quarter you are into April perhaps and then.

Speaker Change: Are you starting to see any any sort of inflection in conversations on the back of the recent stimulus announcement then.

Speaker Change: Maybe maybe only in the in the far out order funnel so to speak.

Speaker Change: And I don't think you'll you'll be sort of thinking that to the bank for the back half guide by any means but just curious as to whether you are starting to see any green shoots there yes.

Speaker Change: Yes, yes, so with respect to the trends that we're seeing in China I would say the actual performance there is no material trend.

Speaker Change: In terms of their year over year change, whether it's from Q4 full year 2003 or Q1, so it's been fairly consistent but with respect to your green shoots.

Speaker Change: We did sort of qualitative you see.

Speaker Change: Pretty reasonable surge and the desire for support for grant applications under the expectation.

Speaker Change: The stimulus monies will be forthcoming, but I think we also recognize that while that's been announced there's sort of a bureaucratic step function to align those distributed those to our market segment and then drill into all those out so I'd say the only.

Brian McKelligon: But I think we all sort of recognize that while that's been announced, there's sort of a, you know, a bureaucratic step function to align those, distribute those to our market segment, and then dole those out. So I'd say the only, you know, only quote green shoot Tejas that I think we can point to is really an uptick in the requested support, immediate support for supporting grant applications. So that's, you know, that's a positive thing.

Speaker Change: I only called Green shoot change asset that I think we can point to is really an uptick in.

Speaker Change: The requested support immediate support.

Speaker Change: For supporting grant applications. So that's a positive and I would say.

Brian McKelligon: And I'd say, as a side note, while we're not going to quantify it, you know, our partnership with KR over the, you know, midterm does provide us another potential avenue outside of the life sciences, discovery of translational markets for potential sources of revenue and growth in this clinical market with the CARE-HT5 that's based on the R-HT system approved as a class. Got it. Thanks, Brian. I appreciate the

Speaker Change: As a side note, while we're not going to quantify it.

Speaker Change: Our partnership with KR over over the mid term.

Speaker Change: It does provide us another potential avenue outside of the life Sciences discovery of translation of markets for potential sources of revenue and growth in this in this clinical market with the <unk> five and it's based on our HD system approved as a class two device.

Speaker Change: Got it thanks, Brian I appreciate the color. Thank you.

Speaker Change: One moment for our next question.

Operator: One moment for our next question. Our next question will come from Sabu Nimbai. Your line is open. Thank you, guys. This is Subhu Nambi from Guggenheim.

Speaker Change: Our next question will come from Cebu nearby.

Speaker Change: Uh huh.

Cebu: Your line is open.

Subhalaxmi T. Nambi: Guys, thank you for taking my question. Recognizing that you do not provide quarterly guidance, you missed consensus by 6 to 7 million, and this seems... and is more than a transitory issue given how much you cut your full year guidance. That said, first, we think about pre-announcing, I ask, so we can understand your practices moving forward. Second, does the fact that you didn't manage expectations down indicate that the end of the quarter is where you came up short of your target, and third, how should we get comfortable that you lowered guidance now?

Cebu: Thank you this is <unk> from Guggenheim.

Guggenheim: Guys. Thank you for taking my question.

Guggenheim: Recognizing that you do not provide quarterly guidance.

You missed consensus by $6 million to $7 million and it seems.

And more than transitory issue given how much you've kept your full year guidance that said.

Speaker Change: We think about pre announcing Ross so we can understand your practices moving forward.

And that's the fact that you didn't manage expectations.

Speaker Change: Oh don't indicate that the end of the quarter is where you came up short of your targets and how should we be do we get comfortable that you lowered guidance enough.

Speaker Change: <unk>.

Yes, so the <unk>.

Subhalaxmi T. Nambi: Yeah, so if you look at our intra-quarters... You're correct that it's extremely bad, and it was even more so in Q4 and Q1. And so as we looked at, those changes in funnel velocity and funnel conversion finally occurred in December, and then through the first three quarters of the year.

Speaker Change: So if you look at our intra quarter.

Speaker Change: Revenue trends.

Speaker Change: You are correct that ex extremely back loaded.

Speaker Change:

Speaker Change: And it was even more so in Q4 and Q1.

Speaker Change: And so as we looked at.

Speaker Change: Those changes in front of velocity in funnel conversion.

Speaker Change: Finally realized in December and then through.

The first three quarters of the year.

Speaker Change: We recognize then the shortfall.

Brian McKelligon: We recognized the shortfalls and decided to take the energy and time to make sure that as we look forward to the rest of the year, we accounted for in our guide, those changing dynamics that we talked about with Kate Tejas. [inaudible] That's the process that we went through to manage expectations. And while I understand your desire and question around pre-announcement, we wanted to make sure that we coupled that pre-announcement with a really informed view on how we look at the guide for the rest of the year, given that, as Mason was asking, given that it's going to account for a little bit more of a second half waiting.

Speaker Change: And decided to take the energy and time to make sure.

Speaker Change: And as we look forward to the rest of the year that we accounted for in our guide.

Speaker Change: Those changing dynamics that we talked about with Kate page us with respect to the macro environment, but more specifically how do we think our recovery on the reagents.

Speaker Change: Instrument delayed instrument purchase purchases will be realized throughout the rest of the year. So.

Speaker Change: That's the process that we went through to manage expectations and while I understand your desire and question around pre announce.

Speaker Change: We wanted to make sure that we.

Speaker Change: We coupled that pre announcement with a really informed decision making process on how we look at the guide for the rest of the year given that as Mason was asking there given that it's going to it's going to account for a little bit more of a second half waiting. So let me pause there and see if Johnny would like to add anything more on the prop.

Brian McKelligon: So, let me pause there and see if Johnny would like to add anything more on the process of our financial assessment in coming up with the guide, and I do want to make sure, too, that I addressed all of the subcomponents of your question in the Q&A. Yeah, I would just maybe clarify a little bit. You made a point, Brian, that the last month of the quarter is generally more heavily loaded with instruments, right? We generally have a pretty good view of reagents through the quarter. They're much more expensive, you know, and follow a normal ordering pattern.

John Frederick Ek: <unk> of our financial assessment in coming up with the guidance and I do want to make sure that I addressed all of the sub components of your question that I got them all.

John Frederick Ek: Yes.

John Frederick Ek: Maybe clarify a little bit.

Speaker Change: Brian in the last months of the quarter is generally more heavily loaded certainly instruments, we generally view of reagents through the quarter. They are much more.

Speaker Change: Following our order pattern.

Johnny: It's, as you can imagine, capital equipment and instruments naturally fall to the last month when you're closing the deal. And so, with that, that sort of speaks to Brian's prior point. And I think, again, not to continue to go back to this point, but there was a meaningful enough amount of revenue that was related to the CDX point. I want to make sure that as we do that analysis and think of what the Q1 sort of miss was in total, there's a reminder that what was missed in Q1 is truly moving to the back half, and so that allows you to better understand what the revenue miss was from an instrument perspective.

Speaker Change: Can imagine capital equipment and instruments naturally falls in the last month when you are closing the deal and so.

Speaker Change: With that sort of speaks to Brian.

Speaker Change: Prior point and I think again not to.

Speaker Change: To continue to go back to this point, but there was a meaningful enough.

Speaker Change: Amount of the revenue that was related to the.

Speaker Change: Cvs point I would make sure that as we do that analysis and maybe on what the Q1 sort of Miss was in total of the debt.

Speaker Change: There is a recollection.

Speaker Change: What was missed in Q1 is truly moving to the back half is that that allows you to better understand what the revenue Miss was from an instrument perspective.

Speaker Change: Oh.

Johnny: But guys, the microenvironment, none of us have a crystal ball that it's going to improve. So, that is where I am a little worried that the loading of the guidance is equal to what you missed in Q1, more or less. So, then how do we know it recovers in the second half? And I know everyone tried to ask this question two, three different ways, but I haven't heard anything that I felt, okay, this makes sense.

Speaker Change: The macro environment, none of us have a crystal ball that it's going to improve so that is what I'm a little worried that the lowering of the guidance is equal to what you missed in Q1 more or less but then how do we know it took over the second half.

Speaker Change: Everyone tried to ask this question two or three different ways, but I haven't heard anything that says okay. This makes sense.

Subhalaxmi T. Nambi: Well, maybe we can catch up offline. Yeah, so, you know, I think we've effectively identified the contributors to Q1. And we quantify those phenocyclers that were delayed due to those purchases as we quantify the shift in the CDX revenue the second half and bring our guide down. You know, those were the metrics that we determined to say we've got some fundamental contribution of the macro to the guide.

Speaker Change: Well, maybe we can catch up offline.

Speaker Change: Yes, so so.

Speaker Change: We've effectively so as we look at.

Speaker Change: The contributors to the Q1 Miss.

Speaker Change: And we quantify.

Speaker Change: Those <unk> that.

Speaker Change: That were delayed due to those purchases as we quantify the shift in the <unk> revenue in the second half.

Speaker Change: And bring our guide down those where the metrics that we determined to say we've got some fundamental contribution of the macro to the guide but overall the point is that are we believe that we've embedded initially.

Subhalaxmi T. Nambi: But overall, the point is, Subhu, that we believe that we've embedded initially in and in our full-year guide some contributions to the macro that continued in Q1, but the overwhelming contributions, in terms of base dollars, to the Key One Myths to Six Million. You call that sort of, you know, low single digits of that was the CDX shift.

Speaker Change: And.

Speaker Change: And our full year guide some contributions to the macro the continued in Q1, but the over overwhelming contributions in terms of base dollars to the Q1, Miss the $6 million.

Speaker Change: You called out sort of.

Speaker Change: Low single digits of that.

Speaker Change: Was the CTX shift and we can account for nearly the majority of the remainder and instrument purchases that were shifted.

Brian McKelligon: And we can account for nearly the majority of the remainder in instrument purchases that were shifted. Goddard. Thank you guys. Our next question will be from Rachel Vadenstal of J.P. Morgan. Perfect. Good afternoon.

Speaker Change: Got it thank you guys.

Speaker Change: One moment for our next question.

Speaker Change: Our next question will be coming from Rachel <unk> of J P. Morgan.

Rachel: Perfect. Good afternoon. Thanks for taking the question you guys. So first up I just wanted to ask on after that Matthew touched on budgets are bad. So I was wondering if you could unpack that for us a little bit more well, obviously the conversations youre, having with your academic and government customers and then what is assumed in guidance and our budget outflow standpoint across the U S and Europe.

Rachel Marie Vatnsdal Olson: Thanks for taking the question, you guys. So first up, I just want to ask about academics. You touched on budgets a bit. So I was wondering if you could unpack that for us a little bit more.

Rachel: Well the assumption.

Brian McKelligon: Walk us through the conversations you're having with your academics and government customers. And then what is assumed in guidance from a budget outflow standpoint across the US and Europe as well? Well, the assumption is that the budget outflow in academia is essentially in line with... the Flat NAIH budget that was put in place, and then the EU Horizons flat this year in a cut.

Rachel: The budget outflow in academia is essentially in line with the.

The flat NIH budget that was that was put in place and then the EU horizons flat. This year in a cut next year. So that's the assumption in.

Rachel Marie Vatnsdal Olson: So that's the assumption in the revenue guide with respect to the overall funding within those market segments and then how we contemplate the impact of that funding on our funnel velocity, on our conversion rates. You know, that's a byproduct of the detailed analysis of pipeline, funnel growth, opportunity expansion, and how we look at those conversion rates, which then determine what we believe to be our Q2, Q3, and Q4 instrument revenue given these changing dynamics.

In the revenue guide with respect to the overall funding within those market segments.

Rachel: And then how we contemplate.

Impact of that funding on our funnel velocity on our conversion rates.

Rachel: That's a byproduct of the detailed analysis of pipeline funnel growth opportunity expansion and how we look at those conversion rates, but then determine what we believe to be our Q2 Q3 and Q4 instrument revenue given these changing dynamics knowing that we have now exited.

Rachel Marie Vatnsdal Olson: Knowing that we have now exited the acute Q1 challenges from the reagent side that caused some of those instrument purchases. Great. And then, just as my follow-up from a geographic standpoint, can you tell us how performance trended by region in the quarter? And are there any regions where you're feeling better or worse in terms of the back half ramp?

The acute Q1 challenges from the reagent side that caused some of those instrument purchases to be delayed.

Speaker Change: Great and then just as my follow up from a geographic standpoint can you tell us how performance trended by region in the quarter.

Speaker Change: Any regions, where you're feeling better or worse in terms of the back half ramp and then you mentioned some of the volatility in China as well I was just wondering can you clarify for us given how China performed the last 12 months, how much is China revenue in terms of the client base at this point. Thank you.

Brian McKelligon: And then you mentioned some of the volatility in China as well. I was just wondering, could you clarify for us, given how China, you know, has performed in the last 12 months, how much is your Chinese revenue in terms of Akoya's base at this point? Thank you. Yeah, so China is historically so in this last quarter, APAC was about 18% of the total. And that was sort of consistent with full year 2023.

Brian McKelligon: You know, you can think China is sort of 60 to 70% of that. So that is the Chinese contribution. In terms of the regional performance within the quarter, AIPAC was the most challenged, and North American and EMEA were fairly similar in sort of the high single digits, low single digits, year-over-year.

Speaker Change: Yes, so China is historically so in this last quarter APAC was about 18, 818% of the total and that was sort of consistent with full year 2023.

Speaker Change: You can think china's sort of 60% to 70% of that.

So that is that is the China contribution in terms of.

Speaker Change: The regional performance within the quarter.

Speaker Change: APAC was the most challenged and North American and EMEA were were fairly similar in sort of the high single digits low single digits.

Speaker Change: Year over year challenge.

Speaker Change: Okay, and one moment for our next question.

Brian McKelligon: One moment for our next question. Our next question will come from Mason Carrico of Stevens. Your line is open, Mason. Hey guys, thanks for taking the question. Sorry about the issues earlier.

Our next question will come from Mason Caracol.

Mason Owen Carrico: Stephens Your line is open Mason.

Mason Owen Carrico: Hey, guys. Thanks for taking the question sorry about the issues earlier, a lot's been asked I'll keep it to one.

Mason Owen Carrico: A lot of questions have been asked; I'll keep it to one. Could you talk a little bit about the growth you've seen in your CRO service network and, broadly, are you seeing any dynamic where customers are increasingly deciding to outsource their samples or their work to CROs instead of purchasing another instrument themselves given the upfront capital costs? Yeah, to your last question first. Our CRO, our network of CRO providers, the 20 or so, those are increasingly our highest quality, whether they're on the HTs or the PCFs.

Could you talk a little bit about the growth you've seen in your CRO service network and then broadly.

Are you seeing any dynamic where customers are increasingly deciding to outsource their samples or their work to <unk> instead of purchasing another instrument themselves given the upfront capital cost.

Speaker Change: Yes to your last question first.

Speaker Change: Our our CRO.

Speaker Change: Our network of CRM providers.

Speaker Change: One year or so.

Speaker Change: Those are increasingly.

Speaker Change: Increasingly our highest users.

Speaker Change: They are on the HTS or the PCF or both.

Mason Owen Carrico: So I do think you see a growing trend, or a consistent growing trend, of outsourcing. And this is particularly true when we have groups, whether they're an academic group or a biopharma group that are working to build large, high-flex panels of 50 to 60 plus plex and then deploy those as a routine commercial offering. And I would say that is a CRO or that is a core lab.

Speaker Change: So I do think you see a growing trend.

Speaker Change: Or consistent growing trend of outsourcing and this is this is particularly true.

Speaker Change: When we have groups, whether they are an academic group or our Biopharma group that are that are working to build large high plex panels of 50% at $50 to 60 plus flex.

And then and then deploy those as a routine commercial offering.

Speaker Change: I would say that as a CRO or that is a core lab.

Brian McKelligon: And so when we speak to the dynamics, Mason, of our customer base, where they want to do a 50 or 60 plex and have that as a standard offering, Now with our ability to deliver that and fully commit to delivering that, that was, just to take some liberties with your question, that sort of dynamic of wanting a routine 50 to 60 plus offering to make broadly available. Solving for that problem, which we had throughout the first part of the first quarter, is really fundamental to not just recovering a reagent but enabling reference-driven instrument opportunities that were kicked forward because of the issue. So that is an absolute dynamic. In our own internal.

Speaker Change: So when we speak to the dynamics of our customer base.

Where are they wanted to do a 50 or 60 plex and have that as a standard offering.

Speaker Change: Now with our ability to deliver that and fully commit to delivering that that was just to take some liberties with your question that sort of dynamic of 180 routine $50 to 60 plus offering.

Speaker Change: To make broadly available solving for that problem, which we had throughout the first part of the first quarter is really fundamental to not just recovering a reagent growth.

Speaker Change: But enabling referenced driven instrument opportunities that were kicked forward because of the issues. So that is an absolute dynamic in our own internal.

Speaker Change: <unk> services.

Mason Owen Carrico: Lab Services. We try our best to not directly compete with our CRO partners and really focus, primarily. [inaudible] You look at our Q4 lab services revenue, and it's a bit of an asterisk, but you look at our Q1 with the slide deferral, you can see that that momentum is continuing. Got it. That's helpful.

Speaker Change: We try our best to not directly compete with our CRO partners and really focus primarily.

On those large significant late stage opportunities that have a good probability of turning into a clinical trial assay and an ongoing clinical study and so and so with that and I think <unk> is a great example of a catalyst that's going to drive those.

Speaker Change: And <unk>.

Speaker Change: You look at our Q4 lab services revenue and it's a bit of a astros, but you look at our Q1 with a slight deferral you can see that that momentum is continuing to build.

Speaker Change: Got it that's helpful. Thank you.

Speaker Change: And one moment for our next question.

Operator: Thank you. And one moment for our next question. And our last question will be coming from Timothy Chiang of Capital One. Timothy, your line is open.

Speaker Change: And our last question will be coming from Timothy Chiang of capital one Timothy Your line is open.

Timothy Chiang: Alright. Thanks.

Timothy Chiang: All right, thanks. Johnny, you gave a little bit of guidance for the fourth quarter, and obviously, it's sort of back of the envelope, assuming 20% growth over the fourth quarter last year on the top one. I mean, do you expect growth? As Brian sort of highlighted in his prepared remarks, progressing back towards the growth rate that we have seen historically. In region revenue, I mean, that's obviously one of the more important high-margin businesses that you guys have. You know, how quickly do you think that will recover?

Timothy Chiang: Johnny you gave a little bit of guidance for the fourth quarter.

Timothy Chiang: And obviously, it's sort of back of the envelope.

Timothy Chiang: I mean, 20% growth over the fourth quarter of last year on the top one.

Timothy Chiang: Do you expect growth.

John Frederick Ek: To occur in the second quarter or is it more much more heavily weighted to the back half of this year.

John Frederick Ek: Yeah. Thanks, Tim I would look at sort of a progression up to that growth rate into Q4. So.

Speaker Change: We don't expect again without giving direct guidance on each quarter, we don't expect.

Speaker Change: Q2 to be a roaring quarter, and then and then.

Speaker Change: At that level for the year, we expect sort of a sequential through the year to get back as Brian sort of highlighted I think in his prepared remarks.

Speaker Change: Progressing back toward the growth rates that we've seen historically.

And reagent revenue.

Speaker Change: That's obviously one of the more important high margin businesses that you guys have.

Speaker Change: How quickly do you think that will recover.

Johnny: I mean, you had growth even in the first quarter, but, you know, how quickly do you think you can get to 25, 30% growth again? Yeah, I think that reagents is probably where we have the cleanest and most visibility right now because we have the facility fully running, able to supply customers all the reagents they need. And so, as you can imagine, in Q1, we were bringing that live, and we still had a good quarter of reagents in Q1.

Speaker Change: You had growth even in the first quarter, but.

Speaker Change: How quickly do you think you can get to 25% 30% growth again.

Speaker Change: Yeah, I think that our reagent is probably where we're we have the cleanest and most of his ability right now because we have the.

Speaker Change: Salary fully running able to supply customers all the reagents they need and so as you can imagine in Q1, we were bringing that live when we still had a.

Good quarter regions in Q1, and the rest of the year, we expect to be able to get back to that.

Johnny: So for the rest of the year, we expect to be able to get back that normalized reagent growth rate relatively quickly, and 60% gross margin is still achievable sometime in the back half of this year. Yeah, yeah, as I think I mentioned early on, our sort of standard margin for instruments and reagents is both very strong, and we feel it supports that margin growth. It's a matter of making sure that our total revenue, and we have some of the CDX revenue, which can be at a nice margin, that we ensure we have that base to cover the fixed costs of that new facility in Q1 that we incur.

Speaker Change: Normalized reagent growth rate relatively quickly.

And 60% gross margins is still achievable.

Speaker Change: Sometime in the back half of this year, yes, yes, I think I mentioned early on are our sort of standard margin for instruments and reagents are both very strong and we feel support that margin growth, it's a matter of making sure that our total revenue.

Speaker Change: And we have some of the Cds revenue, which can be a nice margin that we have.

Johnny: But we're comfortable with kind of how we see the full year from a gross margin perspective, basically initiatives that we've already started and are starting to see the fruit from. Okay, great. Thanks. And I'm showing no further questions. I would now like to turn the call back to Brian for his closing remarks. Yeah, look, thank you. Thank you all for your questions and your time. I know that we covered a lot of ground and it was a very unique and challenging quarter for Akoya given our historical consistent execution, but I think we firmly believe that we have proactively addressed the core drivers of the top-line myths, particularly those driven by the instruments and our temporary manufacturing transition.

Speaker Change: Sure we have that base to cover fixed cost of that new facility in Q1 that we incur but but we're comfortable with with kind of how we see the full year from a gross margin perspective based on the initiatives that we've already started and starting to see it.

Speaker Change: Okay, great. Thanks.

Speaker Change: Yes.

Speaker Change: And I'm showing no further questions I would now like to turn the call back to Brian for closing remarks.

Brian: Yes. Thank you. Thank you all for your questions and your time I know that we covered a lot of ground and it was it was a very unique and challenging quarter for Korea, given our historical <unk>.

Brian: And execution, but I think we firmly believe that we have proactively addressed the core drivers of the top line Miss particularly those driven by by the instruments are temporary manufacturing transition.

Johnny: So with that and the clinical revenue push in the second half of the year, we really feel like we've got ourselves on track to recover and see continuous sequential improvements in our top line performance, as well as our margin. And, you know, countering that in the mid to longer term, the three partnerships we've talked about really are showing really high value clinical market opportunities. And we feel like these current emerging opportunities, which are really late stage programs, provide us the ability to deliver either long-term clinical value coupled with recovery on the core business side.

Brian: So with that in the clinical revenue post the second half of the year, you really feel like we've got ourselves on track to recover and see our continuous sequential improvements in our topline performance as well as our margin.

Brian: Forms.

Brian: And I think chartering that in mid to longer term.

Brian: The three partnerships, we've talked about really.

Brian: Are showing really high value.

Brian: Clinical market opportunity and we feel like these churn emerging opportunities, which are really late stage program provide us the ability to deliver long term clinical value coupled with the recovery on the core business side. So with that we thank you for your time and look forward to following up.

Brian McKelligon: So with that, we thank you for your time and look forward. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now. All right. Thanks, everyone. Thank you for watching! ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

Speaker Change: Ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

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