Q1 2024 Standard BioTools Inc Earnings Call

Operator: Good day and welcome to the Std Biotools Inc first quarter 2024 earnings conference call. All participants will be in the suddenly mode. Should you need assistance, please see the World Conference Specialists for Pressing the Star Key, followed by Xero. Please note, today's event is being recorded. It's now my pleasure to introduce David Holmes of Investor Relations.

Good day and welcome to the standard Bio tools, Inc. First quarter 'twenty to 'twenty four earnings conference call.

David Holmes: All participants will be in a selling mode.

Speaker Change: You need assistance, please see the old conference specialist by pressing the star key followed by zero.

Operator: Please note today's event is being recorded its now my pleasure to introduce David Holmes of Investor Relations.

David Holmes: Thank you, Operator, and good afternoon, everyone. Welcome to Std Biotools' first quarter 2024 earnings conference call. Leading the call today is Michael Egholm, President and Chief Executive Officer, and Jeff Black, Chief Financial Officer. At the close of market today, Std Biotools released its financial results for the quarter ended March 31, 2024. During the call, we will review our results and provide an update on our financial and operational performance for 2024, as well as market trends and strategic initiatives.

David Holmes: Thank you operator, and good afternoon, everyone. Welcome to standard Biofuels first quarter 'twenty 'twenty four earnings conference call, leading the call today is Michael Holmes, President and Chief Executive Officer, and Jeff Black Chief Financial Officer.

David Holmes: At the close of market today standard buyer tools released its financial results for the quarter ended March 31, 2024 during the call. We will review our results and provide an update on our financial and operational performance 'twenty 'twenty four outlook.

David Holmes: Market trends.

David Holmes: Jake initiatives.

David Holmes: During this call, we will be making forward-looking statements about events and circumstances that have not yet occurred, including plans, projections of our business, our outlook for 2024, and future financial results, market trends and opportunities, and our expectations related to the combined operations with SomaLogic, including potential synergies and our business outlook for the combined company. These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectations.

David Holmes: During this call we will be making forward looking statements about <unk> and circumstances that have not yet occurred including plans projections of our business our outlook for 2024, and future financial results market trends and opportunity and our expectations related to the combined operations with <unk>.

David Holmes: Including potential synergies and our business outlook for the combined company.

David Holmes: These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectations.

David Holmes: The forelooking statements on this call are based on information currently available to us, and we disclaim any obligation to update these statements, except as may be required by law. During the call, we will also present some financial information on a non-gap basis. We believe these non-GAAP financial measures are useful in evaluating our core performance and as a baseline for assessing the future earnings potential of the company. We use these non-GAAP measures in our own evaluation of continuing operating performance. We encourage you to carefully consider our results on a gap and non-gap basis.

David Holmes: The forward looking statements on this call are based on information currently available to us and we disclaim any obligation to update these statements except as may be required by law.

David Holmes: During the call. We will also present some financial information on a non-GAAP basis. We believe these non-GAAP financial measures are useful in evaluating our core performance and as a baseline for assessing the future earnings potential of the company.

David Holmes: We use these non-GAAP measures and our own evaluation of continuing operating performance. We encourage you to carefully consider our results on a GAAP and non-GAAP basis.

David Holmes: The reconciliation between non-GAAP measures and their GAAP equivalents are provided in the tables accompanying today's press release and as an appendix to today's presentation slides.

David Holmes: Please note management will be referring to a slide presentation, including updated supplemental financial information within the webcast today.

David Holmes: Boeing management's remarks, we will host a Q&A session.

David Holmes: Today's slide presentation, along with the replay of the webcast are available on the investors section of our website.

David Holmes: The reconciliation between non-GAAP measures and their GAAP equivalents is provided in the tables accompanying today's press release and as an appendix to today's presentation slide. Please note that management will be referring to a slide presentation, including updated supplemental financial information, during the webcast today. Following management's remarks, we will host a Q&A session. Today's slide presentation, along with a replay of the webcast, are available on the investor section of our website. I would now like to turn the call over to Michael Egholm, President and CEO of Std Biotools.

David Holmes: I'd now like to turn the call over to Michael <unk>, President and CEO of standard modules Michael.

Michael Egholm: Thank you, David. We greatly appreciate everyone joining us on today's call after a successful first year of operation at Std Biotools and now on to our first full quarter with an integrated SumaScan platform and SumaLogic team. Integrating technologies is hard; integrating culture is harder.

Michael Egholm: Thank you David we greatly appreciate everyone joining us on today's call. After a successful first year of operation at stand about tools and now onto our first full quarter of it and integrate it so much kind of platform and so my logic team.

Michael Egholm: But this has been one of the smoothest of the dozens I've been involved in over my career. Thanks go to the management team at SomaLogic who stepped in and helped the operating team at Stand Up Truth through the hard work of bringing diverse organizations and platforms together. It is a testament to both cultures and a clear recognition that each believe in the statement that we are indeed better together. So, thank you to everyone involved.

Michael Egholm: Integrating technologies as hot integrating cultures hada, but this has been one of the smoothest stuff that does since I've been involved in all my career. Thanks go to the management team at Soma logic, who leaned in and help the operating team at standard chewed through the half.

Michael Egholm: Good work of bringing diverse organizations and platforms together.

Michael Egholm: It is a testament to both cultures.

Michael Egholm: And clear recognition that each belief in the statement that we are indeed better together. So thank you everyone involved.

Michael Egholm: Now on to the realization of their teamwork on the power of scale in life sciences. We are ahead of plan on operating synergy targets and now expect to achieve 50 million of the 80 million expected synergies we projected by the end of this year. Next year, we'll capture the remaining 30 million of that initial synergy target.

Michael Egholm: Now on to the realization of that team work on the power of scale and life Sciences.

Michael Egholm: We are ahead of plan on operating synergy targets and now expect to achieve $50 million of the $80 million expect synergies we projected by the end of this year next year, we will capture the remaining $30 million of that initial synergy targets as an organization. We are laser focused on reducing cash burn.

Michael Egholm: As an organization, we are laser focused on reducing cash burn and accelerating profitability while maintaining long-term growth prospects through focused investments in our commercial organization and our R&D pipeline. Importantly, in addition to the operational, technological, and financial leverage achieved in the combination, we are experiencing the early benefits of a more diversified revenue and customer mix. As our peers have discussed this quarter, it remains a challenging market for capital equipment sales and life sciences, perhaps one of the most challenging in the last decade.

Michael Egholm: And accelerating profitability.

Michael Egholm: While maintaining long term growth prospects through focused investments in our commercial organization and our R&D pipeline.

Michael Egholm: Importantly, in addition to the operational technological and financial leverage achieved in the combination we are experiencing the early benefits of a more diversified revenue and customer mix and.

Michael Egholm: As our peers have discussed this quarter it remains a challenging market for capital equipment sales in life Sciences, perhaps one of the most challenging in the last decade at stent that while we are seeing similar headwinds our consumable and service business, which now includes so much scan and its high quality service offering.

Michael Egholm: At Standard, while we're seeing similar headwinds, our consumable and service business, which now includes SomaScan and its high-quality service offering, are helping to smooth our growth while we continue to expand our overall corporate growth margins and reduce costs and cash burns. Now, let's dive in to our quarterly performance and some highlights from our product portfolio. In the first quarter, on a performer-combined basis, we observed revenue growth of roughly 2% year-over-year.

Michael Egholm: Ah helping to smooth out of growth, while we continue to expand our Oh, all corporate gross margins.

Michael Egholm: And reduce cost and cash burn.

Michael Egholm: Now, let's dive into our quarterly performance and some highlights.

Michael Egholm: From a product portfolio in the first quarter on a pro forma combined basis. We have showed revenue growth of roughly 2% year over year. This is 80% revenue growth on an as reported basis year over year with the impact of Soma scanner revenue in 2024.

Michael Egholm: This is 80% revenue growth on an as-reported basis year-over-year, with the impact of so much revenue in 2024. This is largely in line with our expectation, considering the aforementioned ongoing macroeconomic challenges affecting the life science industry, which extended sales cycles, which again pushed some instrument purchases beyond Q1. Importantly, with the benefits of cost rationalization, we delivered a 26% reduction in non-gap operating expenses and a 45% adjusted EBITDA improvement on a performer combined basis.

Michael Egholm: This is largely in line with our expectation considering the aforementioned ongoing macroeconomic challenges impacting the life science industry with extended sales cycles, which again pushed some instrument purchases beyond Q1.

Michael Egholm: Importantly, with the benefits of cost rationalization, we delivered a 26% reduction in non-GAAP operating expenses and 45% adjusted EBITDA improvement on a pro forma combined basis.

Michael Egholm: This is the power of the Std Biotools model, actively pursuing M&A as an augmentation to organic growth, building scale in a highly fragmented space, and using that to achieve operational leverage. Our expanded portfolio offers products across multiple distinct product categories, including instruments, consumables, field-based services, and now our SOMA Scan service. To give you a sense of our sales mix this quarter, on a performer-based basis, instruments accounted for approximately 11% of revenue in Q1, consumables and kits made up 40%, instrument support services 13%, and soma scan services 34%.

Michael Egholm: This is the power of the standup articles model actively pursuing M&A as an augmentation to organic growth building scale in a highly fragmented space and using that to achieve operational leverage.

Michael Egholm: Our expanded portfolio office product across multiple distinct product categories, including instrument consumables field based service and now our Soma scant service to give you a sense of our sales mix this quarter on a pro forma combined basis instruments accounted for approximately 11%.

Michael Egholm: Our revenue in Q1 consumables and kits made up 40% instrument support services, 13% and so much again. So this is 34% importantly, our combined recurring sources of consumable and instrument support services revenue bolstered by our expenses servicing kit offerings represented.

Michael Egholm: Importantly, our combined recurring sources of consumables and instrument support services, revenue bolstered by our expansive service and kit offerings, represented about 90% of total revenue, which served as a nice offset to softer capital equipment purchases. While our SomaScan business is still concentrated in a few handful of key pharma accounts, where revenue can be lumpy and is dependent on the timing of projects and available budgets, these expanded revenue sources further enhance our diversification, and the more diversified we become, the better we can navigate capital cycles like the one we currently find ourselves operating in. Furthermore...

Michael Egholm: 90% of total revenue, which served as a nice offset to softer capital equipment purchases, while our Soma scanner business is still concentrated in a few handful of key pharma accounts, where revenue can be lumpy and is dependent on timing of projects and available budget. These expanded revenue sources for them.

Michael Egholm: <unk> enhanced our diversification and the more diversified we become the better we can navigate cabot's in sites like the kind of like the one you're currently find ourselves operating in.

Michael Egholm: Furthermore.

Michael Egholm: These offerings cater to a broad customer base across academic research and biopharma, positioning us well for sustained growth in these large and attractive markets. We believe it's a key opportunity to leverage our combined technology platforms for future offerings, particularly expanding our existing lab service business into a multi-modality offering, providing customers premium data with clinical solution support in a model we call Multi-omics as a Service. This approach is a natural extension of what we do and provides a quicker path to technology adoption while avoiding some of the capital budget constraints currently facing the broader biopharma market.

Michael Egholm: These offerings cater to a broad customer base across academic research and Biopharma positioning us well for sustained growth in these large and attractive markets.

Michael Egholm: We believe the key opportunity to leverage our combined technology platforms for future offerings.

Michael Egholm: Particularly are expanding our existing lab. So this business into a multi modality offerings, providing customers premium data with clinical solution support and a model we call multi omics as a service.

Michael Egholm: This approach is a natural extension of what we offer and provides a quick a pet to technology adoption, while avoiding some of the capital budget constraints currently facing the broader biopharma market. We are also exploring new models to selling Soma scant boat with a lower plex more cost.

Michael Egholm: We are also exploring new models to sell somascan, both with a lower plex, more cost-effective model and a single somamere reagent. Of the most exciting is the early enthusiasm from our partnership with Illumina, which will broaden market access through the Illumina-NGS partnership. We are off to a strong start, and Illumina began its early access program with a small number of customers in the first quarter. Early feedback has been overwhelmingly positive.

Michael Egholm: It's a model and a single Soma reagents.

Michael Egholm: Of the most exciting is the early entre. She asked me traction from our partnership with Illumina, which would broaden market access to the Illumina MTS partnership we're off to a strong start and illuminate began its early access program with a small number of cross customers into first quarter early feedback has been.

Michael Egholm: Overwhelmingly positive as a reminder, this jointly developed product allows customers to run their highest plex almost kind of had to utilizing the installed base of Noah's seeks S. E. T S readout as demonstrated by our successful <unk> program.

Michael Egholm: As a reminder, this jointly developed product allows customers to run their highest-plex soma scan assay, utilizing the installed base of NOAA-Seqs as an NGS readout. As demonstrated by our successful authorized sites program, there is clear demand from our customers to be able to run the assay on a distributed basis or via kits. The teams from both companies are working closely together, and Illumina is on track for a full commercial release in early 2025. Std Biotools is a true enabler for scientists, allowing them to answer the most difficult questions they have.

Michael Egholm: Clear demand from our customers to be able to run to assay on a distributed basis all kids spaces. The teams from both companies are working closely together and Illumina is on track for a full commercial release in early 2025.

Michael Egholm: <unk> is a true enabler for scientist, allowing them to answer the most difficult questions. They have while we focus on building ohmic solutions, our job is to supply services instruments and consumable for researchers to produce the Omega answer that's rather than to their scientific question. This is how we.

Michael Egholm: While we focus on building OMICS solutions, our job is to supply services, instruments, and consumables for researchers to produce the OMICS answer that's relevant to their scientific questions. This is how we fundamentally look at our business and business units. If you look at our business today through an ohmic lens, our performance was as follows. Proteomics accounted for roughly 80% of our total revenue this quarter, representing a 3% increase year-over-year. We continue to lead with the industry's most comprehensive and differentiated proteomics platform, comprising high-plex plasma proteomics, flow cytometry, and spatial biology. Despite the modest year-over-year growth, we have a high conviction that these technologies represent exciting near and long-term growth opportunities due to their innovative applications and strong end-market demand. Our genomic solutions are currently in decline.

Michael Egholm: Mentally look at our business and business units. If you look at our business today, It's one O make lens. Our performance was as follows proteomics accounted for roughly 80% of our total revenue this quarter, representing a 3% increase year over year, we continued to lead but the interest rates most comfort.

Michael Egholm: Hence it and differentiated proteomics platform comprising high plex plasma proteomics flow cytometry and spatial biology does.

Michael Egholm: Spite the modest year over year growth, we have a high conviction that these technology represent exciting near and long term growth opportunities due to the innovative applications and strong end market demand.

Michael Egholm: Gnomic solution currently in decline and as discussed before we manage our legacy Microfluidic solution for profitability not quote while down 6% year over year. The bright spot is our strategic transition to use this technology as an OEM provider and strategic enabler.

Michael Egholm: And as discussed before, we manage our legacy microfluidics solution for profitability, not growth. While down 6% year-over-year, the bright spot is our strategic transition to use this technology as an OEM provider and strategic enabler to a core set of customers, including another leading proteomics company which currently has approximately 200 of the OEM instruments in the field, which are, again, dependent on our microfluidics consumables. Finally, we have been laser-focused on strategic capital allocation to drive long-term value creation.

Michael Egholm: To a core set of customers.

Michael Egholm: Including another leading proteomics company, which currently has approximately 200 of the OEM instruments in the field.

Michael Egholm: Which again dependent on our Microfluidics consumables.

Michael Egholm: Finally, we have been laser focused on strict strategic capital allocation to drive long term value creation, we are committed to targeted investment in our existing technologies.

Michael Egholm: We're committed to targeted investment in our existing technologies and platforms and to M&A, of which we have a full pipeline of potential partners. We also preserve shareholder value via share buybacks and opportunistically simplifying our capital structure. To that end, in mid-March, we announced an agreement with our two largest shareholders, Viking Global and Kasten Capital, to exchange all outstanding shares of their CSB convertible preferred stock for shares of common stock and eliminate all associated CSB preferred rights and privileges.

Michael Egholm: And platforms and to M&A of which we have a full pipeline of potential partners. We also preserve shareholder value via share buybacks and opportunistically simplifying our capital structure to that end in mid March we announced an agreement with our two largest shareholders Viking global and <unk>.

Michael Egholm: <unk> capital to exchange all outstanding shares of series B convertible preferred stock for shares of common stock and eliminated all associated series B preferred rights and privileges coupled with our share buyback. These actions represent major steps forward in streamlining and.

Michael Egholm: Coupled with our share buyback, these actions represent major steps forward in streamlining and simplifying our capital structure, which we believe will ultimately make us more attractive to new long-term investors and potential M&A partners. Std Biotools today is a growing leader in the life science tool sector, which remains fragmented, under-resourced, and for most companies unprofitable. Today I'm excited to address you as a unified company with a fortified balance sheet, a diverse product mix, and a scaled platform that integrates critical life science solutions under one roof and equally report on a firm path to profitability in early 2026.

Michael Egholm: Defying our capital structure, which we believe will ultimately make us more attractive to new long term investors and potential M&A partners.

Michael Egholm: Standby tools today.

Michael Egholm: Growing leader in the license to sector, which remains fragmented under resource and for most companies unprofitable today I'm excited to address you as a unified company with a fortified balance sheet diverse product mix and a scaled platform that integrates critical life science solutions under one roof.

Michael Egholm: And equally important on a firm path to profitability in early 'twenty six.

Michael Egholm: Looking ahead, we are reaffirming our full-year revenue guidance of $200 million to $205 million for 2024, and we are on track to achieve approximately $300 million in revenue in 2026. I now turn the call over to Jeff to discuss our financial results in more detail.

Michael Egholm: Looking ahead, we are reaffirming our full year revenue guidance of $200 million to $205 million for 2012, and we are on track to achieve approximately $300 million in revenue in 2026.

Michael Egholm: I'll now turn the call over to Jeff to discuss our financial results in more detail.

Michael Egholm: Jeff.

Jeff Black: Thank you, Michael. And thank you all for joining our call today. As a reminder, our first quarter results on an as-reported basis include the combined operations of Std Biotools and SomaLogic since the close of the merger on January 5 of this year, while the first quarter of 2023, as reported, includes the financial results of the Std Biotools legacy business only. So for comparative purposes, we think it's much more meaningful to look at the combined results of operations for both businesses. So my commentary today will focus on the pro forma combined results for both Std Biotools and Somalogic for both the first quarter, 23 and 24.

Jeff: Thank you Michael and thank you all for joining our call today.

Jeff Black: As a reminder, our first quarter results on an as reported basis include the combined operations of standard bio tools and <unk> since the close of the merger on January 5th of this year, while the first quarter of 2023 as reported includes the financial results of the <unk> legacy business only.

Jeff Black: So for comparative purposes, we think it's much more meaningful to look at the combined results of operations for both businesses. So my commentary today will focus on the pro forma combined results for both standard bio tools and some logic for both the first quarter 'twenty three and 'twenty four and that includes the stub period between January one 'twenty four and have closed.

Jeff Black: And that includes the stub period between January 1, 24 and the close of the merger on January 5. As a reminder, please refer to today's press release and the appendix to our investor deck for more information, including a reconciliation of GAAP to the non-GAAP measures I'll be discussing here. So starting off with revenue in the first quarter, our pro forma combined revenue was just over 46 million. It grew about 2%, as Michael said, largely in line with expectations.

Jeff Black: The merger on January 5th.

Jeff Black: As a reminder, please refer to today's press release, and the appendix to our investor deck for more information, including a reconciliation of GAAP to the non-GAAP measures I'll be discussing here.

Jeff Black: And again, all while continuing to navigate the lingering headwinds from the challenging macroeconomic environment. The Somascan related business contributed about 24 million in revenue for the quarter and grew over 20%. And that's based on healthy demand from Somascan customers, growth in our kits business to authorized sites, and the initiation of the early access program with Illumina, which, as Michael mentioned, is on track for full commercial launch in 2025. And again, not only do we see the SomaScan-related business as a growth driver for us, it's also a valuable source of revenue diversification for the combined business. And we saw that reflected in our first quarter results. On the standard Biotools instruments, consumables, and instrument support services side of the business, revenues were $22 million, down 12% over last year.

Jeff Black: So starting off with revenue in the first quarter, our pro forma combined revenue was just over $46 million. It grew about 2% as Michael said largely in line with expectations and again, all while continuing to navigate the lingering headwinds from a challenging macroeconomic environment.

Jeff Black: The Soma scan related business contributed about $24 million in revenue for the quarter grew over 20% and that's unhealthy demand from <unk> customers growth in our kids business to authorized sites and the initially initiation of the early access program with Illumina, which as Michael mentioned is on track for a full commercial launch in 2020.

Jeff Black: Five.

Jeff Black: And again not only do we see the Soma skin related business as a growth driver for US. It's also a valuable source of revenue diversification for the combined business and we saw that reflected in our first quarter results.

Jeff Black: On the standard bio tools instruments consumables and instrument support services side of the business revenues were $22 million down 12% over last year and that's due primarily to the lingering economic headwinds, we mentioned, most notably impacting capital budgets in both Biopharma academic research.

Jeff Black: And that's due primarily to the lingering economic headwinds we mentioned, most notably impacting capital budgets in both biopharma and academic research, as well as continuing pressure outside the US. With that said, we do see a robust and growing pipeline of opportunities. We expect a return to growth in the second half of 2024 as macroeconomics are expected to improve and budgetary constraints begin to lift.

Jeff Black: As well as continuing pressure outside the U S.

Jeff Black: With that said, we do see a robust and growing pipeline of opportunities. We expect to return to growth in the second half of 2024 as macroeconomics are expected to improve and budgetary constraints begin to lift.

Jeff Black: Overall, consumables and services in both proteomics and genomics were impacted by our pre-2023 declines in our legacy installed base, and we do expect to see pull-through begin to expand in late 2024 as our 2023 and 2024 installations continue to ramp up. Proteomics as a whole was up 3% year over year, while genomics was down 6% as we continue to manage this business through its planned transition. We've now right-sized our operating expenses in genomics to a positive contribution margin, and we'll continue to drive profitable growth in that segment.

Jeff Black: Overall consumables and services in both proteomics and genomics were impacted by our pre 2023 declines in our legacy installed base and we do expect to see pull through begin to expand in late 2024, as our 'twenty three 'twenty four installations continue to ramp up.

Jeff Black: Proteomics as a whole was up 3% year over year, while genomics was down 6% as we continue to manage this business through its planned transition. We've now rightsize, our operating expenses in genomics to a positive contribution margin and will continue to drive profitable profitable growth in that segment.

Jeff Black: Moving on to our operating performance, non-gap gross margin on a pro forma combined basis expanded by 300 basis points, from 53% to 56%, and that's driven by a combination of product mix and pricing. But it's also important to note here that this also includes over 350 basis points of offset due to the classification of certain operations, services, and quality-related operating expenses that we moved into COGS to align accounting policies between Std Biotools and SomaLogic as a result of the merger.

Jeff Black: Moving onto our operating performance on.

Jeff Black: On margins, our non-GAAP gross margin on a pro forma combined basis expanded by 300 basis points.

Jeff Black: From a 53% to <unk> 56, and that's driven by a combination of product mix and pricing, but it's also important to note here that this also includes over 350 basis points of offset due to the classification of certain operations services and quality related operating expenses that we moved into Cogs to ally.

Jeff Black: In accounting policies between center Biofuels and some logic as a result of the merger. So we expect this will have a similar impact for the full year gross margin in 2024.

Jeff Black: So we expect this will have a similar impact on the full year gross margin in 2024. As we stated before, we continue to make significant strides in aggressively managing residual headwinds related to legacy service and warranty-related costs, often on a customer-specific basis.

Jeff Black: As we stated before we continue to make significant strides in aggressively managing residual headwinds related to legacy service and warranty related costs often on a customer specific basis. We expect this could can continue to create pressure throughout 2024, but we continue to remain confident in our ability to drive our non-GAAP grow.

Jeff Black: We expect this could continue to create pressure throughout 2024, but we continue to remain confident in our ability to drive our non-gap gross margins into the mid-60s over time, especially as we move past these transitory headwinds, we grow sales, and we drive cost improvements through continued deployment of SBS and lean principles across our combined operations. Moving to operating expenses. I'm very pleased to report that we're ahead of plan on our operating expense reduction initiatives.

Jeff Black: Margins into the mid sixties over time, especially as we move past. These transitory headwinds we grow sales and we drive cost improvements through continued deployment of Sps and lean principles across our combined operation.

Jeff Black: Yeah.

Jeff Black: Moving to operating expenses very pleased to report that we're ahead of plan on our operating expense reduction initiatives on a combined pro forma basis non-GAAP opex of just over $49 million decreased by about $17 million or 26% and that just reflects early traction on expense reduction initiatives that began in the.

Jeff Black: On a combined pro forma basis, non-GAAP OPEX of just over $49 million decreased by about $17 million, or 26%. And that just reflects early traction on expense reduction and issues that began in the second half of last year. Keep in mind that our first quarter OPEX excludes about 1.7 million of expenses related to the classification of OPEX in the COGS, as I mentioned.

Jeff Black: Second half of last year.

Jeff Black: Keep in mind that our first quarter Opex exclude about $1 7 million of expenses related to the classification of Opex and the Cogs as I mentioned.

Jeff Black: But even excluding this impact, our combined non-GAAP operating expenses were down over 15 million, or 23%. And that's before we see any impact from the operational restructuring initiatives that we recently implemented. As a reminder, on overall cost out, we previously announced our intention to remove $80 million in non-GAAP operating costs as compared to what we call our jumping off point of $250 million, which was our annualized OPEX based upon the combined first half 2023 run rate. We broke out that target reduction as follows: $40 million in G&A, $20 million in R&D, and $20 million in sales and marketing.

Jeff Black: But even excluding this impact our combined non-GAAP operating expenses were down over $15 million or 23%.

Jeff Black: And that's before we see any impact from the operational restructuring initiatives that we recently implemented.

Jeff Black: And as a reminder, on overall cost out we previously announced our intention to remove $80 million and non-GAAP operating costs as compared to what we call our jumping off point of $250 million, which is which was our annualized opex based upon the combined first half 2023 run rate.

Jeff Black: We broke out that target reduction as follows $40 million in G&A 20 million R&D and $20 million in sales and marketing.

Jeff Black: We also previously announced that we expect to achieve the full $80 million in annualized cost synergies by fiscal 26, and that we would have at least 50%, or $40 million, of that operationalized in 2024, with the full P&L impact of those savings reflected in 2025. Based upon our recently announced reorganization and restructuring initiatives, we now expect to have operationalized $50 million in annual operating expense savings for the full year in 2025, with $40 to $45 million coming from SG&A and $5 to $10 million from R&D.

Jeff Black: We also previously announced that we expect to achieve the full $80 million in annualized cost synergies by fiscal 'twenty six and then we would have at least 50% or $40 million of that operationalize in 2024 with the full P&L impact of those savings reflected in 'twenty five.

Jeff Black: And that's net of a number of planned, focused reinvestments. And finally, to avoid any confusion on this, these OPEX savings are in addition to the reclassification of the 7 to 8 million in annual OPEX into COGS that I mentioned before. So in total, we expect that approximately 20 to 25 million of these savings will show up in the P&L in 2024, and the full P&L impact will be reflected in So based upon these efforts, we are very enthusiastic, more than ever, about the value we expect to generate under our now combined cost structure, leveraging the scale and reach of our portfolio and managing to a positive adjusted EBITDA target in 2026. But at the same time, we'll continue to make focused investments in our commercial organization and our R&D pipeline to support sustained long-term revenue growth.

Jeff Black: Based upon our recently announced reorganization and restructuring initiatives. We now expect to have operationalized $50 million in annual operating expense savings for the full year in 2025.

Jeff Black: With 40% to $45 million for coming from SG&A and $5 million to $10 million from R&D and Thats net of a number of planned focus reinvestments.

Jeff Black: And finally to avoid any confusion on this these opex savings are in addition to the reclassification of the $7 million to $8 million in annual Opex into Cogs that I mentioned before.

Jeff Black: So in total we expect that approximately 20% to $25 million of these savings will show up in the P&L in 2024, and the full P&L impact will be reflected in 2025.

Jeff Black: So based upon these efforts we are very enthusiastic more than ever about the value, we expect to generate under our now combined cost structure, leveraging our scale and reach of our portfolio and managing to a positive adjusted EBITDA target in 2026, but at the same time, we'll continue to maintain focus investments in commercial.

Jeff Black: Innovation, and our R&D pipeline to support sustained long term revenue growth.

Jeff Black: That brings me to cash flow and the balance sheet. We ended the first quarter with about $464 million in cash equivalents, restricted cash, and short-term investments. As expected, cash burn was unusually high in the quarter due to several merger-related and other non-operating uses of cash.

Jeff Black: So that brings me to cash flow and the balance sheet. We ended the first quarter with about $464 million in cash equivalents restricted cash and short term investments.

Jeff Black: As expected cash burn was unusually high in the quarter due to several merger related and other non operating uses of cash in the aggregate during the first quarter, we made about $70 million in cash payments for settlement of yearend operating accruals merger related expenses term debt retirement and share repurchases.

Jeff Black: In the aggregate, during the first quarter, we made about $70 million in cash payments for settlement of year-end operating accruals, merger-related expenses, term debt retirement, and share repurchases. Excluding the impact of these items, our adjusted operating cash burn was about $29 million, and that represents about a $5 million or 14% reduction over pro forma combined burn a year ago. And this is before the impact of any of the cost initiatives we recently analyzed.

Jeff Black: Excluding the impact of these items, our adjusted operating cash burn was about $29 million never business represents about a $5 million or 14% reduction over poor pro forma combined burn a year ago.

Jeff Black: And this is before the impact of any of the cost initiatives, we recently announced.

Jeff Black: And we also think it's important to note that some of this quarter's burn is a function of the timing of payments for merger transaction costs. Just as a reminder, when we announced the merger last October, we gave an expected 2023 year-end cash outlook of around $500 million. We actually ended the year at $565 million, with a big driver of this difference being payments that we expected to make in 2023 that were pushed into the first quarter.

Jeff Black: And then we also think it's important to note that some of this quarter burn is a function of the timing of payments for our merger transaction costs. Just as a reminder, when we announced the merger last October we gave an expected 2023 year end cash outlook of around $500 million, we actually ended the year at $565 million with a big <unk>.

Jeff Black: Driver of this difference being payments that we expected to make in 'twenty three that were pushed into the first quarter.

Jeff Black: So we expect our operating cash burn over the next few quarters will reduce significantly. While not at the levels that we saw in the first quarter, we do expect continued cash outlays for merger-related costs, restructuring activities, as well as additional share buybacks we've executed since the end of the first quarter before having recently terminated that program. We're well positioned to fund both these non-operating cash needs and to support the combined business to cash flow breakeven, again, our target of 2026.

Jeff Black: So we expect our operating cash burn over the next few quarters will will reduce significantly.

Jeff Black: Well not at this level that we saw in the first quarter. We do expect continued cash outlays for merger related costs restructuring activities as well as additional share buybacks. We've executed since the end of the first quarter before having recently terminated that program.

Jeff Black: We're well positioned to fund both these non operating cash needs and to support the combined business to cash flow breakeven again, our target of 2026.

Operator: And as we think about any future funding for M&A, you can remain assured that we'll be thoughtful about additional strategic M&A when such opportunities arise, including the related use of cash. And one final update on our capital structure initiatives. As we previously announced in February, the board approved a new share repurchase program of up to 50 million. With our enhanced balance sheet, this has enabled us to repurchase common shares to offset future dilution from possible future equity issuance from our convertible debt and other instruments in our cap structure.

Jeff Black: And as we think about any future funding under for M&A. You can remain assured that we'll be thoughtful about additional strategic M&A, when such opportunities arise, including the related use of cash.

Operator: And one final update on our capital structure initiatives as we previously announced in February the board approved a new share repurchase program of up to $50 million.

Operator: With our enhanced balance sheet. This has enabled us to repurchase common shares to offset future dilution from possible future equity issuance rising from our convertible debt and other instruments in our cap structure.

Operator: We actually saw this as really nothing more than responsible housekeeping, providing flexibility to preserve long-term shareholder value. Including the 11 million in share buybacks through our first quarter, year to date, we've purchased approximately 13.6 million shares, or about three and a half percent of our common outstanding shares for a total of about 36 million in cash at an average repurchase price of $2.68 per share. Well, we still have room available under the 50 million plan that was authorized by the board.

Operator: We actually saw this is really nothing more than responsible housekeeping, providing flexibility to preserve long term shareholder value.

Operator: Including the $11 million in share buybacks through our first quarter year to date, we purchased approximately $13 6 million shares.

Operator: Or about three 5% of our common outstanding shares for a total of about $36 million in cash at an average repurchase price of $2 68 per share.

Operator: While we still have room available under the $50 million plan that was authorized by the board we did terminate the existing buyback plan on may 2nd.

Operator: We did terminate the existing buyback plan on May 2. So, in summary, we're executing operating and financial objectives, we remain responsible stewards of our assets, and we remain committed to creating long-term value for our shareholders. And with that, I'll turn the call back to the operator for Q&A.

Operator: So in summary, we're executing operating and financial objectives objectives, we remain responsible stewards of our assets and we remain committed to create long term value for our shareholders.

Operator: And with that I'll turn the call back to the operator for Q&A.

Operator: Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the... If at any time your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble the roster. And the first question comes from Matt Stanton with Jeffrey.

Speaker Change: Yes. Thank you.

Operator: I will begin the question and answer session.

Matt Stanton: Thanks. Maybe the first one for you, Michael.

Matthew Jay Stanton: I'll ask a question you May press Star then one on your telephone keypad.

Matt Stanton: Speakerphone, please pick up your handset before pressing the keys.

Matt Stanton: Tom Your question has been addressed and you would like to withdraw it. Please press Star then two.

Matt Stanton: At this time, we will pause momentarily to assemble the roster.

Matt Stanton: Yeah.

Matthew Jay Stanton: And the first question comes from Matt <unk> with Jefferies.

Michael Egholm: I think you talked about the early findings from Illumina being overwhelmingly positive. Can you maybe just talk a little bit more about what the initial feedback has been and then some of the important proof points from here and how we should start to think about the commercial launch in 2025? Obviously, you don't flip a switch, so onboarding, ramping up, things to think about. And then, in terms of contribution to SOMA and 1Q, is there any way to quantify what Illumina early access contributed? If you guys would be willing to share that,

Matthew Jay Stanton: Hey, Thanks, maybe first one for you Michael I think you talked about the early findings from Illumina as overwhelmingly positive can you maybe just talk a little bit more about what the initial feedback has been and then some of the important proof points from here and how should we should start to think about the commercial launch into.

Michael Egholm: 25, obviously, you don't flip a switch so onboarding ramping up things to think about and then in terms of contribution to Soma and <unk> is there any way to quantify what the alumina early access contributed if you guys have done.

Speaker Change: Sure. Thanks.

Michael Egholm: Yeah, I'll let Jeff follow up on the last part of the question. The teams have been hard at work for quite a while, and so putting a version of the 7K in the hands of customers was the first, big leap, and essentially able to reproduce what we've been doing internally and maintaining that very high hit rate on many proteins and a low CV, which is what differentiates us. Full launch will be in early 2025, is what Illumina is communicating so far, and will be based on the 11K assay.

Michael Egholm: Yes.

Michael Egholm: Ill, let Jeff follow up on the last part of the question. So.

Michael Egholm: Okay.

Michael Egholm: The teams have been hard at work for quite a while and at this and so putting a version of the seven Kay in the hands of customers as well as the first <unk>.

Michael Egholm: Firstly and essentially.

Michael Egholm: Able to reproduce.

Jeff Black: What we've been doing internally and.

Michael Egholm: At a very like maintaining that very high.

Michael Egholm: Hit rate on many proteins and the low CV, which is what.

Michael Egholm: Differentiate us.

Michael Egholm: The full launch will be in early 'twenty five is what illuminates communicating so far and will be based on 11 K.

Michael Egholm: 11 KSA.

Michael Egholm: I'll say I'm personally much more, even more enthusiastic about this relationship than I was a few months ago when I stepped in, as I've seen the early readouts and the data and also seen the value in having a partner like Illumina with the market reach that they have, which, of course, far, far exceeds ours. And then you had a question here on the timing and transitioning, we're still working through that, but net net, we believe this is going to be a long-term growth driver. Maybe also just a reminder, there was a $30 million payment up front, which basically still sits on our balance sheet as unrecognized. Unrecognized revenue And so, anything to add, Jeff?

Jeff Black: I'm personally much more even more <unk> of this relationship than it was a few months when I when I stepped in as I've seen.

Jeff Black: Early read out in the data and also seeing the value in having a partner like illumina or at the market reach that they have of course.

Michael Egholm: Sure.

Jeff Black: Exceeds ours.

Jeff Black: And then two you had a question here on the timing transitioning we're still working through that but net net we believe this is going to be a.

Jeff Black: Long term growth driver maybe also just a reminder.

Speaker Change: 30 million.

Jeff Black: Payment upfront, which basically still sits on our balance sheet is unrecognized.

Michael Egholm: An unrecognized revenue and so anything to add Jeff.

Jeff Black: Yeah, to your question, Matt, on Illumina, we don't break out revenue specific to Illumina separately, but I can tell you it's still early stages. It's a handful of customers. It's in the, you know, call it the very low millions, very low single millions.

Michael Egholm: Yes.

Jeff Black: To your question, Matt on alumina, we don't breakout revenue specific to Illumina.

Jeff Black: Separately, but I can tell you it's still early stages, it's a handful of customers it's called.

Jeff Black: Call it very low millions very low single millions.

Speaker Change: Okay great.

Matt Stanton: That's helpful. And, um, you know, Michael, you talked about some of the updates coming out of the strategic plan and read out, um, some newer growth opportunities around multi-omics as a service, low-plex, or single-somum, or, uh, reagent models. Do you talk about kind of timing around those, as we think of those as new growth opportunities and any, you know, investments or costs associated with getting those, um, off the ground here?

Jeff Black: That's helpful.

Jeff Black: Michael you talked about some of the uptick coming out of the strategic plan readout.

Matt Stanton: Newer growth opportunities around multi omics as a service low plex or single some of them are reagent models could you talk about kind of timing around those as we think about.

Matt Stanton: This new growth opportunities in any.

Matt Stanton: Investments or costs associated with getting those off the ground here.

Michael Egholm: Yeah, so first off, no, thanks, good, very good question here. As we are reporting it now, and the investments we are making, like the cost savings we projected here so far, 50 million operationalized, and we'll see it flow through here by the end of the year, are net of the investments that we are making in those initiatives. So it's a really important thing to note, and our strategic review confirmed or confirmed and highlighted a number of tweaks to the strategy.

Michael Egholm: Yes, so first off note.

Michael Egholm: Very good question here.

Michael Egholm: Okay.

Michael Egholm: As we are reporting it now and the investments we are making like the cost savings we projected here, so far 50 million operationalized and we'll see it.

Michael Egholm: Flow through here by the end of the year is net of investments that we're making and dose initiatives and it's really important thing too to note.

Michael Egholm: And our strategic review.

Michael Egholm: Confirmed a confirmed and highlight a number of tweaks to the strategy number one was that.

Michael Egholm: Number one was that SomaScan is highly, highly invented, and unlike any other technology we see out there, it's scalable in that as we expand content, we maintain our low CV and do not increase complexity or cost. And that means that we're going to keep investing in that engine to expand that content and put a distance between us and a further distance between us and the competition. Secondly, we saw a very, very high cost of demand for individual Soma mayors, and we've got to recognize that Soma mayors aren't like antibodies, but they are just another affinity reagent, just like an antibody with the same..., approximate affinity and specificity.

Michael Egholm: Soma scan is highly highly advantaged and unlike any other technology, we see out there is scalable and that as we expand content, we maintain our low Cvs.

Michael Egholm: And do not incremental complexity of costs and that means that we're going to keep investing in that engine to expand that content and a.

Michael Egholm: Put a distance between us and further distance.

Michael Egholm: Between us and the competition.

Michael Egholm: Secondly.

Michael Egholm: We saw a very very high customer demand for individual <unk>.

Michael Egholm: And we've got to recognize that Soma has.

Michael Egholm: They're not like antibodies, but they adjust and other affinity agents just like an antibody with the same APA.

Michael Egholm: Approximate affinity and specificity and we have 11000 mono clonal.

Michael Egholm: Human affinity rare.

Michael Egholm: 7000 affinity agents for human proteins, and we believe this represents a unique opportunity we're going to start small and we're going to start operationalize. It hit by the middle of the year initially to our current customers and then offer a much more broadly. So we think there is a very strong pool internally.

Michael Egholm: And we have 11,000 monoclonal human affinity reagents, 11,000 affinity reagents for human proteins. We believe this represents a unique opportunity. We're gonna start small, and we're gonna start operationalizing it here by the middle of the year, initially to our current customers, and then offer it up much more broadly. So we think there's a very strong pull internally, but also from current customers, but we're even beginning to see a much broader opportunity with somameres being a routine reagent used for orthogonal validation of antibodies, or as another thing up a researcher's sleeve when they cannot make an antibody work.

Michael Egholm: But.

Michael Egholm: From current customers, but we even beginning to see a much broader opportunity with someone they as being a routine rage and use too.

Michael Egholm: Talking all validation to antibodies and all be noticing up research asleep when that cannot make an antibody work and then the third piece that.

Michael Egholm: And then the third piece that we recognized was around the value of the service we run. We run a very sophisticated service that works with very sophisticated customers and COOs. So we have the whole workflow from getting all the samples from COOs, running them quickly, and getting bioinformatics analysis and clinical guidance back to our customers. And we expect to lean into this and add some of the other products that we have, most obviously our flow cytometry solution, which we think will be highly synergistic.

Michael Egholm: That we recognized was around the value of the service we run we run a very sophisticated service that work with very sophisticated customers and so we have the whole workflow from getting the cost for getting all the samples from <unk> running them quickly.

Michael Egholm: Getting bioinformatics analysis and clinical guidance back to our.

Michael Egholm: Our customers and we expect to lean into this and at somebody out of products that we have most obviously our flow cytometry solution.

Michael Egholm: Which we think will be highly synergistic.

Michael Egholm: And last but not least we are already as I briefly alluded to in the script.

Michael Egholm: And last but not least, we are already, as I briefly alluded to in the script, beginning to look at how we can combine our microfluidics solution as a readout and maybe, longer term, expand on the workflow. So, maybe a longer answer than what you were asking for, but we're excited here after the strategic review.

Michael Egholm: Beginning to look at how we can combine our microfluidics solution.

Michael Egholm: As a readout and maybe longer term expand on the workflow.

Michael Egholm: So may be longer answer than what you're asking for.

Michael Egholm: We're excited here after the strategic review.

Speaker Change: I appreciate that that's really helpful. I guess, just last one sticking with you Mike.

Michael Egholm: I appreciate that. That's really helpful. I guess just this last one, sitting with you, Michael. In terms of allocations related to M&A, you talked about a pretty healthy pipeline. Just talk about, you know, appetite for deals, maybe potential size of deals, and just the general bandwidth of the team, given, you know, the SOMA integration and a lot of other heavy lifting you guys are doing behind the scenes. Thank you. Yeah, so

Michael Egholm: In terms of application allocations relates to M&A, you've talked about a pretty healthy pipeline and just talk about your appetite for deals maybe potential size of deals and Youre just a general bandwidth of the team given the Soma integration a lot of other heavy lifting you guys are doing behind the scenes. Thank you.

Speaker Change: Yes so.

Michael Egholm: Integration and successful integration is job number one, two, and three. Having said that, I did build out a very strong team here over the last two years. So there's definitely capacity in the team. And we can walk and chew gum at the same time.

Speaker Change: Integration and successful integration is job number one two and three.

Michael Egholm: Having said that I did build out a very strong team here over the last two years. So there is definitely capacity and the team.

Michael Egholm: We can walk and chew gum at the same time secondly, as I'm sure you are all well aware it does really of evil and hitting.

Michael Egholm: Secondly, as I'm sure you are all well aware, there's a real upheaval here in the venture-funded part of the market, and we're seeing ever more interesting assets eager to work with us or eventually to be acquired for us. So we'll be highly disciplined and opportunistic and we will, for sure, just on the size... We won't do anything that's so big that it burns down the very significant buffer we have between where we are now and profitability. And we'll keep working. The bigger deals, as everyone knows from the disclosures, we worked on the Somalogic deal, which was a year and a half plus. And so we'll keep doing that.

Michael Egholm: And debenture funded part of the market and we are seeing evermore interesting assets.

Michael Egholm: Being eager to work.

Michael Egholm: Work, but also eventually to be a quiet for us will be highly disciplined and opportunistic and we will for sure just on the size.

Michael Egholm: We won't do anything that is so big that it burns down on the very significant buffer we have between where we are now in.

Michael Egholm: And profitability.

Michael Egholm: We will keep working.

Michael Egholm: The bigger deals.

Michael Egholm: As everyone know from our disclosures we worked on the <unk> deal what was a year and a half plus.

Michael Egholm: And so we'll keep keep doing that.

Speaker Change: Super Thank you.

Dan Brennan: Thank you. The next question comes from Dan Brennan with TD Gallant.

Michael Egholm: Thank you and the next question comes from Dan Brennan with TD Cowen.

Dan Brennan: Great, thank you. Thanks for the question, guys. Congratulations on the quarter.

Daniel Gregory Brennan: Great. Thank you. Thanks for the question guys congrats on the quarter.

Michael Egholm: Maybe just kind of high level, just on the guide for the year. Obviously, Mike, we talked about some of the CapEx challenges. Unknown Attendee, Michael Egholm, Vikram Jog, Adam Taich, Elizabeth Garcia, Scott Greenstone, Std Biotools

Daniel Gregory Brennan: Maybe just kind of high level just on the guide for the year, obviously, Mike when you talked about some of the Capex challenges.

Daniel Gregory Brennan: The first quarter was kind of a you know a little bit better than you guys expected, but it does imply a nice steep ramp in the back half. So just any any thoughts on like Q2, I think consensus sits at 48 million any thoughts of that that's about right and then if you think about like the growth that's implied in the back half of the year I guess kind of what can you say about how the visibility or just some of the assumptions there.

Michael Egholm: Yeah, so we are confident in the long-term, even the mid-term growth here. So we are navigating, as we talked to all of you about here over the last few months, sort of a number of transitory headwinds, one of them being this very, very tough capex market, as I'm now seeing all our peer companies reporting as well. So what confidence do we have?

Speaker Change: Yes, so we.

Michael Egholm: We are confident in the long term, even the midterm growth here. So we are navigating as we talk to all of you about here over the last few months.

Michael Egholm: A number of transitory headwinds one of them being this very tough capex market is now.

Michael Egholm: Now seeing all our peer companies report as well so what confidence do we have we're seeing our sales funnels.

Michael Egholm: We're seeing our sales funnels are getting larger. I have not seen any cancellations. I've only seen purchases being pushed out.

Michael Egholm: Are getting larger.

Michael Egholm: I have not seen any cancellations I've only seen purchases.

Michael Egholm: <unk> being pushed out and then we're getting or some of the headwinds we had and then not.

Michael Egholm: And then we're getting all or some of the headwinds we had. And then, last but not least, at the AACR last month, we launched sort of the next extension on our Hyperion XTi, new imaging modes with lightning fast and We launched a long-awaited slide loader, which can take 40 slides, and customers can crank through those in 24 to 72 hours.

Michael Egholm: Last but not least.

Michael Egholm: At the ACR here last month, we launched.

Michael Egholm: So at the next extension on our Hyperion ex Ti new imaging modes with.

Michael Egholm: Lightning fast.

Michael Egholm: And we.

Michael Egholm: We launched a long awaited slide loader.

Michael Egholm: Which can take 40 slides and customers could crank through those and 24% to 72 hours.

Michael Egholm: I would add here that we're the only proteomics platform that needs a slide loader out there. So, very excited about the progress and excitement around that. And then last but not least, as we have talked about on the legacy standard BIOS side, our CyTOF flow, there were a number of issues we're working through. And we're really getting confident in the solution and seeing this, our ability to chip away at what is a very big flow market that, with time, or part of that market, will transition to high-parameter flow.

Speaker Change: I would add here, we are the only proteomics platform the need a slight load.

Michael Egholm: So very excited.

Michael Egholm: Our progress and excitement around that and then last but not least as we have talked about on the legacy standup biocide. Our site off flow. There were a number of issues were working through and we're really getting confident in the solutions and see this our ability to chip away of what is a very.

Michael Egholm: Flow market debt.

Michael Egholm: Will the time, a part of that market will transition to high parameter flow in and to that end at the <unk> meeting I think it's actually it was yesterday's <unk> meeting in Edinburg that was work presented by one of our collaborators to show that.

Michael Egholm: And to that end, at the CITO meeting, I think it was yesterday, the CITO meeting in Edinburgh, there was work presented by one of our collaborators that showed that not only do we have fast panel design up to 50 markers, we are hugely advantaged over any other technology when looking at intracellular markers such as cytokines, and that, really, if you want to study that biology, which is really important, we are really the only solution All that gives us hope for the back end and for 2025 and 2026.

Michael Egholm: Only.

Michael Egholm: Fast panel to sign up to 50 markers, we are hugely advantaged or any audit technology unlocking at intra cellular markets such as cytokines and that really if you want to study that biology, which is really important.

Michael Egholm: We are really the only solution to all of that gives us hope for back end and for 25 and 26.

Dan Brennan: Okay. Oh, great.

Michael Egholm: Okay.

Speaker Change: Great and then.

Dan Brennan: A question or two already on some laundry, but really strong quarter up almost 20% and some of our diligence reflected that could be hitting a nice growth inflection here. Despite the challenging market. So is that is that kind of growth sustainable for the year. Do you think just any any any color kind of what you saw I know you've talked a lot about the illumina partnership for 25.

Michael Egholm: And then I know there's a question or two already on Somalogic, but a really strong quarter, up almost 20%. You know, some of our diligence reflected that they could be hitting a nice growth inflection here despite the challenging market. So, is that, is that kind of growth sustainable for the year? Do you think just any, any, any color, kind of what you saw, I know you've talked a lot about the Illumina partnership for 25, but kind of the driver today on Somalogic, and is that kind of growth sustainable for the year?

Michael Egholm: The kind of the driver to that somewhat draconian kind of this kind of growth sustainable for the year.

Michael Egholm: As I noted in my script, we see really..., like strong validation for our assay out there. We are aware of a couple of bake-offs that will be reported soon with our major competitor, which is hugely favorable to us. So long term, we're really bullish on this. The big customers we have in pharma are all project-based and subject to sample availability and budget availability, and we still, while we have a view to move more to translational research, where funding typically is not as temperamental as in discovery. We're still mostly in discovery, so I don't really have a good answer for you there. But we love the quarter we just had on the legacy SOMA scan side.

Michael Egholm: And as I noted in my script.

Michael Egholm: We see really.

Michael Egholm: Like strong validation for our assay out there we are aware of a couple of bake offs that will be reported out soon with our major competitor.

Michael Egholm: Acutely favorable to us so long term we really.

Michael Egholm: We are bullish on this.

Michael Egholm: The big customers, we Havent pharma.

Michael Egholm: All project based and subject to sample availability and budget availability and be still while we have a.

Michael Egholm: A view to move more to translational research.

Michael Egholm: We're funding typically is not as temperamental Essent discovery, we're still mostly in discovery. So I don't really have a good answer for you for you there so but we love the quarter. We just had on the legacy Soma scanner side.

Dan Brennan: Great. And maybe one for Jeff, just in terms of the OPEX leverage, nice leverage in the quarter. Can you give us some thoughts on the pacing of the OPEX for the year and how the synergies flow in kind of as we get towards the back half of the year?

Michael Egholm: Great and maybe one for Jeff just in terms of the Opex leverage nice leverage in the quarter can you give us some thoughts on the pacing.

Jeff Black: On the Opex through the year and how does the synergies flow and kind of as we get towards the back half of the year yes.

Dan Brennan: Yeah, I'll hand that one over to Jeff.

Dan Brennan: Yes, I'll hand that one over to Jeff.

Jeff Black: Yeah Dan, great to hear from you. So, as I said, we've operationalized, you know, 50 million in savings, and so we expect to see the full P&L impact of that 50 million for the full year. That will start to layer in really in the second half of the year, so we expect that we'll see call it 20 to 25 million of that actually hit the P&L in the second half of the year, so you know in the P&L, you'll see somewhere around 40 to 50 percent of that 50 million.

Jeff Black: Yes, Dan great great to hear from you.

Jeff Black: As a as I said, we have what I'll call Operationalized 50 million in savings and so we expect to see the full P&L impact of that $50 million for the full year 'twenty five that will start to layer in really the second half of the year. So we expect that we'll see call it 20%.

Jeff Black: $25 million of that actually hit the P&L in the second half of the year. So.

Jeff Black: In the P&L, you'll see somewhere around 40% to 50% of that $50 million reflected in 'twenty four.

Jeff Black: Great.

Dan Brennan: You'll primarily see it come out of SG&E. All right. Well, great, guys. Thank you very much.

Jeff Black: Primarily you primarily see it come out of SG&A.

Speaker Change: Okay, Alright, great guys. Thank you very much.

Operator: Thank you. The next question comes from Paul Knight with KeyBank.

Dan Brennan: Thank you and the next question comes from Paul Knight with Keybanc.

Paul Knight: Hi, congratulations on what must have been a lot of work to put this number set together. Thanks, Paul.

Paul Richard Knight: Hi, congratulations on what must have been a lot of work to put this.

Paul Knight: Number.

Paul Knight: Together.

Paul Knight: Yeah.

Paul Knight: The color you put out earlier on this SomaScan early partnership on NGS. You know, obviously, O-Link has a readout on NGS that's getting a lot of traction as well. Are you going to be competitive with the O-Link technology on the NGS readout?

Paul Richard Knight: Thanks, Paul Thank you.

Paul Knight: All of you pointed out earlier on this summer scan early partnership on Ngls.

Paul Knight: Obviously only has read out on Ngls, that's getting a lot of traction as well.

Paul Knight: Are you going to be competitive with the old link technology on the Ngls readout.

Michael Egholm: Yeah, so maybe just for sort of a background. SomaLogic in the past stepped away from the market for a three-year period, which gave an opening to O-Link, which they executed beautifully on and, therefore, have many, many more sites up and running than we do. Unknown Speaker, Our solution, together with Illumina, is highly competitive, and the advantage really lies in the..., in the SOMA scan assay, which I alluded to before, but the underlying advantage is that our technology is scalable.

Speaker Change: Yes, so maybe just.

Michael Egholm: For background.

Michael Egholm: So my logic in the past stepped away from the market.

Michael Egholm: Three year period.

Michael Egholm: It's Gabe and opening to OLED with the executed beautifully on and therefore I have many many more sites up and running that we had.

Michael Egholm: Our solution together with Illumina is highly competitive.

Michael Egholm: And it really the advantage really lies in the.

Michael Egholm: In the Soma scan assay.

Michael Egholm: You alluded to it before but the underlying advantages that our technology is scalable we see many many more proteins and we see them at a much much lower CEB, which means that the discovery power.

Michael Egholm: We see many, many more proteins, and we see them at a much, much lower CEV, which means that the discovery power of our assay is many-fold larger than that of O-links, and without discussing cost, but they're sort of in the same ballpark. We think we are highly advantaged in the long term, and I also alluded to bake-offs to be published here over the next year. Okay.

Michael Egholm: Our assay.

Michael Egholm: As many fold larger than that.

Michael Egholm: All links and without discussing cost, but they're sort of in the same ballpark. We think we are we are highly advantage in the long term and I also alluded to.

Michael Egholm: Bake offs.

Michael Egholm: To be published here over the next year.

Michael Egholm: Okay, and then on the genomic side, you know, you obviously supply some OEM partners in the marketplace. Um, do you think you will see yourself really linked long term as supplying the microfluidic technology? Years out, Michael.

Michael Egholm: Okay.

Michael Egholm: Then on the genomic side, you, obviously supply from OEM partners in the marketplace.

Speaker Change: Do you see yourself really link our long term is supplying the microfluidic technology.

Michael Egholm: Years out Michael.

Michael Egholm: Yes, we actually believe it's a highly differentiated solution is a very high performing solution for certain.

Michael Egholm: Yes, we actually believe it's a highly differentiated solution. It's a very high-performing solution for certain sample complexity points, so it's a really good solution.

Michael Egholm: Jordan.

Michael Egholm: Sample flask completely sample complexity points that it's a really good solutions one of them as we are.

Michael Egholm: One of them is that we are an OEM partner to that other proteomics company there, and they, like, as best as we can estimate, they must have something approaching 200 units out in the field that are still reliant on our proprietary consumables, the integrated fluidic circuits. So with what we have today, we actually feel really good about the business. We certainly expect to be good partners to Thermo once that acquisition closes, and don't expect any change there. But if there should be one, as I said, we already have 200 units out there that will consume the IFC.

Michael Egholm: An OEM partner to that order.

Michael Egholm: Pretty almost company there and they like asbestos we can estimate the must have something approaching 200 units out in the field that are still reliant on our proprietary consumables. The integrator fluidics circuit, so, but what we have today, we actually feel really good about the business we.

Michael Egholm: And we expect to be as good partners to thermo once that acquisition closes and don't.

Michael Egholm: Spec change there, but if there should be one as I said, we already have 200 units out there.

Michael Egholm: That will consume the difc, so feeling really good about that and as we recently announced we added.

Michael Egholm: So, I'm feeling really good about that. And as we recently announced, we added a second OEM relationship, NextGen Diagnostics. We're very excited about the prospect there. It won't... yield anything fast here, but in a few years, this will be a very nice growth and profit driver, and rest assured, we are working on additional OEM relationships. As I said, nothing there happens fast, but once they are off and running, highly

Michael Egholm: Our second OEM relationship next Gen diagnostics.

Michael Egholm: We're very excited about the prospect it won't yield.

Michael Egholm: Yield anything thoughts here, but in a few years this will be a very nice growth.

Michael Egholm: And profit driver and rest assured we are working on additional OEM relationships as I said nothing happens fast, but once theyre often running.

Michael Egholm: Highly highly accretive.

Paul Knight: Okay, and, and I guess Jeff, my last question would be the 71 million cash payment that includes you said 11 million of the share buyback.

Speaker Change: Okay and.

Speaker Change: And I guess, Jeff My last question would be.

Paul Knight: The $71 million cash payment.

Paul Knight: That includes you said 11 million of the share buyback.

Jeff Black: Yeah, yeah, so it's 11 million share buyback, 8 million in we retired our Silicon Valley Bank debt, and then you know 30, 34 million in merger, and there was an elevated amount of payments that we're paying off year-end accruals, which is pretty typical in the first quarter. So we think about our adjusted operating burn more in that $29 million, $30 million range.

Jeff Black: Yes, yes, so it's $11 million share buyback.

Jeff Black: $8 million and we retired our Silicon Valley Bank debt.

Jeff Black: And then you know 30 $34 million of merger and there was an elevated amount of payments that were paying off year end accruals, which is pretty typical in the first quarter.

Jeff Black: So we think about our adjusted operating burn more in that $29 million $30 million range.

Jeff Black: Okay.

Paul Knight: and kind of flat, similar in 2Q. Yeah, I think that's it.

Jeff Black: It kind of flat similar to Q.

Jeff Black: Yeah, I think that's right. Like I said, in terms of kind of normalized adjusted operating burn, yes, we do expect we'll continue to have some merger-related cash payments, but nothing to the level that you saw in the first quarter.

Speaker Change: Yes, I think thats right I mean.

Jeff Black: Like I said in terms of kind of normalized adjusted operating burn yes, we do expect we will continue to have some merger related.

Jeff Black: Cash payments, but nothing to the level you saw in the first quarter.

Jeff Black: Okay.

Speaker Change: Okay. Thank you.

Michael Egholm: Thank you, and this concludes our question and answer session. I would like to return the conference to Michael Egholm for any closing comments.

Speaker Change: Thank you and this concludes our question and answer session I would like to return the conference to my quick home for any closing comments.

Operator: Thank you, operator. I will close by once again thanking our team for their continued execution and dedication to our mission and to our investors for your continued support. I continue to be ever mindful of the work and challenges ahead but remain more excited and confident in our ability to empower research to change patients' lives and, in turn, create value for all stakeholders. Stay tuned for future updates. We look forward to connecting with many of you at the upcoming Jeffries, Cowen, and Scotiabank conferences in June, and I'll now turn the call over to the operator to conclude the call. Thank you. The conference has now concluded.

Michael Egholm: Thank you operator.

Operator: By once again thanking our team for their continued execution and dedication to our mission and to our investors for your continued support.

Operator: Continue to be ever mindful of the work and challenges ahead, but we remain more excited and confident in our ability to empower research to change patients' lives and in turn create value for all stakeholders stay tuned for future updates.

Operator: We look forward to connecting with many of you at the upcoming Jefferies Cowen and Scotiabank conferences in June and I will now turn the call over to the operator to conclude the call.

Operator: Yes, thank you. The conference has now concluded. Thank you for attending today's presentation. Now disconnect your phone lines.

Speaker Change: Yes. Thank you.

Operator: It has now concluded thank you for attending today's presentation.

Speaker Change: Phone lines.

Operator: Yes.

Operator: [music].