Q2 2024 Akoya Biosciences Inc Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the Akoya Bioscience's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Operator: Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Priyam Shah, Head of Investor Relations. Please go ahead.
Speaker Change: To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand the conference over to Priyam Shah, Head of Investor Relations. Please go ahead.
Priyam Shah: Thank you, operator, and thank you to everyone who's joining us today on this call and Priyam Shah, Head of Investor Relations at Akoya Bioscience. On the call today, we have Brian McKelligan, Chief Executive Officer, and Johnny Ek, Chief Financial Officer.
Speaker Change: Thank you, Operator, and thank you to everyone who's joining us today on this call. I'm Priyam Shah, Head of Investor Relations at Akoya Biosciences.
Speaker Change: On the call today, we have Brian McKelligan, Chief Executive Officer, and John Ek, Chief Financial Officer.
Speaker Change: Earlier today, Akoya released financial results for the second quarter ended June 30, 2024. A copy of the press release is available on the company's website.
Priyam Shah: Earlier today, Akoya released financial results for the second quarter ended June 30, 2024. 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. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.
Speaker Change: Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Priyam Shah: 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 factors 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, August 5th, 2024.
Speaker Change: 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 the forward-looking statements due to a variety of factors.
Speaker Change: For a list and description of the risks and uncertainties associated with Akoya's business,
Speaker Change: 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 annual report on Form 10-K for the year ended December 31, 2023.
Speaker Change: filed on March 5, 2024, and 10Q filed today, August 5, 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: We urge you to consider these factors, and you should be aware that these statements are considered estimates only and are not a guarantee of future performance. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 5th, 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.
Speaker Change: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 5, 2024.
Speaker Change: 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.
Priyam Shah: The audio portion of this call will be archived on the investors section of our website later today under the heading event. Lastly, Akoya will be participating in the upcoming Canaccord Genuity Growth Conference and the Morgan Stanley Healthcare Conference, and we hope to see many of you there. And with that, I will turn the call over to Brian.
Speaker Change: The audio portion of this call will be archived on the investors section of our website later today under the heading events.
Priyam Shah: Lastly, Akoya will be participating in the upcoming Canaccord Genuity Growth Conference and the Morgan Stanley Healthcare Conference and we hope to see many of you there. And with that, I will turn the call over to Brian .
Brian McKelligon: Thank you, Priyam, and good afternoon or evening to everyone. We appreciate you joining us today. During today's conference call, I will provide an overview of our performance in the second quarter, highlight our business and operational advancements, as well as strategic decisions aimed at positioning our company for long-term growth. Following that, Johnny will delve into our financials, key trends, and our outlook for the future. We are pleased to report revenue of $23.2 million in the second quarter, a 26% sequential increase from the $18.4 million in the first quarter, and stable year-over-year performance.
Speaker Change: Thank you, Priyam, and good afternoon or evening to everyone. We appreciate you joining us today.
Priyam Shah: During today's conference call, I will provide an overview of our performance in the second quarter, highlight our business and operational advancements,
Priyam Shah: as well as strategic decisions aimed at positioning our company for long-term growth.
Priyam Shah: Following that, Johnny will delve into our financials, key trends, and our outlook for the future.
Johnny: We are pleased to report revenue of $23.2 million in the second quarter, a 26% sequential increase from the $18.4 million in the first quarter, and stable year-over-year performance.
Brian McKelligon: Our new Manufacturing Center of Excellence in Marlboro, Massachusetts, is now fully operational and was a key contributor to the rebound this quarter in both reagent volumes and instrument placement. In line with our objectives for the quarter, we were pleased with our ability to deliver strong, sequential growth across all revenue categories, especially in Instrument revenue reached $8.3 million, reflecting a 70% sequential revenue growth, with 51 instruments placed in the second quarter versus 30 instruments in the first quarter, a robust rebound and trajectory.
Johnny: Our new Manufacturing Center of Excellence in Marlborough, Massachusetts is now fully operational and was a key contributor to the rebound this quarter in both reagent volumes and instrument placements.
Johnny: In line with our objectives for the quarter, we were pleased with our ability to deliver strong, sequential growth across all revenue categories, especially on instruments.
Johnny: Instrument revenue reached $8.3 million, reflecting a 70% sequential revenue growth, with 51 instruments placed in the second quarter versus 30 instruments in the first quarter, a robust rebound and trajectory.
Brian McKelligon: Reagent revenue totaled $7.4 million, a 27% increase from the prior year, and sequential growth above the $7 million we reported in the first quarter. We now have a total installed base of 1,264 instruments, the largest in the industry, and a fully available catalog of molecular bar-coded antibodies and accompanying reagents manufactured in Service and other revenue totaled $7.2 million for the second quarter, an increase of approximately 14% over the prior year period and 17% sequential growth over the first quarter.
Johnny: Reagent revenue totaled $7.4 million, a 27% increase from the prior year, and sequential growth above the $7 million we reported in the first quarter.
Speaker Change: We now have a total install base of 1,264 instruments, the largest in the industry, and a fully available catalog of molecular barcoded antibodies and accompanying reagents manufactured internally.
Speaker Change: Service and other revenue totaled $7.2 million for the second quarter, an increase of approximately 14% over the prior year period, and 17% sequential growth over the first quarter.
Brian McKelligon: A vital objective for Akoya in 2024 is to optimize our operating efficiency and deliver operating cash flow break-even by the end of the year. In the first half of this year, we completed several strategic initiatives to support our efforts to achieve this goal. First, as noted earlier, our manufacturing center of excellence is now fully operational and has enabled a near-complete overhaul and refresh of our entire molecular barcoded antibody catalog. We have not only resolved the reagent availability challenges faced earlier in the year but also now have robust reagent development and manufacturing capability.
Speaker Change: A vital objective for Akoya in 2024 is to optimize our operating efficiency and deliver operating cash flow break-even by the end of the year.
Speaker Change: In the first half of this year, we completed several strategic initiatives to support our efforts to achieve this goal.
Speaker Change: First, as noted earlier, our Manufacturing Center of Excellence is now fully operational and has enabled a near complete overhaul and refresh of our entire molecular barcoded antibody catalog.
Speaker Change: We not only resolved the reagent availability challenges faced earlier in the year, but also now have robust reagent development and manufacturing capabilities.
Brian McKelligon: Our focus will now turn to continued process optimization, catalog expansion, and reagent gross margin improvement. Next, we completed comprehensive reorganization efforts to optimize and align our teams with our corporate objectives. This included two restructurings, one in January and a second more recent one in July. In aggregate, we implemented a workforce reduction of approximately 35% compared to the end of year 2022.
Speaker Change: Our focus will now turn to continued process optimization, catalog expansion, and reagent gross margin improvements.
Speaker Change: Next, we completed comprehensive reorganization efforts to optimize and align our teams with our corporate objectives.
Speaker Change: This included two restructurings, one in January and a second more recent one in July .
Speaker Change: In aggregate, we implemented a workforce reduction of approximately 35% compared to end of year 2023.
Brian McKelligon: Parallel, this allowed us to consolidate our functions from four facilities to two core facilities in Marlborough and included the closing of our Menlo Park, California offices and labs. We believe we now have the disciplined P&L necessary to support our financial goals, return to meaningful growth by the end of 2024, capitalize on the emerging and exciting clinical opportunities, and deliver sustaining value to our shareholders. Shifting focus, let's review our product portfolio. The PhenoCycler Fusion, or PCF, now with 236 combined units in the field, is the top-selling spatial proteomics platform for the discovery and translational market, features a unique two-in-one system, supporting scalable molecular barcoding for high plex tissue analysis of up to 100 plex, while in parallel, enabling high throughput, low to mid plex studies, using off-the-shelf third-party antibodies with our gold-standard OPAL kit.
Speaker Change: In parallel, this allowed us to consolidate our functions from four facilities to two core facilities in Marlboro and included the closing of our Menlo Park, California offices and labs.
Speaker Change: We believe we now have the disciplined P&L necessary to support our financial goals, return to meaningful growth by the end of 2024, capitalize on the emerging and exciting clinical opportunities, and deliver sustaining value to our shareholders.
Speaker Change: Shifting focus, let's review our product portfolio.
Speaker Change: The PhenoCycler Fusion, or PCF, now with 236 combined units in the field, is the top-selling spatial proteomics platform for the discovery and translational markets.
Speaker Change: It features a unique 2-in-1 system, supporting scalable molecular barcoding for high plex tissue analysis of up to 100 plex.
Speaker Change: while in parallel enabling high-throughput, low-to-midplex studies using off-the-shelf third-party antibodies with our gold-standard OPAL chemistry.
Brian McKelligon: Phenoimager HT, of which we now have 368 in the field, is the only clinical-grade spatial platform on the market actively being used in biopharma prospective clinical trials. The HT has three core attributes that make it stand alone in the clinical research. First, it has proven technical robustness, sensitivity, and reproducibility for multiplex immunofluorescence at an unmatched throughput of greater than 300 samples per week. Second, it has been developed under ISO and full design control and deployed in a CLIA setting.
Speaker Change: The phenoimager HT, or HT, of which we now have 368 in the field, is the only clinical-grade spatial platform on the market, actively being used in biopharma prospective clinical trials.
Speaker Change: The HT has three core attributes that make it stand alone in the clinical market.
Speaker Change: First, it has proven technical robustness, sensitivity, and reproducibility for multiplex immunofluorescence at an unmatched throughput of greater than 300 samples per week.
Speaker Change: Second, it has been developed under ISO and full design control and deployed in a CLIA setting.
Brian McKelligon: And finally, with our partners at Acrivon, it is on a potential path to achieve U.S. regulatory approval, having been granted breakthrough device designation by the FDA for the Acrivon ACR368 oncosignature assay, coupled to fast-track designation for its ACR368 therapy. We believe our pharma partners see these attributes as confirmation of the HT as a viable clinical plan, and as clear evidence of Akoya's expertise and organizational capabilities to deliver on and support a companion diagnosis. The annualized pull-through is now in the low to mid $50,000 range for the PCF. The high $30,000 range for each.
Speaker Change: And finally, with our partners at Acrobon, it is on a potential path to achieve U.S. regulatory approval.
Speaker Change: having been granted breakthrough device designation by the FDA for the ACRIVON ACR368 oncosignature assay coupled to FASTRAQ designation for their ACR368 therapy.
Speaker Change: We believe our pharma partners see these attributes as confirmation of the HT as a viable clinical platform.
Speaker Change: and as clear evidence of Akoya's expertise and organizational capabilities to deliver on and support a companion diagnostic.
Speaker Change: The annualized pull-through is now in the low to mid $50,000 range for the PCF.
Brian McKelligon: We expect this to increase along with our installation. We continue to direct our content and application development efforts to address the significant market opportunities in oncology and inflammatory disease, but with our manufacturing now up and running, we are poised to accelerate our efforts into additional markets like neurobiology and preclinical drug development. We also continue to lead the market in publication volume, reaching a total of 1,450 publications citing Akoya's technology as of the second quarter, a 47% increase from the prior year.
Speaker Change: and a high $30,000 range for the HT.
Speaker Change: We expect this to increase along with our install base.
Speaker Change: We continue to direct our content and application development efforts to not only address the significant market opportunities in oncology and inflammatory disease,
Speaker Change: But with our manufacturing now up and running, we are poised to accelerate our efforts into additional markets like neurobiology and preclinical drug development.
Speaker Change: We also continue to lead the market in publication volume, reaching a total of 1,450 publications citing Akoya's technology as of the second quarter, a 47% increase from the prior year.
Brian McKelligon: This growing number of publications underscores the broad utility and trust researchers have in our planet. Akoya's comprehensive product portfolio supports the continuum from high-flexibility discovery to routine clinical diagnosis. According to the 2024 DeciBio Spatial Biology Market Research Report, proteomic phenotyping using multiplex immunofluorescence will be the key driver of spatial biology market growth over the next five years. Desi Bios specifically identified Akoya as the leading provider, with products ideally suited for clinical trial support and spearheading the commercialization of spatial proteomic companion diagnosis.
Speaker Change: This growing number of publications underscores the broad utility and trust researchers have in our platforms.
Akoya: Akoya's comprehensive product portfolio supports the continuum from high-flex discovery to routine clinical diagnostics.
Speaker Change: According to the 2024 DesiBio Spatial Biology Market Research Report, proteomic phenotyping using multiplex immunofluorescence will be the key driver of spatial biology market growth over the next five years.
Speaker Change: Desi Bios specifically identified Akoya as the leading provider.
Speaker Change: with products ideally suited for clinical trial, support, and spearheading the commercialization of spatial proteomic companion diagnostics.
Brian McKelligon: On our first core earnings call, we announced several significant late stage clinical development updates and have strong momentum in this emerging business segment. These included, as noted earlier, a biopharma partner, Acrobon's promising phase 2 clinical trial progress using the ACR368 oncosignature assay deployed on our HD plant to identify ovarian and endometrial cancer patients who may benefit from ACR368. We also announced an exclusive partnership with NeriCare to enable personalized therapy selection for early stage melanoma. Their immunoprint assay has demonstrated robust clinical performance in identifying early-stage melanoma patients at high risk of relapse through multiple independent Prospective and Retrospective Clinical Studies
Speaker Change: On our first quarter earnings call, we announced several significant late-stage clinical development updates and have a strong momentum in this emerging business segment.
Speaker Change: These included, as noted earlier,
Speaker Change: biopharma partner Acribone's promising phase 2 clinical trial progress using the ACR-368 oncosignature assay
Speaker Change: deployed on our HD platform to identify ovarian and endometrial cancer patients who may benefit from their ACR 368 therapy.
Speaker Change: We also announced an exclusive partnership with NeriCare.
Speaker Change: to enable personalized therapy selection for early-stage melanoma.
Speaker Change: Their immunoprint assay has demonstrated robust clinical performance in identifying early stage melanoma patients.
Speaker Change: at high risk of relapse through multiple independent prospective and retrospective clinical studies.
Brian McKelligon: The data demonstrates that the immunopriority high-risk patient group is ideally suited to benefit from the therapeutic options that would usually only be administered later. We believe that this would represent a significant expansion of the TAM for current melanoma therapy. ImmunoPrint had a strong presence at this year's American Society of Clinical Oncology meeting, and we are making significant progress in our pharma partnership discussions. And finally, we announced the NMPA approval of the HT instrument in China, enabling its integration into clinical workflows across hospitals throughout.
Speaker Change: The data demonstrates that the immunoprotein high-risk patient group is ideally suited
Speaker Change: to potentially benefit from the therapeutic options that would usually only be administered in later stages.
Speaker Change: We believe that this would represent a significant expansion of the TAM for current melanoma therapies.
Speaker Change: ImmunoPrint had a strong presence at this year's American Society of Clinical Oncology meeting and we are making significant progress in our pharma partnership discussions.
Speaker Change: And finally, we announced the NMPA approval of the HT instrument in China.
Speaker Change: enabling its integration into clinical workflows across hospitals throughout China.
Brian McKelligon: Over the last year within our Advanced Biopharma Solutions CLIA Lab, we have also seen the rapid transition of our CLIA Lab services migrating from project-based translation work to now predominantly higher-value, longer-term clinical trial studies, making up approximately 90% of the ongoing program. The rapidly increasing use of multiplex immunofluorescence across early and late stage drug and diagnostic assay development signals that the clinical trial market is approaching quickly and has the potential to fundamentally transform We believe Akoya has the only true clinical-grade spatial platform with the HT, affording us a significant head start and leadership position in the clinical market.
Speaker Change: Over the last year within our advanced biopharma solutions CLIA Lab, we have also seen the rapid transition of our CLIA Lab services
Speaker Change: migrating from project-based translational work.
Speaker Change: to now predominantly higher-value, longer-term clinical trial studies, making up approximately 90% of the ongoing programs.
Speaker Change: The rapidly increasing use of multiplex immunofluorescence across early and late stage drug and diagnostic assay development signals that the clinical trial market is approaching quickly and has the potential to fundamentally transform those spatial biology landscapes.
Speaker Change: We believe Akoya has the only true clinical-grade spatial platform with the HT, affording us a significant head start and leadership position in the clinical markets.
Brian McKelligon: In closing, we are pleased with our commercial rebound in the second quarter and the progress of our clinical program. Given market conditions, our first half is finished. Operating Efficiency Gains, we believe we're well positioned to achieve our second half financial objectives and exit the year with a return to top line growth while meeting our goal of operating cash flow break-even. With that, I will now turn the call over to Johnny to discuss this in more detail. Johnny?
Speaker Change: In closing, we are pleased with our commercial rebound in the second quarter and the progress of our clinical programs.
Speaker Change: Given market conditions, our first half finish.
Speaker Change: and Operating Efficiency Gains, we believe we're well positioned to achieve our second half financial objectives and exit the year with the return to top-line growth while meeting our goal of operating cash flow break-even.
Speaker Change: And with that, I will now turn the call over to Johnny to discuss this in more detail. Johnny?
Johnny Ek: As Brian highlighted, total revenue for the second quarter of 2024 was $23.2 million, a 26.2% sequential quarter-over-quarter increase, and is now at a stable baseline compared to the prior year period. Product revenue, including instruments, reagents, and software, totaled $15.9 million for the second quarter. Total instrument revenue was $8.3 million, a 70.4% sequential increase from the first quarter. We placed 51 instruments in the field this quarter, a substantial increase from the 30 instruments placed in the first quarter of 2024 and more in line with the expected quarterly placement trajectory we had in 2023. Our industry-leading installed base now totals 1,264 instruments, including 374 phenocyclers and 890 phenoimagers.
Johnny: Thank you, Brian . As Brian highlighted, total revenue for the second quarter of 2024 was $23.2 million, a 26.2% sequential quarter-over-quarter increase, and is now at a stable baseline compared to the prior year period.
Speaker Change: Product revenue, including instruments, reagents, and software, totaled $15.9 million for the second quarter.
Johnny: Total instrument revenue was $8.3 million, a 70.4% sequential increase from the first quarter.
Johnny: We placed 51 instruments in the field this quarter, a substantial increase from the 30 instruments placed in the first quarter of 2024, and more in line with the expected quarterly placement trajectory we had in 2023.
Johnny: Our industry-leading install base now totals 1,264 instruments, including 374 phenocyclers and 890 phenoimagers.
Johnny Ek: We delivered $7.4 million in reagent revenue in the second quarter, reflecting a 5.6% sequential increase from $7.0 million in the first quarter and a 27.0% year-over-year increase from $5.8 million in the prior year period. The annualized reagent pull-through continues to climb across our instrument portfolio, of which the PCF and the HT are the primary contributors. The PCF, the combination of a phenocycler and a fusion, now totals 236 in the field and, as of the second quarter, has an average annualized pull-through in the low to mid $50,000. VHT, of which there are now 368 in the field, as of the second quarter, has an average annualized pull-through in the high $30,000.
Johnny: We delivered $7.4 million in reagent revenue in the second quarter, reflecting a 5.6% sequential increase from $7.0 million in the first quarter and a 27.0% year-over-year increase
Johnny: from $5.8 million in the prior year period.
Johnny: The annualized reagent pull-through continues to climb across our instrument portfolio, of which the PCF and the HT are the primary contributors.
Johnny: The PCF, the combination of a phenocycler and a fusion, now totals 236 in the field, and as of the second quarter, has an average annualized pull-through in the low to mid $50,000 range.
Johnny: The HT, of which there are now 368 in the field, as of the second quarter, has an average annualized pull-through in the high $30,000 range.
Johnny Ek: Service and other revenue totaled $7.2 million for the second quarter, a 16.6% sequential growth from $6.2 million reported in the first quarter, and a 13.6% year-over-year growth from $6.4 million reported in 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 clinical studies through new and existing biopharma partnerships.
Johnny: Service and other revenue totaled $7.2 million for the second quarter.
Johnny: a 16.6% sequential growth from $6.2 million reported in the first quarter and a 13.6% year-over-year growth from $6.4 million reported in the prior year period.
Johnny: Services have been a growth segment for us as our instrument warranty and field service revenue have rapidly expanded, coupled to our large install base, in addition to our lab services business driving higher value clinical studies through new and existing biopharma partnerships.
Johnny Ek: Gross profit was $13.4 million in the second quarter, representing a 59.8% sequential increase from $8.4 million reported in the first quarter and a 10.5% year-over-year increase over $12.1 million reported in the prior year period. Gross margin was 57.8% in the second quarter compared to 45.7% reported in the first quarter and 51.5% in the prior year period. As we drive increases in our reagent revenue mix, leverage the full capacity of our recent manufacturing investment, and execute on our Identified Operations Optimization efforts, we expect to improve our inventory utilization and to continue to expand our gross margin through 2024 and beyond.
Johnny: Gross profit was $13.4 million in the second quarter, representing a 59.8% sequential increase.
Johnny: from $8.4 million reported in the first quarter and a 10.5% year-over-year increase over $12.1 million reported in the prior year period.
Johnny: Gross margin was 57.8% in the second quarter compared to 45.7% reported in the first quarter and 51.5% in the prior year period.
Johnny: As we drive increases in our reagent revenue mix, leverage the full capacity of our recent manufacturing investments,
Johnny: and execute on our Identified Operations Optimization efforts, we expect to improve our inventory utilization and to continue to expand our gross margin through 2024 and beyond.
Johnny Ek: Operating expenses were $24.5 million in the second quarter, compared to $30.0 million in the first quarter, an 18.3% sequential decrease, and $31.4 million in the prior period, a 22% year-over-year decrease. Loss from operations was $11.1 million in the second quarter, compared to $21.6 million in the first quarter, a 48.6% sequential decrease, and $19.2 million in the prior year period, a 42.4% year-over- As Brian noted, in addition to cost-saving measures in the first quarter, we took actions to reduce operating expenses through a workforce reduction at the end of July, further streamlining our operating costs for the balance of the year.
Johnny: Operating expenses were $24.5 million in the second quarter compared to $30.0 million in the first quarter, an 18.3% sequential decrease.
Johnny: and $31.4 million in the prior period, a 22% year-over-year decrease.
Johnny: Loss from operations was $11.1 million in the second quarter.
Johnny: compared to 21.6 million in the first quarter, a 48.6% sequential decrease.
Johnny: and $19.2 million in the prior year period, a 42.4% year-over-year decrease.
Johnny: As Brian noted, in addition to cost-saving measures in the first quarter, we took actions to reduce operating expenses through a workforce reduction at the end of July , further streamlining our operating costs for the balance of the year.
Johnny Ek: Looking ahead to the second half of 2024, we remain committed to our goal of operating cash flow breakeven and a return to top line growth as we exit the year. We believe that if we can successfully achieve our revenue projections, leverage the stable and improving gross margin, and maintain our new baseline operating expenses, we will continue to reduce our losses from operations, and we are well positioned to achieve adjusted EBITDA positivity as we exit 2024.
Johnny: Looking ahead to the second half of 2024, we remain committed to our goal of operating cash flow break-even and a return to top-line growth as we exit the year.
Johnny: We believe that if we can successfully achieve our revenue projections, leverage the stable and improving gross margins,
Johnny: and maintain our new baseline operating expenses, we will continue to reduce our loss from operations and are well positioned to achieve adjusted EBITDA positivity as we exit 2024.
Johnny Ek: We ended the quarter with approximately $48.7 million of cash, cash equivalents, and marketable securities. Common Shares outstanding and Fully Diluted Shares, including the impact of outstanding options and Unvested Restricted Stock Awards, are $49.5 million as of June 30, 2024.
Johnny: We ended the quarter with approximately $48.7 million of cash, cash equivalents, and marketable securities.
Johnny: Common Shares Outstanding and Fully Diluted Shares, including the impact of Outstanding Options and Unvested Restricted Stock Awards, are $49.5 million as of June 30, 2024.
Priyam Shah: In summary, we made significant operational progress in the first half of 2024 and saw significant sequential growth in the second quarter while we continue to execute our strategy to reduce operating losses and improve cash flow. We have assessed our first half revenue performance along with market conditions that will enable continued top-line improvement in the second half of 2024. And accordingly, we maintain our commitment to operating cash flow break-even and a return to top-line growth by the end of the year, while at a reduced revenue target. We are therefore updating our Revenue Outlook for the full year 2024 to be in the range of $96 to $104 million.
Johnny: In summary, we made significant operational progress in the first half of 2024 and saw significant sequential growth in the second quarter while we continue to execute our strategy to reduce operating losses and improve cash flow.
Johnny: We have assessed our first half revenue performance along with market conditions that will enable continued top-line improvement in the second half of 2024.
Johnny: And we accordingly maintain our commitment to operating cash flow break-even and a return to top-line growth by the end of the year, while at a reduced revenue target.
Johnny: We are therefore updating our revenue outlook for the full year 2024 to be in the range of $96 to $104 million.
Operator: Thank you, Johnny. We look forward to executing our strategic and financial objectives throughout the remainder of the year as we drive the business forward. And we're thankful for the hard work of our fellow dedicated Akoyans, as well as for the continued support of our customers and shareholders. And at this point, we're open to calls for questions. Operator? Just a reminder, if you'd like to...
Brian McKelligan: Back to you, Brian .
Brian McKelligan: Thank you, Johnny. We look forward to executing our strategic and financial objectives throughout the remainder of the year as we drive the business forward.
Brian McKelligan: And we're thankful for the hard work of our fellow dedicated Akoyans, as well as for the continued support of our customers and shareholders. And at this point, we're open to call up to the questions. Operator?
Operator: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of William Bonello with Craig Hallam.
Speaker Change: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question, please press star 11 again.
Speaker Change: Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of William Bonello with Craig Hallam.
William Bonello: Hey guys, thanks for taking the call.
Brian McKelligon: A couple of follow-up questions here. The first one is just on the operating cash flow. So obviously, you know, part of what's giving you confidence is the reduction in the workforce that you put in in July. Are there any other sort of metrics that you can give us that sort of tell us maybe where you are on a sort of cash burn run rate as you came out of the quarter or post the July workforce reductions, just some more reasons to feel confident about that progress?
William Bonello: Hey, guys. Thanks for taking the call. A couple of follow-up questions here. The first one, just on the operating cash flow, so obviously, you know, part of what's giving you, you know, confidence is the
Speaker Change: is the
Speaker Change: reduction in workforce that you put in in July .
Speaker Change: Are there any other sort of metrics that you can give us that sort of, you know, tell us maybe where you're at on a sort of cash burn run rate as you came out of the quarter or post the
Speaker Change: [inaudible]
Johnny Ek: Yeah, I think what we can do, and maybe Johnny you can just do some high-level scenarios on with the more controlled and reduced operating expenses, what that means in terms of as we look to balance our top line with achieving that operating cash flow breakeven and positive adjusted EBITDA. Kind of what do we have to deliver to kind of hit those benchmarks? Maybe Johnny, you can talk through that directionally a little bit to give Bill a better sense, but thanks for the question. Yeah, hey, Bill.
Speaker Change: with now the more controlled and reduced operating expenses. What that means in terms of, as we look to balance our top line with achieving that operating cash flow breakeven.
Johnny: and positive adjusted EBITDA. Kind of what do we have to deliver to kind of hit those benchmarks? Maybe Johnny, you can talk through that directionally a little bit to give Bill a better sense, but thanks for the question Bill.
Johnny Ek: Yeah, hey Bill. The way we look at the back half as we consider the OPEX reductions, we expect to get to, sort of, call it 2021 million. We'll end up being our run rate OPEX is how we project it. While not guiding specifically, that's how we see the run rate. And so by Q4, once we have fully factored in this cost reduction effort that we took in this quarter, even though, you know, in July, we'll start to get to that run rate.
Johnny: Yeah. Hi, Bill.
Johnny: The way we look at the back half as we consider the the OPEX reductions we expect to get to a
Speaker Change: We'll end up being our run rate opex is how we project it, while not guiding specifically, that's how we see the run rate.
Johnny: By Q4, once we have fully factored in this cost reduction effort that we took,
Johnny Ek: And if you do some of the math we've sort of outlined in prior calls, the math we've sort of outlined in prior calls is: take our Q4 revenue within our guide that we've highlighted, keeping it at the margin that we've also highlighted in that low 60% range of gross margin, and then if you use that reduced OPEX. You can pretty quickly get to a cash used in operations view that is positive in Q4. So what we try to do is really just highlight those building blocks, sort of using the information we provided, including the updated guide, a gross margin in that low 60s range, and then with this new OPEX, you drop down to a positive or break even as you exit the year.
Johnny: In this quarter, even though you know in July , we'll start to get to that run rate. And if you do some, the math we've sort of outlined in prior calls is
Johnny: If you take our Q4 revenue, sort of within our guide that we've highlighted, keeping it at the margin that we've also highlighted, sort of in that low 60% range, gross margin, and then if you use that reduced OPEX
Johnny: You pretty quickly can get to a cache used in operations view that is positive in Q4. So what we try to do is really just highlight those building blocks, sort of in...
Johnny: Using the information we provided, including the updated guide, a gross margin in that low 60s range, and then with this new OPEX, you drop down to a positive or break even as you exit the year cash from operations.
Brian McKelligon: Sorry, I made it again. Thanks. That's really helpful. And then maybe you could just talk a little bit about the revenue guidance that caught us a little bit by surprise about what the sort of, you know, what you're seeing that that, you know, caused you to take the guidance down, just thoughts on that? What's your level of confidence at this point that they're not coming down again?
Speaker Change: Sorry, I made it again. Thanks. That's really helpful. And then maybe you could just talk a little bit about the revenue guidance that caught us a little bit by surprise, what the sort of, you know, what you're seeing that
Speaker Change: caused you to take the guidance down.
Speaker Change: [inaudible]
Brian McKelligon: It's a good question. And I think that as we were kind of going through the process here, we looked at what we think was a strong rebound in Q2 with, as we noted, a 70% sequential increase versus Q1 in terms of instruments. And typically, that's about a 15% to 20% walk from Q1 to Q2 in terms of the step-up. So a meaningful step-up on instruments.
Speaker Change: We looked at what we think was a strong rebound in Q2 with, as we noted, a 70% sequential increase.
Speaker Change: versus versus Q1 in terms of instruments and typically that's it's about a 15 to 20 percent walk from Q1 to Q2 in terms of the step up so a meaningful step up on instruments.
Brian McKelligon: We look at our reagents and our continued trend for sequential increases that we've seen over the last number of quarters. I guess the fundamentals, Bill, as we looked at the scale of the rebound as we closed the quarter and realized that it was a little bit behind the pace we needed to support our second half recovery. And so we thought, based on those data points and the continued macro pressure, just a much more prudent second half growth.
Speaker Change: You know, we look at our reagents and our continued trend for sequential increases that we've seen over the last number of quarters.
Speaker Change: I guess, you know, the fundamentals, Bill, as we looked at the scale of the rebound as we closed the quarter...
Bill: and, you know, realized that it was a little bit behind the pace we needed to support our second half recovery. And so we thought, you know, based on those data points and the continued macro pressure, just a much more prudent second half growth.
Brian McKelligon: But again, thankfully, in parallel with the proactive restructuring we did, we were able to reaffirm our commitments to operating cash flow breakeven. It was really, Bill, just around the scale and the pace of the bounce back in Q2, while meaningful, it was going to be a pretty big ask for the second half bounce.
Bill: But again, thankfully, in parallel with the proactive restructuring we did, we were able to reaffirm our commitments to operating cash flow break-even. It was really, Bill, just around the scale and the pace of the bounce back in Q2, while meaningful, it was going to have a pretty big ask for the second half bounce.
William Bonello: Okay, thank you very much. I appreciate it.
Speaker Change: Okay, thank you very much. Appreciate it.
Operator: Our next question comes from a line from Kyle Mixon with Canaccord Genuity.
Speaker Change: Our next question comes from a line of Kyle Mikson with Canaccord Genuity.
Kyle Mixon: Hey guys, thanks for the questions. It was a really good quarter.
Kyle Nixon: Hey guys, thanks for the questions. Really good quarter. So let's actually go back to the guidance, please. Can you talk about the issues related to the Center of Excellence?
Kyle Mixon: So let's actually go back to the guidance, please. Just can you talk about whether the issues related to the Center of Excellence are fully resolved? It seems like maybe I just want to give you the opportunity to dive into that a little bit. And then also, could you walk through how you kind of recognize that biopharma trial revenue that was delayed from 1Q but then was expected to be captured by the end of this year? You know, the point is, like, are we getting that to a good baseline? And now there's, like, no downside to the updated guidance given the current market conditions. Yes,
Kyle Nixon: are fully resolved, it seems like.
Speaker Change: Maybe, I just wondered.
Speaker Change: I'll give you the opportunity to dive into that a little bit. And then also, could you walk through how you kind of recognize that biopharma trial revenue that was delayed from 1Q, but then was expected to be captured by the end of 1Q.
Speaker Change: This year, you know, the point is, like, are we getting back to a good baseline and now there's, like, nominal downside to the updated guidance given the current market conditions? Yeah, so the Center of Excellence is fully operational.
Brian McKelligon: Yeah, so the Center of Excellence is fully operational. So it's up and running, and that was sort of realized as we kind of walked from March into April. So it's completely fully operational, as we noted in the opening remarks. We have really kind of remanufactured and reestablished our full catalog present on site in our Center of Excellence. So it's completely done. Our catalog is completely refreshed, and our customer KPI metrics, in terms of on-time delivery, we're meeting and exceeding those internal metrics.
Speaker Change: So it's up and running and that that that was sort of realized as we as we kind of walked from March into April So it's completely fully operational as we noted in the opening remarks
Speaker Change: You know, we have really kind of re-manufactured and re-established our full catalog present on site.
Speaker Change: in our Center of Excellence. So it's completely done. Our catalog is completely refreshed.
Speaker Change: and our customer KPI metrics in terms of on-time delivery.
Brian McKelligon: So it is finished, and it is complete. And then, as I noted in the opening statements, the next phase is really to focus on the bombs and the specific cause on a product by product basis and continue to optimize not just the gross margins there but also our management of inventory to maximize working capital. So completely resolved. The revenue, in terms of the clinical milestones, that's pushed really to the second half, and it's committed. So that's embedded within the guide.
John K.: We're meeting and exceeding those internal metrics. So it is finished and it is complete. And then, as I noted in the opening statements, the next phase is really...
Speaker Change: to focus on, you know, the bombs and the specific cause on a product-by-product basis.
Speaker Change: and continue to optimize, not just the gross margins there.
Speaker Change: but also as our management of inventory to maximize working capital. So completely resolved that the the Revenue in terms of the clinical milestones that that's pushed really to second half and it's committed. So that's that's embedded within the guide
Johnny Ek: And I would just add, Kyle, Johnny, I would just add, we recognized really exactly what we expected to in Q2 from that contracted revenue. We have contracted opportunities and new opportunities in the funnel, but all those that we expected to recognize in the second quarter. And then to Brian's point, there's more in the back half. And I would also just add, you know, one of the pluses, if you will, of getting our Center of Excellence fully operational is that we found efficiencies there that allowed us to take action as part of the reduction in force that were kind of savings, if you will, by some of the support around that Center of Excellence really drove efficiencies because we weren't managing a And so that's part of the cost reduction that we were able to take in Q2. Some of that was found in getting that Center of Excellence fully operational.
Speaker Change: And I would just add, Kyle, Johnny, I would just add, we recognize...
Speaker Change: [inaudible]
Speaker Change: The pluses, if you will, of getting our Center of Excellence fully operational is we found efficiencies there that allowed us to take action as part of the reduction in force that were kind of found savings, if you will, by
Speaker Change: Some of the support around that center of excellence really drove efficiencies because we weren't managing a supply chain that sort of spread all over. And so that's part of the cost reduction that we were able to take in Q2. Some of that was found in getting that center of excellence fully operational.
Kyle Mixon: Okay, yeah, that was great, guys. And then maybe we can just continue with the guidance reduction. How much of this reduction here was due to like some sort of lack of visibility on the instrument side, given maybe an extended or elongated kind of, you know, capital purchase, like, you know, situations and dynamics, or maybe just like, you know, pressure utilization, maybe there's, you know, less demand, or the kind of projects that are already being kind of worked through, and, you know, consumers are needed to be ordered. What exactly is the Is it on the instrument side or the consumable side for that product revenue line item?
Speaker Change: Okay, yeah, that was great, guys. And then maybe we'll just continue on the guidance reduction. How much of this reduction here was due to, like, some sort of lack of visibility on the instrument side, given maybe, like, extended or elongated kind of, you know, capital purchase, like, you know, situations and dynamics? Or maybe just, like, you know,
Speaker Change: Pressure Utilization, maybe there's...
Speaker Change: [inaudible]
Brian McKelligon: It's just really, Kyle, it's just really a more refined, tightened outlook for the second half, certainly the capital purchases. Pressures are still there, though those have not abated, but as we look to a more refined outlook for the second half, given that we've got, you know, now a much higher degree of predictability on the outlook, given with acute scenarios like we faced in Q1 with our reagent challenges, you know, coming into Q2, we just got a more refined outlook on the expectations for instrument sales cycles, close rates, etc. That's really what it was, just a tightened, more refined outlook, given that we've now eliminated that variable, that I would say somewhat self-imposed variable of our manufacturing challenges, now just solely focused on standard pipeline metrics.
Speaker Change: It's just really, Kyle, it's just really a more refined, tightened outlook for Second Half. Certainly the capital purchases.
Speaker Change: Pressures are still there. Those have not abated. But as we look to a more refined outlook for second half, given that we've got
John Ek: Here in? a much higher degree of predictability on the outlook given the acute scenarios like that we faced in Q1 with our reagent challenges coming into Q2, we just got a more refined outlook on the expectations And
John Ek: instrument sales cycles, close rates, etc.
John Ek: That's really what it was, just a tightened, more refined outlook given that we've now eliminated that variable, that I would say somewhat self-imposed variable of our manufacturing challenges, now just solely focused on standard pipeline metrics.
Brian McKelligon: Okay, if I can ask just one quick one, I think that PCF pulled through in the 50,000, I guess below the mid-50,000 range, I think, I believe that was pretty similar last quarter. How do you, like, you know, Brian and John, how do you guys feel about that number, and is there a lot of upside to that, or like, a high ceiling?
Speaker Change: Okay, if I can ask just one quick one. I think that the PCS pull through in the 50,000, I guess below the mid 50,000 range, I think, I believe that was pretty similar last quarter. How do you, like, you know, Brian and John , how do you guys feel about that number and is there a lot of upside to that or a high ceiling?
Brian McKelligon: You know, I think we're just going to continue to, you know, I think the way I like to look at it, Kyle, is I like to look at it, I think quarterly it's, you know, you have some flow to that. If you just look at, you know, first half versus first half prior, and look back at the last three to four years, we've consistently seen about a 25 to 30 percent year-over-year increase as you look at first half this year versus first half last year.
Speaker Change: You know, I think, I think we're just going to continue to, you know, I think the way I like to look at it, Kyle, is I like to look at, I think quarterly it's, you know, you have some, some, some flow to that. If you just look at
Kyle Nixon: You know, first half versus first half prior, and look back over the last three to four years, we've consistently seen about a 25 to 30 percent year-over-year increase as you look at first half this year versus first half last year.
Brian McKelligon: And that's a byproduct of what we've been talking about over the last several years, which is just the continued incremental improvement in workflow, in speed, in availability of content. And that's why we just continue to see this up-and-to the-right march of pull-through. And we think that that rate of pull-through expansion is going to continue as we continue to make investments in expanding Plex levels, expanding workflow efficiencies, getting into adjacent markets, like I noted on the call, the neurobiology market, and the preclinical drug development market. So I think the trend is going to continue from the mid-50s at a similar rate into next year and the year beyond. So I think that that slope will continue.
Kyle Nixon: And that's a byproduct of what we've been talking about over the last several years, which is just the continued incremental improvements.
Kyle Nixon: in workflow and speed.
Kyle Nixon: and availability of content, and that's why we just continue to see this up and to the right march of pull-through. And we think that that rate of pull-through expansion is going to continue.
Kyle Nixon: As we continue to make investments in expanding Plex level, expanding workforce efficiencies,
Kyle Nixon: getting into adjacent markets, like I noted on the call, the neurobiology market and the preclinical drug development market. So I think the trend is going to continue from the mid-50s at a similar rate into next year and the year beyond. So I think that slope we'll maintain.
Kyle Mixon: Okay, that sounds great. Thanks, guys. I appreciate it.
Speaker Change: Okay, that sounds great. Thanks guys, appreciate it.
Operator: Our next question comes from the line of Tejas Savant with Morgan Stanley.
Speaker Change: Our next question comes from the line of Tejas Savant with Morgan Stanley .
Tejas Savant: Hey guys, thanks for the time. Looking at some of the comments you just made there around the COE reagent manufacturing transition, largely having sort of gone to plan and fully operational now. I think you also talked about the milestones, you know, that were pushed out in the first quarter. They're all sort of on track to be realized here by year-end. So, that sort of leaves the third leg of the stool there, which was the elongated sales cycle, right?
Teja Savant: Hey guys, thanks for the time.
Teja Savant: Looking at some of the comments you just made there around
Speaker Change: The COE reagent manufacturing transition largely having sort of gone to plan and fully operational now. I think you also talked about
Speaker Change: [inaudible]
Tejas Savant: And yet, you had instrument revenue and placements come in pretty strong in the second quarter. So, was there any pull-forward of demand here? And when you look at your order funnels here as they stand today, they don't support sort of that continuing into the back half of the year. Is that the right interpretation as we think about the $8 million that you've taken out from the guide here?
Teja Savant: Instrument revenue and placements come in pretty strong in the second quarter. So was there any pull forward of demand here? And when you look at your order funnels here as they stand today, they don't support sort of that continuing into the back half of the year. Is that the right interpretation as we think about the $8 million that you've taken out from the guide here?
Brian McKelligon: So I missed the second part of your question, but there was no pull forward. And I think what resolving the manufacturing challenges enabled us to do is it enabled us to really double down and begin to rebuild and re-accelerate that pipeline, returning to, quote, somewhat normal levels of instrument placements. So, you know, the 51 is close and approaching to kind of our standard average quarterly instrument placement over the last year or so. So it's really just a recovery and a resurgence. It was not a pull forward. Does that answer your question?
Speaker Change: So, I missed the second part of your question, but there was no pull forward, and I think what resolving the manufacturing challenges enabled us to do is it enabled us to really double down and begin to rebuild and re-accelerate that pipeline.
Speaker Change: returning to, quote, somewhat normal levels of instrument placements. So, you know, the 51 is close and approaching to kind of our standard average quarterly instrument placement over the last year or so. So it's really just a recovery and a resurgence. It was not a pull forward.
Tejas Savant: Yeah, no, I mean, it was just that, is it just the funnel relative to what you placed in 2Q that makes you incrementally more cautious in the back half of the year?
Speaker Change: Did that answer your question? I missed the second part of your question, Tejas.
John: Yeah, no, I mean, it was just that, is it just the funnel relative to what you placed in 2Q makes you incrementally more cautious in the back half of the year?
Brian McKelligon: Oh, I see, with respect to not being more aggressive, a vertical ramp in terms of instrument placement, you know, without the re-guide, it's a pretty accelerated, ask with the understanding that the sales cycles, even with our recovery, have not contracted.
John: Oh, I see, with respect to not being more aggressive.
Speaker Change: vertical ramp in terms of instrument placements.
Speaker Change: Without the re-guide, it's a pretty accelerated ask with the understanding that the sales cycles, even with our recovery, have not contracted.
Tejas Savant: Got it, okay, that's helpful. And then as you think about it, you talked about that 30% headcount rift relative to year-end 23. Can you share a little bit of light on what gives you the confidence that, in a sense, the question we're gonna get tomorrow is, can Akoya cut its way to growth, right? And cut its way to recovery? And I understand that you're still on track for cash flow break-even by year-end, but just give us some color around organizational morale, how confident you are that you have what you need to drive that recovery and lean into it as the macro sort of picks up. And then what are the options you're looking at?
Speaker Change: Got it. Okay, that's helpful.
Speaker Change: And then as you think about, you know, you talked about that 30% headcount RIF relative to year-end 23, can you share a little bit of light around, you know,
Speaker Change: What gives you the confidence that, you know, in a sense, like, the question we're going to get tomorrow is, can Akoya, like, cut its way to growth, right, and cut its way to a recovery? And I get it that you're still on track for cash flow breakeven by year-end.
Speaker Change: But, just give us some color around, you know, organizational morale, how confident you are that you have what you need to drive that, you know, recovery and lean into it as the macro sort of picks up. And then, what are the options you're looking at to fortify the balance sheet here?
Brian McKelligon: Yeah, in terms of the former, and I'll let Johnny speak to the latter, you know, any time you do a restructuring, it's difficult on the organization. And you know, qualitatively, what we have done is we really consolidated and streamlined, you know, both our R&D and operational functions, really to drive, in a consolidated organization, the product development activities around continued reagent development and workflow improvement. That was really the focus of the realignment. Look, you always have to make choices.
Speaker Change: Yeah, in terms of the former, and I'll let Johnny speak to the latter, you know, any time you do a restructuring, it's difficult on the organization. And you know, qualitatively, what we have done is we really consolidated and streamlined, you know, both our R&D and operational functions.
Johnny: really to drive in a, you know, a consolidated organization the product development activities around continued reagent development and workflow improvements.
Johnny: That was really the focus of the re-alignment. Look, you always have to make choices.
Brian McKelligon: As you know, at a high level, there's always a choice and a trade-off between investing in growth and driving to profitability. We just felt, in today's environment, given where we were coming out of Q1, we have to really strike a balance right now between continuing that growth and ensuring that we meet our bottom line goal. We don't feel like we're cutting our way to growth. We certainly had to mute our growth
Johnny: As you know, at a high level, there's always a choice and a tradeoff between investing in growth and driving to profitability.
Johnny: And, you know, we just felt in today's environment, kind of given where we were coming out of Q1, we have to really strike a balance right now between continuing that growth but ensuring that we meet our bottom line goals.
Johnny: We don't feel like we're cutting our way to growth. We certainly had to mute our growth, that's the reality, but we feel like we've got the organizational structure in place to return to those growth trajectories and do it in a manner where it's actually contributing to profitability. We just had to really strike a much tighter balance.
Brian McKelligon: That's the reality. But we feel like we've got the organizational structure in place to return to those growth trajectories and do it in a manner where it's actually contributing to profitability. We just had to really strike a much tighter balance, given where we were in Q1, given what's happening in the market, and today was a great example of really trying to find a balance between investing in growth and driving profit. I got it. It's a lot of fun. Yeah,
Johnny: Given where we were in Q1, given what's happening in the market, and today was a great example of really trying to find a balance between...
Johnny: Investing in growth and driving to profitability.
Johnny Ek: And as, yeah, as it relates to the balance sheet, certainly cash is very important to us, with just under $50 million at the quarter end, which we were able to cut our cash burn effectively in half from the last quarter. And if we're able to continue to do that again and again to year end, we get to the point where we're exiting at that cash flow break, even with sufficient cash to turn that corner.
Johnny: John, can you speak for a second? Yeah, go ahead.
John: And yeah, as it relates to the balance sheet, certainly we, you know, cash is very important to us with just...
John: under $50 million at the quarter end, which we're able to cut our cash burn effectively in half from the last quarter. And if we're able to continue to do that again and again to year-end, we get to the point where we're exiting at that cash flow break, even with sufficient cash to turn that corner. And then as we have growth next year, as Brian has alluded to, the back half growth, with growth again next year, maintaining this baseline OPEX.
Johnny Ek: And then as we have growth next year, as Brian has alluded to, the back half growth, with growth again next year, maintaining this baseline OPEX and this low 60s gross margin and kind of moving up into next year, we feel we've got the cash to execute what we need to execute. At the same time, driving to cash flow positivity, showing that streamlined OPEX allows us to approach and continue to work with our debt partners and others with a stronger P&L to, you know, settle any capital needs that we have into the future.
Brian McKelligan: and this low 60s gross margin and kind of moving up into next year.
Brian McKelligan: You know, we feel we've got the cash to execute what we need to execute. At the same time...
Brian McKelligan: Driving to cash flow positivity, showing that streamlined OPEX allows us to approach and continue to work with our debt partners and others with a stronger P&L.
Johnny Ek: But really, it puts us in a different position than we've been in prior years, where when you're just burning so much cash, it's, you know, it's a different negotiation, a different position to be in as you strengthen your balance sheet.
Brian McKelligan: to settle any capital needs that we have into the future. But really, it puts us in a different position than we've been in prior years where when you're just burning so much cash, it's a different negotiation, a different position to be in as you strengthen your balance sheet.
Tejas Savant: Got it. And last one for me, Brian.
Tejas Savant: As we think about the competitive landscape here, can you just give us an updated snapshot of what you're seeing out there, both in terms of incremental pricing pressures and just where you see the pricing environment evolving? Because one of the themes in the second quarter has been some irrational pricing and so on in certain pockets of the market. Just curious as to what you guys are seeing there and to what extent that is factored into the guide.
Brian McKelligan: Got it. And last one for me, Brian . As we think about the competitive landscape here, right, can you just give us an updated sort of snapshot of what you're seeing out there, both in terms of, you know, incremental pricing pressures?
Speaker Change: and just sort of where you see the pricing environment evolving, right? Because one of the themes in the second quarter has been, you know, some irrational pricing and so on in certain pockets of the market. Just curious as to what you guys are seeing there and to what extent is that sort of factored into the guide?
Brian McKelligon: Yeah, it's a really good question. It's not really about, I would say, pricing pressure in terms of, for example, ASPs on instruments. You know, I think what was interesting, Tejas, is... With the manufacturing challenges we had in Q1, I think we admittedly created a window of opportunity for others to try to step in and take market share. But with it fully resolved, as Kyle kind of asked about.
Speaker Change: Yeah, it's a really good question.
Speaker Change: It's not really about, I would say, pricing pressure, in terms of, for example, ASPs on instruments. You know, I think what was interesting, Tejas, is...
Speaker Change: that with
Speaker Change: With the manufacturing challenges we had in Q1, I think we admittedly created a window of opportunity.
Speaker Change: for others to try to step in and take market share. But with it fully resolved, as Kyle kind of asked about, we are really only in a minority of sales opportunities.
Brian McKelligon: We are really only in a minority of sales opportunities, running into direct head-to-head competition, and I would say that we are routinely winning those now. That's at least how we're looking, and that's happening across geographies where we're seeing direct, kind of head-to-head competition. Again, this happens in a minority of cases; it's not in every case. And some of the reasons why, at least we're hearing, that we're winning those head-to-heads is because of our higher platform. In fact, the larger imaging area is super important for customers, for large tissues or multiple tissues per slide, and the increased throughput.
Speaker Change: running into direct head-to-head competition and I would say
Speaker Change: that we are routinely winning those now. That's at least how we're looking at it.
Speaker Change: And that's happening across geographies where we're seeing direct kind of head-to-head competition. Again, in a minority of cases, it's not in every case. And some of the reasons why, at least we're hearing, that we're winning those head-to-heads is because of our higher plex.
Speaker Change: In fact, the larger imaging area is super important for customers for large tissues or multiple tissues per slide, and the increased throughput. So those are some of the big reasons why we think we're winning.
Brian McKelligon: So those are some of the big reasons why we think we're winning, in addition to, I think, the value of the penocyclic fusion as a two-in-one system for high-plex discovery and then high-throughput validation. So it feels like, to us, Tejas, that the competitive pressures... I think for us, it feels like it has shifted in our favor, but again, we'll wait to hear. We feel like we are in a pretty strong position to maintain that market leadership position.
Speaker Change: In addition to, I think the value of the phenocyclic fusion as a two-in-one system for high-plex discovery and then high-throughput validation. So it feels like to us, Tejas, that the competitive pressures
Speaker Change: I think for us, it feels like it has shifted in our favor, but again, we'll wait to hear.
Speaker Change: how this continues well for the year. But we feel like we're in a pretty strong position to kind of maintain that market leadership position.
Tejas Savant: Got it. Thanks, guys. Appreciate the time.
Speaker Change: Got it. Thanks, guys. Appreciate the time.
Operator: Our next question comes from a line from David Westenberg with Piper Sandler.
Speaker Change: Our next question comes from a line of David Westenberg with Piper Sandler.
David Westenberg: Hey, guys, thank you for taking the question. And sorry, the recurring theme is that on that on the guide, but I think it is going to be kind of the area of focus for a lot of investors here. So, um, you know, I think some of the other analysts have gotten to just kind of the sales cycle here. So I just want to ask you two different things.
David Westenberg: Hey guys. Thank you for taking the question. And sorry, the recurring theme is on the guide, but I think it is going to be kind of the area of focus for a lot of investors here. So I think some of the other analysts have gotten to just kind of the sales cycle here. So I just want to ask in two different things. One is a build on Tejas' question in terms of was there any maybe instruments benefit that you got in this quarter from of course the disruption from last quarter? And I'm talking about actually the sales funnel.
David Westenberg: One is a build on Tejas' question in terms of was there any maybe benefit from instruments that you got in this quarter from, of course, the disruption from last quarter? And I'm talking about actually the sales funnel versus the actual placements. And then building on Kyle's question in terms of the build and the lengthening of cycles here, can you remind us what the typical sales cycle is? We're just I'm just trying to figure out the actual visibility that you have in the guidance based on the funnel that you have. And sorry, I know that was a really long question, but I promise I'm only asked one follow-up.
David Westenberg: versus the actual placements.
Speaker Change: And then, building on Kyle's question in terms of the lengthening of cycles here, can you remind us what is the typical sales cycle? I'm just trying to figure out the actual visibility that you have in the guidance based on the funnel that you have. Sorry, I know that was a really long question, but I promise I'm only going to ask one follow-up.
Brian McKelligon: So just to make sure I'm precise... The 51 instruments that we sold this quarter don't represent a magnified artificial bump, Relative to what we would have expected without the challenges in Q1. It represents a step function up on the path to returning to instrument numbers like you've seen from us historically. So it wasn't an artificial bump in terms of either the closed opportunities or the resurgence of the funnel. But the refunnel does...
Speaker Change: So, just to make sure I'm precise...
Speaker Change: The 51 instruments that we sold this quarter
Speaker Change: is doesn't represent a
Speaker Change: magnified artificial
Speaker Change: bump relative to what we would have expected without the challenges in Q1. It represents a step function up on the path to returning to instrument numbers like you've seen from us historically.
Speaker Change: So, it wasn't an artificial bump in terms of either the closed opportunities
Speaker Change: or the resurgence of the funnel. But the refunnel does...
Brian McKelligon: It does resurge, it does deepen, it does widen because we put the reagent challenges behind it. Now you're more able to proactively build that funnel in the face of sales cycles that I... We do have precise numbers, David, in terms of the number of days each product takes. And I will tell you that it's gone, directionally speaking, from a six to nine month to something that's a little bit longer.
Speaker Change: It does resurge, it does deepen, it does widen because we put the reagent challenges behind us.
Speaker Change: Now, you're more able to proactively build that funnel in the face of sales cycles. We do have precise numbers, David, in terms of the number of days each product takes.
David Westenberg: And I will tell you that it's gone, you know, directionally speaking, from a six to nine month to something that's a little bit longer.
Brian McKelligon: So, hopefully that answers your question with respect to the quarter instrument placements, the funnel itself, and the lengthened sales cycle. I wouldn't say lengthened; I would just simply characterize the current sales cycles in Q2 are similar to what we saw in Q1 and prior.
Amit Bhandari: and Amit Bhandari.
Speaker Change: So, hopefully that answers your question with respect to the quarter instrument placements, the funnel itself, and the lengthened sales cycle. I wouldn't say lengthening, I would just simply characterize the current sales cycles in Q2 are similar to what we saw in Q1 and prior quarters.
David Westenberg: Got it. And then I'll just ask a short one since that one was really long and you have nine, like a lot of analysts covering. So anyway, just in terms of seasonality, can you remind us in terms of seasonality? I know that, you know, a lot of your peers are going to have back halfway through the quarters, just with that way, you know, budget flush and academic and then fourth quarter with commercial. But, you know, you do have a different ASP profile than, say, your transcriptomic peers. So in any way, we can think about that seasonality. Thank you. Our typical seasonality is Q1 is the smallest, Q4 is the largest, and Q2 and Q3 are generally. That's the tip of the iceberg... They're acute.
Speaker Change: Got it. And then I'll just ask a short one since that one was really long and you have nine, like a lot of analysts covering. So anyway, just in terms of, can you remind us in terms of seasonality? I know that, you know, a lot of your peers are going to have
Speaker Change: Back halfway to quarters, just with that way, you know, budget flush and academic, and then fourth quarter with commercial. But, you know, you do have a different ASP profile than, say, your transcriptomic peers.
Speaker Change: So just any way we can think about that seasonality, thank you. Our typical seasonality is Q1 is the smallest, Q4 is the largest.
Speaker Change: and Q2 and Q3 are generally similar.
Brian McKelligon: Q2 and Q3 are typically similar and between the Q1 low end and the Q4 high end. So there's almost three tiers, Dave. That's how you should look at it. A Q1, and then Q2, and then Q3, and then up and a Q4.
Speaker Change: That's the typical seasonality.
Speaker Change: Q2 and Q3 are typically similar and between the Q1 low end and the Q4 high end.
Speaker Change: So there's almost three tiers, Dave. That's how you should look at it. Q1, and then Q2, Q3, and then up into Q4.
Operator: Our next question comes from the line of Racheal Vatnsdal with J.P. Morgan.
Dave: Thank you guys.
Speaker Change: Our next question comes from the line of Racheal Vatnsdal with J.P. Morgan.
Racheal Vatnsdal: Perfect. Hey, you guys, thanks for taking the questions this afternoon. I know there were a lot of questions on guidance here, but I just wanted to go a little bit further on it. Can you walk us through the trends that you saw throughout the quarter? Obviously, it sounds like you saw some continued momentum, but was there any sudden fall off in trends or order funnel that happened either late June or July that we need to be aware of that kind of suggests some of this guy down here? Yeah, that's a really good question.
Rachel Vattenthal: Perfect. Hi you guys. Thanks for taking the questions this afternoon.
Rachel Vattenthal: I know there's been a lot of questions on guidance here, but I just wanted to dig a little bit further on it. I guess, can you walk us through the trends that you saw throughout the quarter? Obviously, it sounds like you saw some continued momentum, but was there any sudden fall-off in trends or order funnel that happened either late June or July that we need to be aware of that kind of suggest some of this guy down here?
Brian McKelligon: Yeah, that's a really good question, and we haven't talked a lot about our instrument pacing intra-quarter. You know, good question from David around seasonality, but typically, what we see, and in doing this for almost 30 years, this is typical of the life sciences market, that within any particular quarter, within month one and month two, you're doing between, call it, 35 and 50% of your total quarterly revenue. And within the third month of that quarter, you're doing half, sometimes 60% of your total instrument sales for any particular quarter. So you not only have seasonality, but you have an intra-quarter month one through month three trend. So you really get visibility on your quarterly performance within that.
Speaker Change: Yeah, that's a really good question. And we haven't talked a lot about our instrument pacing intracorder.
Speaker Change: Good question from David around seasonality, but typically what we see, and in doing this for almost 30 years, this is typical of the life sciences market, that within any particular quarter,
Speaker Change: Within month one and month two, you're doing between
Speaker Change: Call it 35% and 50% of your total quarterly revenue. And within the third month of that quarter, you're doing half, sometimes 60%.
Speaker Change: of your total instrument sales with any particular quarter.
Speaker Change: So you not only have seasonality, but you have intra-quarter, month one through month three trend. So you really get the visibility on your quarterly performance within that third month.
Racheal Vatnsdal: Scott, it's a tough one, but maybe just to push a bit further. So did you see anything materialize that happened in late June or even into early July that's suggesting some of this guy down? Like, was this just coming in slower than the pace that you had expected, or did you actually see a reversal in trends and this actually getting worse throughout the last months? That's a great question.
Scott: Scott, it's helpful, but maybe just to push a bit further, so did you see anything materialize that happened in that late June or even into early July that's suggesting some of this guy down? Like, was this just coming in slower than the pace that you had expected or did you actually see a reversal in trends and this actually getting worse throughout the late months? That's a great question. No, it's just pace. It's just pace.
Brian McKelligon: No, it's just pace. It's just pace. It was really just, again, about the pace of the clothes.
Scott: It was really just again about the pacing of the close as we close June going into July and then looking at
Brian McKelligon: The breadth of the funnel and doing a real bottoms-up and tops-down forecast, given the number of opportunities in the funnel, the expected growth of that funnel, our conversion rates, and all the metrics and math around it. So the pace of Q2, the size of the funnel, and the expected funnel expansion is what informed how we looked at the second. Okay, thanks for that clarification. That's really helpful. Then, my follow-up question just in terms of the capital budget. You mentioned that the pressure there just hasn't abated.
Scott: The breadth of the funnel and doing a real bottoms up and top down forecast, given the number of opportunities in the funnel, the expected growth of that funnel, our conversion rates, and all the metrics and math around that.
Scott: So, the pace of Q2, the size of the funnel, the expected funnel expansion is what informed how we looked at the second half on instruments.
Speaker Change: Okay, thanks for that clarification. That's really helpful.
Brian McKelligon: So can you unpack that a bit for us? We've seen some of the headlines around pressure on academic and government budgets; pharma obviously continues to be weak as well. So what did you see across your key customer segments in terms of budgeting dynamics this quarter? And then did any of those get better or worse?
Speaker Change: Then my follow-up, just in terms of capital budgets, you've mentioned that the pressure there just hasn't abated, so can you unpack that a bit for us?
Speaker Change: We've seen some of the headlines around pressure on academic and government budgets. Pharma obviously continues to be weak as well. So, what did you see across your key customer segments in terms of budgeting dynamics this quarter, and then did any of those get better or worse?
Brian McKelligon: So, no material shifts in trend lines, but I would say... Let me take it two ways. So, our system utilization was pretty strong in kind of the academic government and biopharma setting. The system utilization and CROs actually contracted a little bit as we saw more and more projects come internal to biopharma out of CROs. That was a trend that we saw. That's more of a consumable trend. On the instrument side, in both academia and biopharma, there is still continued pressure. [inaudible]
Speaker Change: So, no material shifts in trend lines, but I would say...
Speaker Change: Let me take it two ways. So our system utilization.
Speaker Change: was pretty strong in kind of the academic government and biopharma setting.
Speaker Change: The system utilization and CROs.
Speaker Change: was actually contracted a little bit as we saw more and more projects come internal to biopharma out of CROs. That was a trend that we saw. That's more of a consumable trend. On the instrument side, in both academia and biopharma, still the continued pressures.
Speaker Change: on capital purchases consistent with what we saw in the prior quarters. But similar to what I just talked about in system utilization, we do see a lot of challenges within the CRO settings, and I think you've seen some commentary from others like that as well.
Racheal Vatnsdal: Perfect. That's it for me. Thank you. Our next question comes from the line of Subhu Nambi with Guggenheim Security. Good afternoon, this is Rikki on behalf of
Operator: Our next question comes from the line of Subhu Nambi with Guggenheim Security. Good afternoon, this is Rikki.
Speaker Change: Perfect, that's it for me. Thank you.
Speaker Change: Our next question comes from the line of Subhu Nambi with Guggenheim Securities.
Speaker Change: Good afternoon, this is Rikki Anfersubu at Guggenheim. Thanks for taking our questions. You mentioned the NMPA approval for the HT instrument in China. Some of your peers have signaled encouraging trends in China, others have said it's still been challenging. Could you please provide us some color on the environment you saw in China in the second quarter and then also how you're thinking about that in the guidance for the rest of the year? Thanks.
Subhu Nambi: Thanks. Yeah. So, nothing. The NMPA approval in China, really, it's not going to have any immediate real impact on the instrument as we kind of work with our partner there to gear up the clinical utility and validation study. So, that's more of a longer term goal on the clinical side. On the RUO side... There has really been no material change in China. There's been a lot of talk about the stimulus and why we've seen a real material increase in the number of RFPs. [inaudible]
Speaker Change: Yeah, we're so nothing so the NMPA approval in in China really
Speaker Change: It's not going to have any immediate real impact on the instrument as we kind of work with our partner there.
Speaker Change: to gear up the clinical utility and validation study. So that's more of a longer term on the clinical side. On the RUO side,
Speaker Change: There's really been no material change in China. There's been a lot of talk about the stimulus and while we've seen a material increase in the number of RFPs and quoting that has gone out, we don't think those are gonna really impact or be realized until 2025.
Operator: Our next question will come from the line of Mark Massaro with BTIG.
Mark Massaro: Hey guys, this is Vivian Althomark. Thanks for taking the questions. So just as far as CAPEX placements, do you think we've gotten to a more sustainable, kind of normalized range of just 50 to 70 clips? You edged that here in Q2, so, you know, just to confirm, is it your understanding that this will continue going forward? Just any more granularity that you can share to help us get comfortable with the new guide, aside from that additional $2 million in services that you're expecting in the back half?
Speaker Change: Our next question will come from the line of Mark Massaro with BTIG.
Vivian: Hey guys, this is Vivian, I'm from ARC, thanks for taking the questions. So just as far as CAPEX placements, do you think we've gotten to a more sustainable, kind of normalized range of just 50 to 70 clips? You edged back here in Q2, so...
Speaker Change: Just to confirm, is it your understanding that this will continue going forward? Just any more granularity that you can share to help us get comfortable with the new guide, aside from that additional $2 million in services that you're expecting in the back half? Yeah, I think we'll see as we look to the second half. Obviously,
Mark Massaro: Yeah, I think we'll see as we look to the second half. Obviously, Vivian, we don't guide quarterly, but qualitatively, we expect. Similar trends into the second half, as we saw in Q2, with some incremental improvements, certainly as we get into, as we were discussing with David, the seasonality in Q4. So I do think, as you look back at the average or number of instrument placements you saw last year, I do think we begin to incrementally continue to improve on that, particularly as we get into Q4.
Speaker Change: So again, we don't guide quarterly, but qualitatively we expect...
Speaker Change: I think similar trends into the second half as we saw in Q2.
Speaker Change: with some incremental improvements, certainly as we get into, as we were discussing with
Speaker Change: with David the kind of the seasonality in Q4. So I do think as you look back at the kind of the average or number of instrument placements you saw last year I do think we begin to kind of incrementally continue to improve on that particularly as we get into Q4.
Mark Massaro: So hopefully, that answers your question. Yes, perfect. I'll leave it there. Thanks guys.
Speaker Change: So hopefully that answers your question, Vivian.
Vivian: Yes, perfect. I'll leave it there. Thanks guys.
Operator: Our next question comes from a line from Tim Chiang with Capital One.
Speaker Change: Our next question comes from the line of Tim Chiang with Capital One.
Timothy Chiang: Hey, thanks, Brian. Johnny, you guys talked about this recent restructuring in July. How big is this restructuring relative to the restructuring in January? Was this a smaller? Reduction in headcount, I mean, is there any more granularity you could provide, and will this have any sort of impact on third-quarter revenues?
Tim Cheung: Hey, thanks. Brian , Johnny, you guys talked about this recent restructuring in July . You know, how big is this restructuring relative to the restructuring in January ? Was this a smaller?
Speaker Change: Reduction in headcount. I mean, is there any more granularity you could provide and, you know, will this have any sort of impact to the third quarter revenues this year? No, to the latter. You know, we think we've been able to accomplish this.
Brian McKelligon: This year? No.
Johnny Ek: To the latter. We think we've been able to accomplish this restructuring without impacting the core business. You know, for example, kind of the revenue-carrying portion of our commercial team was slightly affected but not in any significant way. And, you know, I think what you'll see in terms of restructuring charges, Tim, will be very similar to what you saw in Q1. So we didn't give the specific number of employees, but it was sort of on a similar scale.
Speaker Change: [inaudible]
Speaker Change: For example, the revenue-carrying portion of our commercial team was slightly affected, but not in any significant way.
Tim Cheung: and you know the I think what you'll see in the terms of restructuring charges Tim it's be very similar to what you saw in Q1
Speaker Change: So we didn't give the specific number of employees, but it was sort of at a similar scale.
Timothy Chiang: Got it. And maybe just one follow-up question for Johnny. Johnny, you sort of mentioned, you know, to get to cash flow break-even by year-end, you need to get your gross margins into the low 60% range. You know, what else needs to happen? I mean, is it just more tweaking of the product placements, or, you know, is there anything else that has to get done to get you from around, what, 58% gross margin for the second quarter up into the low 60s? By year-end? Yeah,
Speaker Change: Got it. And maybe just one follow-up for Johnny. Johnny, you sort of mentioned, you know, to get to...
Speaker Change: Thank you.
Johnny Ek: Yeah, so good question. It's, we've got a, as we built out our revenue forecast and kind of can see the components of revenue, they each carry different gross margins, and so the mix of the revenue has a lot to do with it. Some of our contracted service business has some strong revenue, kind of milestone-based. Our instruments and reagents are holding strong margins, which allows us to have visibility into the low 60s.
Johnny: Yeah, so good question, it's
Johnny: We've got a, as we built out our revenue forecast and kind of can see the components of revenue, they each carry different gross margins, and so the mix of the revenue has a lot to do with it.
Johnny: Some of our contracted service business has some strong revenue, kind of milestone-based. Our instruments and reagents are holding.
Johnny Ek: It's really about getting the volume of revenue back where we kind of want it to be and know it should be, which absorbs a lot of the costs that we brought in to establish our in-house center of excellence. And so, with that and a better utilization of inventory, one of the natural Weights on margin, as you might expect, is reagent inventory. If it expires or if something happens, it becomes obsolete in the channel, et cetera.
Johnny: Holdings Strong Margins, which was allows us to have visibility into that low 60s. It's really about getting the volume of
Johnny: of revenue back where we kind of want it to be and know it should be, which absorbs a lot of the costs that we brought in to establish our in-house center of excellence. And so with that and a better utilization of inventory, one of the natural...
Speaker Change: Weight on Margin, as you might expect.
Johnny Ek: And so bringing that all in-house really made a meaningful difference that we'll be able to reap benefits as we get a couple quarters out from the go-live of the Center of Excellence because it allows us to have much better visibility into the utilization of our inventory, the ability to have longer-dated inventory, et cetera, because it's the natural, natural case in a business like ours that when you have reagents And so that's been a historic, always has been a historic weight on our margin. And as we go live with our Center of Excellence, it allows us to manage that much, much better. And that allows for that margin expansion that we expect. Okay, I got it. That's very helpful. Thanks.
Speaker Change: is
Speaker Change: Reagent inventory if it if it expires or if it Something happens. It comes obsolete in the channel, etc. And so bringing that all in-house
Speaker Change: really made a meaningful difference.
Speaker Change: natural case in a business like ours when you have reagents that expire you have to make sure you manage them carefully so you don't so you don't have any expiry issues and so that's been a historic
Speaker Change: always has been a historic weight on our margin and as we go live with our Center of Excellence it allows us to manage that much much better and that allows for that margin expansion that we expect.
Speaker Change #100: Okay, got it. That's very helpful, thanks.
Operator: Our next question comes from a line from Mason Carrico with Stephen.
Speaker Change #101: Our next question comes from a line of Mason Carrico with Stevens.
Mason Carrico: Hey guys. Thanks for the questions. A lot has been asked here, so I'll keep it to one. On the cash flow break-even target, do you have any additional levers that you can pull going forward from a cost standpoint? Or is this break-even target highly dependent on the revenue range that you've laid out in the guide?
Mason Carrico: Hey guys, thanks for the questions. A lot's been asked here so I'll keep it to one. On the cash flow breakeven target, do you have any additional levers that you can pull going forward from a cost standpoint or is this breakeven target highly dependent on the revenue range that you've laid out in the guide?
Brian McKelligon: I would say it's two things. First, revenue. Making sure we hit our revenue target, certainly that's..., that's really important given the fact that we have stable and improving and very good visibility to gross margin. We have very good visibility into OPEX. Obviously, as the majority of our spend is on headcount, we know what our headcount is. And as a result, we can pretty well predict our OPEX. It's working capital, how working capital moves.
Speaker Change #103: stable and improving and very good visibility to gross margin. We have very good visibility to OPEX.
Speaker Change #104: Obviously, the majority of our spend is headcount.
Brian McKelligon: And that's really just timing, as you know, it's AR, it's AP, it's the use of inventory. So that could move us positive or negative on that breakeven target. And then revenue is the other piece of it. Absolutely. So those are really the two movers on that breakeven. John, let's thank you.
Mason Carrico: Got it. Thanks, guys.
Speaker Change #105: Got it. Thanks guys.
Operator: That concludes today's question-and-answer session. I'd like to turn the call back to Brian McKelligon for closing remarks. Well, listen, thank you all.
Brian McKelligon: Well, listen, thank you all for your time. We appreciate all the questions. Just in closing, I would say that we're pleased with our rebound in the second quarter and looking for a strong second half, simply put, to meet both our top and bottom line goals. So we thank you all for your time and look forward to following up.
Speaker Change #105: That concludes today's question and answer session. I'd like to turn the call back to Brian McKelligon for closing remarks.
Brian McKelligan: Well, listen, thank you all for your time. We appreciate all the questions. Just in closing, I would say that we're pleased with our rebound in the second quarter and looking for a strong second half, simply put, to meet both our top and bottom line goals. So we thank you all for your time and looking forward to following up.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change #106: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change #106: www.mooji.org