Q3 2024 Standard BioTools Inc Earnings Call
Speaker Change: Good day and welcome to the Standard BioTools Inc. 3rd quarter 2024 financial results conference call. All participants will be in less than only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.
Speaker Change: Please note this event is being recorded. I would now like to turn the conference over to David Holmes of Investor Relations. Please go ahead.
David Holmes: Thank you operator and good afternoon everyone. Welcome to Standard Bio Tools, third quarter 2024 earnings conference call.
David Holmes: We do the call today is Michael Egholm, President and Chief Executive Officer and Alex Kim, Chief Operating Officer and Interim Chief Financial Officer.
David Holmes: At the close of market today, standard bio tools released its financial results for the quarter and did September 30, 2024.
David Holmes: During this call, we will review our results and provide an update of our financial and operational performance, 2024 outlook, market trends and strategic initiatives.
David Holmes: During the call we will make forward-looking statements about events and certain fanches that have not yet occurred, including plans and projections for our business.
David Holmes: Our Outlook for 2024 and Future Financial Results, Market Trends and Opportunities, and our expectations related to the combined operations with some allogic, including potential synergies and our business outlook for the combined company.
David Holmes: These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current circumstances.
David Holmes: Before looking statements on this call are based on information currently available to us and we just claim any obligations to update these statements except as as may be required by law.
David Holmes: During the call, we will also present some financial information on a non-gap basis. We believe these non-gap financial measures are useful in evaluating our core performance and is a baseline for assessing the future earnings potential of the company.
David Holmes: We use these non-gap measures in our own evaluation of continuing operating performance.
David Holmes: We encourage you to carefully consider our results on a gap and non-gap basis.
David Holmes: The reconciliation between non-gap measures and their gap equivalents are provided in the tables accompanying today's press release as appendix to today's presentation slides.
David Holmes: Please note that management will be referring to a slide presentation, including updated supplement financial information within the webcast today.
David Holmes: Following prepared remarks, we will host a question and answer session.
David Holmes: Today's slide presentation along with the replay of the webcast will be available on the investor section of our website.
I would now like to turn the call over to Michael Egholm, President and CEO of Standard Bytatoose. Michael?
Thank you, David and good afternoon everyone. We appreciate you joining us today. Before we discuss our quarterly results, I want to welcome Alex Kintelko, who is acting CFO and will be covering our financial performance for the third quarter 2024.
David Holmes: Alex has been with Santa Byer Tools since his exception, instrumental to its founding, and fundamental to its growth as well.
David Holmes: As a co-founder, chief operating officer, Alex brings to the CFO role at deep understanding of our business and seasoned operational acumen home from a decade at Danahe.
In addition, Sean McKay, our Chief Business Officer, who now heads our organic and inner-gannic road efforts, is joining the call and will be available to answer questions. With that, let's discuss our results, with our speaking to perform our numbers.
In the third quarter, we delivered 45 million in revenue, sequential Yacht 21% from last quarter, but down 5% year or year and 128 million.
David Holmes: In revenue year today, it's around 9% versus 2023. From last quarter to this one, the industry backdrop remains challenged with customer budgets for cabbages, equipment, tight and purchasing behaviors conservative.
Operating in a dynamic environment like this one requires deep operational discipline and continuous focus on improvement.
Against these metrics, the team delivered. We made our adjusted revenue target.
David Holmes: and accelerated operational efficiency. Our team is now treat quarters into the somologic integration in a full year ahead on cost reduction, having already operationalized and expected 80 million synergies.
David Holmes: While the savings are expected to be fully realized in 2025, we have already seen a 24% year or year reduction in non-gap operating expenses here today and a 50% improvement in adjusted if the dollar in the quarter.
David Holmes: Our operating system, standard bio tool business system, of just SPS has become deeply embedded in the new businesses.
Examples of the power of SBS include improved forecasting, improved delivery performance and an inherent focus on quality.
David Holmes: For example, we now have an interest.
Now have an industry leading delivery for on-time delivery for products and services.
of 98% versus 78% to US ago.
David Holmes: for Legacy Standard Biochews. We also...
have reduced complaints per installed base for a high-selling instrument, more than four-fold in the same period. This allows our customers to be focused on their exciting research with less downtime, and our sales force to be focused on generating new leads.
We believe we can still be even more efficient and expected you will see that benefit of our continuous improvement culture in both our bottom and top line going forward.
With these results and with full awareness of the current operating environment, we are reiterating our full year 2024 revenue guidance in the previously communicated range of 175 million.
With 368 million in cash and short-term investment as of September 30th, we're well capitalised to advance our strategic vision of building a scaled and profitable life-sounds company.
David Holmes: At Stand About 2, we're building a top tier Lise Science Company, leveraging consolidation to all come the sectors innovation, violent, bottleneck and inability to scale. Our goal is to become the preferred industry partner to customers and to innovators.
David Holmes: We're focused on providing a portfolio of consumables, instruments and services which share platform that drives reliability, performance and profitability for stakeholders and shareholders alike.
We recognised the importance of achieving our profitability of the actives and we're targeting adjusted EBITDA upreg even for this full year, 2026 which will further persist in the company to partner and consolidate a fragmented and capital constraint industry.
With a high performance culture stream-lined infrastructure, team of seasoned operators and access to capital, we're in a way that we're able to do a lot of things.
It is early in our journey, it's not just the first innings, and we're far from done and far from optimized, but we are in our way. We have a clear strategy and a world-class team operating in one of the most challenged environments, which opens new opportunities for us.
Turning to results are revenue mix in the third quarter was split between lab services at 41%. Instrument field services at 14%, instruments at 12% and consumables at 31%.
Our sequential quarter or quarter revenue growth was driven by our service offerings, which is today chiefly summer-skent services. We saw bounce back from last quarter's result from the failable timing from a few large account.
David Holmes: To this end, we're putting, pushing hard to expand our all customer mix And in currently, outside our top five customers can customers Some service revenue will double digit in the quarter year or year
One component our strategy is to expand our footprint beyond our core lab located in Boulder and deeper into our authorized summer scan sites
In the quarter one of the sites we added was the major US-based bio-form customer, which should help us expand the customers' use of our product.
And not a diversifier to our service revenue is our Ole Miss service offering, which leverages all of our products so much again, side-toe of an imaging mass cytometry and future platforms developed acquired a partner.
This offering expands our assay lab services revenue stream and provides customers premium data with clinical research support This will increase the adoption while avoiding the capital budget constraints currently facing the board of biopharmor market
Turning to our instrument business, which is down year or year by 42%, with the biggest impact coming from our higher price, mass cytometry instrument.
The industry headwinds have not played and we're working hard with our customers to unlock budgets and adjust to their new purchasing behaviors where we can.
Our genomic business including Flodix Instruments
David Holmes: and the Consumer Walsh and OEM. While down here, OEM is a contribution margin positive, and it's a case study of the VALU, the SBA's culture and the SBA's culture can create a lean, profitable business unit with upside potential.
Hence, we're working on additional oil and relationships and identifying new niche growth opportunities which leverages our infrastructure and which will be a creative to the bottom line.
Construable is and remains our most attracted product margin profile and in an industry with dark clouds.
is a continued bright growing spot in our business. This revenue stream was up 13% year or year in the quarter.
Consumer World are the most attractive products in the industry and at the top of our product pyramid and the top strategic focus for our boat organically and inorganically.
and Major Example of what we can do with consumables.
is the distributed summer-skant solution on Illumannas sequence in platform which we believe is becoming within increasing clarity the next fixing in polyomics and is an exciting new roadwax for the company.
David Holmes: So much, GAN is a powerful and competitively differentiated platform, which will tremendous of sight potential. And recent studies confirmed the assays unique ability to scale with precision.
Will Dave?
Our turn at the best of you to the solution we can further unlock our potential to be supplying the leading periodic solution.
Our partnership remains on track with full commercial release in the first half of 2025. Demoingurizing the SummerScan ASA on Illuminates installed base of more than 2000 Noisig instruments.
Having now spent time with the team, the technology and customers, it is clear to us that the summa met technology has more headroom and much more.
Commercial Financial, then we originally invits it. We are exploring new ways to leverage the technology and today.
We announced the launch of single summer marriage and as a minimal viable product offering, making each of the 11,000 individuals summer marriage available for purchase.
This is a highly different set of solutions in an all-important and large protein rage in Endmargith. This meets an unmanned need for protein identification and quantification, and inside the right to voice across them or process.
will proceed with care to ensure the utmost quality of our product and prepare for the full product laws in the future.
David Holmes: As we look to the next several quarters in Bionne, we believe we're well equipped to execute our vision on stand-and-end.
David Holmes: for Standard Byrd, Truth.
Where the business of delivering solutions to our customers, not just focusing on individual application, as those can evolve over time.
What's important is that we have strong exposure to attractive and milder today, particularly in academia and pharma.
David Holmes: As we continue to strategically allocate capital to bust the bolster of portfolio, we will expand into other attractive markets.
We have an experience leadership team committed to our continuous improvements in initiatives.
with a track record of drawing growth, expanding growth margins and reducing operating costs.
The current market environment is offering many unique opportunities and we're actively assessing how to accelerate our consolidation feed.
Our story is not complete and we remain focused on scaling the business, driving and market diversification, evolving to a higher margin, consumable offerings and delivering long-term shareholder value. With that.
Speaker Change: Unnoticed the call over to Alex. Alex.
Thank you Michael and thank you all for joining us all today
I'm honored to be representing standard bio tools on this call as an acting CFO. As Michael said, I've been with the company since the inception, and I've been happy to jump into the role of CFO, bringing my knowledge and experiences with business leader and operator to the finance function.
I will take us through our financial results in more detail and provide additional context.
I want to remind you that on as reported basis, our third quarter and year to date, 2024 results, include the combined operations of standard biotools and somologic, since the closer the merger on January 5th of this year.
Speaker Change: While the same period in 2023, including the financial results of the legacy stand-up by a tool's business only.
Speaker Change: Therefore, we'll compare the purposes. We think it's much more meaningful to look at the results of both businesses combined.
And so as I speak to our Q3 Finance results, my commentary will focus on the performer combined results of operations for both stand-by-attools and some oligarch for 2023 and 2024.
Please do refer to today's press release and the appendix to our invested deck for more information, including a reconciliation of gap to non-gap measures that I will be discussing here.
Starting with revenue on slide 9, our third quarter came in at $45 million, down 5% EuroVier, and year to date revenue was $128 million, down 9% EuroVier.
sequentially, on third quarter revenue increase 21% versus the second quarter.
Speaker Change: but
Speaker Change: Breaking revenue down further, Consulal was revenue was 14 million in the third quarter of 13% year of year and 45 million year today of 21% compared to 2023.
Our consumer was growth, particularly benefit it from continued expansion in our so-mascan authorised sites and the Illumina Early Access Program.
As we've discussed in the past, we believe having distributed solutions for summer scan is critical to compete in the established market leadership.
We see this ability to supply more new sites worldwide, as highly complementary to our existing lab services business.
Insumers revenue was just under $6 million in the third quarter down 42% year of year and just under 20 million year today down 28% compared to 2023.
This was largely driven by the external capital spending constraints in the life sciences sector, as well as extended weakness we're seeing in China.
Speaker Change: This is elongating our sales cycle, delaying orders as customers secure funding, but we are encouraged as our funnel continues to grow and particularly with our IMC spatial biology platform.
Speaker Change: Lab Services revenue was 18 million in the third quarter up over 1% year of a year and 41 million year today down 23% compared to 2023.
The third quarter benefit is from favorable timing for my few large customer projects alongside new summer scan customers continuing to commit to the platform.
Historically, our so-must-gand-lapse services business has been heavily reliant on a few large customers for the majority of our revenue.
Speaker Change: And while our year-to-date performance has been impacted by fewer projects from these top customers, we are encouraged by the broadening of the customer base.
Beyond our largest customers, our lab services business to live a double digit revenue growth year to date, positioning us well as we continue to expand and diversify our base.
Field Services Revenue was just over 6 million and third quarter down 4% year of year and 19 million year today, flat compared to 2023.
Field Services Revenue was impacted by lower installation services on fewer instrument sales, offset by continued maintenance contracts.
By our application segments our proteomics business which includes our summer scan, cytos, and IFC product lines with 77% of our revenue and was down 4% for the quarter and down 10% year to day.
While a genomic business represented by a biomarkt product line was 23% of revenue and was down 8% for the quarter and down 7% year today.
Moving on to our operating performance on flight 10.
Our non-gap growth margin on a pro-forma combined basis was 57% in the third quarter versus 52% your over year and 53% year today compared to 52% in 2023.
A third quarter was positively impacted by a shift in revenue mix driven by higher and soables relative to instruments.
Speaker Change: as well as by underlying improved quality yields, lower scrap and lower warranty costs.
There are lingering gross margin headwinds and one-time cost that would continue to navigate through the rest of this year. But we are encouraged by the positive gross margin impact of our SPS activities to reduce waste and improve quality.
as well as our ability to continue to drive gross margin expansion over the long run.
Moving to our operating expenses on slide 11.
Our non-gap operating expenses on a profono basis was 40 million in the third quarter, versus 53 million last year, which is a 24% year-over-year adoption.
and 137 million year to date versus 176 million in 2023, which is a 22% reduction.
Sequentially, from quarter two, we delivered our 17% reduction.
Speaker Change: Our third court improvement is the result of the own ongoing realization of merger class synergies that we've spoken out before.
Speaker Change: As well as a one-time benefit from reduction in our annual bonus to cruel in line with our current full-year expectations.
There will still be a few one-timers, restructuring, and irrigation costs, and timing of U.N. marketing investments that will come across in 44
But we head into 2025 with the full 80 million in target synergies identified, and at a run rate of 170 million non-gap annualized operating expenses.
Speaker Change: vs. our 2023 first half performer annualized operating expenses of approximately 250 million.
Speaker Change: on slide 12.
Our adjusted EBITDA was a $14 million loss in the third quarter compared to a $28 million loss last year, which is a 50% year of a year reduction.
And a 69 million dollar loss due to date, of course, is 102 million dollar loss in 2023, which is a 32% reduction.
This brings me to cash on slide 13. We ended the third quarter with about 368 million in cash, cash equivalents, restricted cash and short term investments.
A total cash burn was 28 million in the third quarter, or is a 68 million in the second quarter, representing a 58% reduction.
This includes about $5 million for transaction, restructuring and integration costs.
Including the impact of these items are adjusted cash burn was about $21 million, representing a 23% reduction versus the second quarter adjusted cash burn of $28 million.
Speaker Change: We are beginning to see material reductions in our cast burn coming through as a result of our restructuring efforts and the ongoing realization of merger cost energies.
and we'll well position with our strategic plan and our balance sheet to support the growth of our business to cash flow break even.
Speaker Change: As we look to the fourth quarter, as Michael said, we are reiterating our full year revenue guidance of 170 to 175 million dollars.
To remind you, our quality results can be lumpy as a few instruments and our lab services projects can move from one quarter to another.
And as I've mentioned, we're still working through some cost headwinds as we end the year.
However, over the long run, we are driving strategic initiatives to more reoccurring consumables revenue and we are committed to delivering long-term, profitable revenue growth.
Back to you, Michael. Hey, thanks, Alex.
We thank you all for your continued support, as we navigate these tough end markets. We look forward to seeing many of you at the UBS Global Healthcare Conference on November 12.
in Ryan Trish Palace, Vadas, California, and at the Jeffers London Hellcap Conference on November 19. And now I hand the cold back to Wyatt for Q&A.
Well, now begin the question and answer session. To ask a question, you may press star then one, on your telephone keypad. If you're using a speaker phone, please pick up your hands at before pressing the keys.
And the first question comes from Dan Brennan with DD Cohen. Please go ahead.
and Peter, you get afternoon guys, this is Kyle and Fredin. Thanks for taking the questions. I just wanted to start if meeting you could quantify what percent of assay services revenue in three queue was timing based, is there where you can quantify that? Thank you.
Speaker Change: What we had.
What we had said before I had cut good to hear you and...
As we talked about before, our summer-skinned services have historically relied on a few.
Speaker Change: and lots of customers like five or so. And as Alex pointed out outside that, we see, outside those, we see double digit growth and the summer scan asset services would see as an encouraging sign.
We had sailbole timing in Q3 and on sailbole in Q2.
Speaker Change: For those five-lots customers we have a hefty headwind on the order of $15-20 million as we're shared before. So it's really encouraging to see the broadening of the summer scanner as it serves businesses.
Speaker Change: Just remind everyone it is these large projects are highly dependent on getting the fuel and then getting the samples and getting it all run. So the quarter to quarter timing.
can post numbers one way or another, but if take a step back, we like where this business is headed.
Speaker Change: God, thank you. And then maybe just on the guide, you know, you ridder rated your guide, 175 million for the year. The midpoint of that, I think, you know, for Q4 implies.
and Flat, a little bit down, cure, recue. Are you expecting any year end budget flush or anything? Any year end spending dynamics that are different from what you saw on three cue. Thank you.
Speaker Change: Wee!
Speaker Change: Wait, wait.
Don't, but it would be really nice if it came. So we do build a little bit of an art taken on instruments here in Q4, but we're not relying on a market recovery or new budget becoming available.
Speaker Change: To that anything to add to that Alex? I think it was a good summary. We continue actively work our funnel and we feel comfortable where our funnel is at to hit the guidance that we shared with you here.
As we've mentioned before, any quarter can be impacted as an instrument and our large service projects may shift from on quarter or another, but we have a funnel that we feel comes to what the guide that we've write it.
God of thank you guys.
And the next question comes from Matt Stanton with Jeffries, please go ahead.
Thanks for being able to pick up there on the instrument size and clearly there are mean, for you guys, and the broader industry. You talk a little bit more about.
Matt Stanton: Your start-in-the-seany green shoots or funnel improvement, you know, when could we start to see maybe demand improve not just easy comps and you called out your China He's unpack a bit more what's going on over there in China and when we could potentially see things improve over there Is it really tight to stimulus dollar starting to flow? Thanks
Yeah, no, my aim at good to hear you and like if you just saw it zoom out a little bit
Instruments at down year to day 28th percent versus last year when we were up 46th percent and I think it's a largely in line with our peers.
selling high-cost instruments that are still working in this. So we're going to toss in myment here as Alex alluded to our funnels are building, which we see as an encouraging sign.
Matt Stanton: for specifically for China.
Our team are talking about it, it's looking a little better but we don't expect it to flow through and cue for hopeful it will be a tailwind in 2025.
Historically up until the last quarter China has been a bright spot for us and we're certainly looking forward to China growing coming back.
and then maybe on green shoots.
Matt Stanton: We are seeing these small, flowing into biotech again and we are beginning to see more leads being generated there but it is not translated into dollars to us yet.
So, cautious optimism, I am, I will characterize it as.
Okay, great, that's helpful. And then maybe you want on the car side a lot of really good progress.
Speaker Change: There, you called out in your script kind of certain growth areas.
Speaker Change: with an old deal, makes the launch of single-somers, it's a service. Something that Adam you talked about in that.
The strategy update back in May. So, if you talk a little bit more about the areas you're investing in, some of those launches, and I think I'm going to single some more launch. You talked about kind of limited launch and then a broader launch later. So any finer point you can talk about just in terms of rolling that product out.
are not customers, you'll be targeting what you can to consider successful, long, to feel about 12-theking months from now.
Yeah, no, a great question, so...
We're taking out 80 million now and I want to thank my team for doing all the heavy lifting here So we really, really well set up with significant, it would use Casper
We are protecting our growth in investments and protecting investments in sales and marketing as a backdrop.
and so to that end, we launched the individual sommum, a son on the book called a minimal viable product.
What, it's minimal viable product because we have not shipped.
Speaker Change: Er...
Individual Regions before Bravenous at a whole infrastructure.
Speaker Change: that said off end.
Speaker Change: There's limited support for the number of applications that you can use them for.
and then we do not have an e-based site that eventually will be there. We will be click on a protein and then get individual storm a mess.
Speaker Change: and to that end, it's limited in that we are rolled it out to all our existing customers and then we'll do a broader launch yet when we've fixed all that infrastructure. And again, we are still investing heavily in...
In an ID because we believe in far technologies there's a long runway ahead.
Speaker Change: Okay, great, thanks, and then maybe you'll understandings.
The backdrop remains pretty pretty fluid out there, I mean
So if you start to think about 25, you know, back after the sheer, you're kind of at 45 million a quarter call it, if you analyze that, we're at 180 million, any kind of...
and the director of the documentary, I want to provide you start to think about 25, obviously instruments, lab music, comps, you have aluminum ramping. Just really think about a 180 million base in some growth that, but any finer point you're willing to put on that, it's our to dial in our models for next year. Thank you.
I learned at Xenla was here.
Yeah, not at this time, we're not priding guidance on 2025 yet. Our focus is very much on Q4 and closing out this year's strong.
I will come back to you in the future with our updated view on 2020, 5 later.
Yeah, I'll just say like so, our, we really guidance of 171 75, it remains a challenging environment and then on top of the business where you can get a big order that can sway it one way
or the order as for 25, as you have heard repeatedly, we're very encouraged by our relationship with the luminance which we think.
Speaker Change: and the long term with get access to much broader customer base. We believe we have the best solution out there. It's the only solution so far that can scale with precision currently 10,000 proteins.
So, long term really good. I've been doing this for 30 years and...
Speaker Change: Rollouts always in the adoption of new workflows, always take longer than you want, so
I wouldn't owe in decks on the Illumina Lawrence or impact on next year for the out years we're certainly expecting a healthy growth if that's helpful Matt.
Matt Stanton: Yeah, that's great to probably be there, thanks guys.
Again, if you have a question, please press star, then one
Speaker Change: Our next question comes from Paul Knight with Keybank. Please go ahead.
Hi, this is Lucas on For Paul Night at Keybank.
It sounds like you recognized revenue from some of those projects like that pushed out by a squatter. Would you say that all of that work is behind you now or are there some delayed projects that will actually get recognized still here in Q4? Thank you.
Speaker Change: Hey, hey, hey Lucas, um...
The way I would characterize it is we had favorable timing this year as we said in the script an unfavorable timing.
Matt Stanton: Last year, it's not a matter of recognition, as I said from our top five customers, we have a $15,000,000 headwind year or year, not because.
They're not spending on a computer to the technology. It's just we had a very favorable 2023. So that's the backdrop. What I would point to as we also talked about in the script is we have...
Matt Stanton: Rick O'er's application of SBS now across the organization and to a much better visibility to win these large projects.
Matt Stanton: where we, when we get the P.O. and when we can get the samples and when we can get them run.
Thanks, that's helpful, understood on the timing. I guess turning over to the instrument side of the equation, obviously you saw weakness in China, but what were you seeing in markets outside of China?
Matt Stanton: It...
We're doing well in the Americas. The rest of Asia, like a particular Japan and Korea, it's been a...
a tough backdrop for a long time, sort of met macroeconomics.
In Europe, we just installed a new leader there and will focus on rebuilding the finals there.
Okay, great, I shall lie ahead.
and includes our question and answer session.
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