Q3 2024 Akoya Biosciences Inc Earnings Call

November 14, 2024

and Brian McKelligan. Thank you.

Speaker Change: Hello and thank you for standing by. Welcome to Alcoaia Biosciences third quarter 2024 earnings conference call.

Speaker Change: At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

To withdraw your question, please press star 11 again.

Speaker Change: I would now like to hand the conference over to Priyam Shah, Head of Investor Relations. You may begin.

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. Earlier today, Equoia released financial results for the third quarter, ended September 30, 2024.

Speaker Change: A copy of the press release is available on the company's website.

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.

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: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 14, 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.

Speaker Change: The audio portion of this call will be archived on the investors section of our website later today under the heading events And with that I will now turn the call over to Brian

Brian McKelligan: 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 third quarter, highlight our operational advancements, new products, recent partnerships, and strategic decisions aimed at positioning our company for long-term growth.

Brian McKelligan: Following that, Johnny will delve into our financials, key trends, and our outlook for the future.

First, let me make some important introductory and thematic comments.

Revenue for the third quarter came in below our expectations.

Brian McKelligan: largely due to ongoing capital equipment purchase constraints seen across the life sciences tools market. We remain optimistic in a long-term growth outlook of our industry and are actively addressing the temporary challenges the current macro environment imposes.

Brian McKelligan: We worked to anticipate these challenges throughout the year with our organizational restructuring, which, while difficult and temporarily disruptive, was the right decision and enhanced our readiness to absorb these headwinds.

Brian McKelligan: That said, we expect to see continued pressure on customer spending and now expect full-year revenue in the range of $80 million to $85 million.

Brian McKelligan: The midpoint implies a minor step up in our fourth quarter revenue from this quarter's performance.

Brian McKelligan: 2024 has been an incredibly challenging year for ECOIA and the life sciences market.

Brian McKelligan: Throughout this year we have built a strong foundation that we believe positions us for long-term success and a return to growth.

Brian McKelligan: We implemented a more operationally efficient cost structure and a manufacturing center of excellence that is delivering solid and improving margins and a growing list of new reagent product offerings.

Brian McKelligan: We continue to advance our companion diagnostic pipeline and believe that it will be a significant contributor to our growth and value in the near term.

Brian McKelligan: We lead with the largest install base and supporting publications in the spatial biology market, a market that we believe is a current and future pillar of the life sciences research and diagnostics.

Brian McKelligan: Last week's Society for Immunotherapy of Cancer Conference, or CITSI, was a strong point of reference where spatial biology as a theme was the most prominent we've seen to date.

We are a company solely dedicated to spatial biology.

Brian McKelligan: From our founding until the end of 2023, we realized the high growth potential and the benefits of being a leader in this rapidly emerging market and consistently delivered solid top line growth.

Brian McKelligan: Because of the improvements in our cost structure and margins, we now have the ability to manage through today's more challenging market environment.

from Discovery to Diagnostics.

Brian McKelligan: supporting a return to top-line growth in 2025 and beyond, and we remain committed to achieving our profitability goals.

Let me now walk through our quarterly revenue numbers.

Brian McKelligan: We reported top-line revenue of $18.8 million in the third quarter, a 25% year-over-year decrease compared to the prior year period.

Brian McKelligan: Much of the top-line miss was driven by instruments, where total revenue for the quarter was $5.7 million.

Brian McKelligan: We placed 35 instruments in the third quarter versus 30 in the first and 51 in the second quarter.

Brian McKelligan: As noted, the underperformance and volatility are driven primarily by extended sales cycles and limited capital equipment funding, especially in the North America's market.

Brian McKelligan: Akoya's total install base increased to 1,299 instruments, a 15% increase over the prior year period.

Brian McKelligan: Reagent revenue totaled $6.3 million, an 11% increase over the prior year period.

Brian McKelligan: Services and other revenue totaled $6.5 million, a 10% decrease over the prior year, primarily driven by underperformance on our instrument sales.

Brian McKelligan: Gross margin was 62.3%, an improvement on the 60.6% from the prior year period, and is a byproduct of our now fully operational Manufacturing Center of Excellence.

Brian McKelligan: Operating expenses were $20.1 million, a 25% decrease over the prior year period.

Brian McKelligan: Even with a reduced top line, the result is an improvement in our loss from operations year over year.

Brian McKelligan: Our loss from operations was $8.3 million, a 28% improvement over the $11.6 million in the prior year period.

Brian McKelligan: The industry's top-selling spatial proteomics platform for the discovery and translational markets, supporting both high plex tissue analysis and high throughput low to mid plex studies.

Our phenoimager HT systems, or just HT, now total 376.

Brian McKelligan: As a clinical grade system on the path for regulatory approval, the HT is at the forefront of establishing spatial biology as a technology that we believe can truly impact patient care.

Brian McKelligan: Akoya continues to lead the market in publication volume, having reached a total of 1,578 publications citing our platform technologies as of the third quarter, a 47% increase from the prior year.

Brian McKelligan: Over the last month, we have announced several important partnership and product introductions.

Let me briefly review those.

Brian McKelligan: In early October, we announced that the Francis Crick Institute and the Royal Marsden NHS Foundation Trust

Brian McKelligan: in the UK announced a large multi-institutional study to better understand why certain patients do or do not respond to cancer immunotherapy and what drives side effects to these drugs.

Brian McKelligan: This multi-million dollar program, titled MANIFEST, which stands for Multi-Omic Analysis of Immunotherapy Features Evidencing Success in Toxicity, has the ambitious goal of identifying all the biomarkers predictive of response to immunotherapies.

Brian McKelligan: The initial testing will include 3,000 patients who have already started their treatment and at least 3,000 new patients in breast, bladder, kidney, and skin cancer over the subsequent four years.

Brian McKelligan: We are proud that the PCF and HT were chosen as the spatial proteomics platforms for this large-scale study.

Brian McKelligan: Okoye's platforms were also the leading spatial proteomic solutions, with the PCF as the only ultra-high plex platform, prominently featured in recent high-impact nature publications from the Humer Tumor Atlas Networks.

Brian McKelligan: which trace the origins and evolution of 20 cancers across 2,000 individuals and were highlighted by Eric Tobol in his popular media outlet Ground Truths.

Brian McKelligan: This was on the heels of major initiatives such as HubMap and the Human Cell Atlas, which have now incorporated spatial profiling and preferentially selected Aquoia's platforms to analyze their samples.

Speaker Change: Akoya's inclusion in these programs is a strong endorsement driving visibility, adoption, scientific value, and a meaningful revenue stream for our platforms.

Speaker Change: Because of the now robust content engine out of our manufacturing center of excellence, we have the ability to rapidly and affordably produce additional high-value content to drive increases in system utilization, reagent revenue, and pull-through.

Speaker Change: At last week's CITSEA meeting, which I previously referenced, Akoya introduced several new reagent product offerings.

First, we announced our Phenocode I06D panel.

Speaker Change: The IO60 panel is an immuno-oncology dedicated solution covering 60 key protein biomarkers on a single panel, enabling interrogation of whole tissue samples or multiple tissue samples per slide at scale and high resolution.

Speaker Change: with a ready-to-use and off-the-shelf panel that is pre-validated and pre-optimized.

Speaker Change: Researchers can quickly begin large-scale discovery and translational projects with little to no setup in panel development time.

Speaker Change: At CITSE, our partner Precisions for Medicine, an industry-leading, high-volume, global contract research organization, and an early adopter of the HT, announced that they have now also incorporated the PCF as a spatial proteomics discovery platform of choice and will actively promote the IO60 panel.

Speaker Change: Based on the positive feedback from CITSE and our customers, we are confident that the I-060 will be a meaningful driver of PCF adoption and utilization.

Speaker Change: Lastly, ACOIA expanded our phenocode catalog of molecular barcodes to enable routine, ultra-high-plex, 100 biomarker spatial experiments.

Speaker Change: These additional molecular barcodes will simplify our customers' ability to easily supplement our HyPlex panels with their own markers of interest or more rapidly develop their own HyPlex panels.

Speaker Change: We will continue to strive to make 100plex routine, fast, and affordable.

Speaker Change: Now, moving on from our core research business, let me provide some updates on the transformative clinical business we are building at ECOI.

Speaker Change: Throughout the year, we announced several significant late stage clinical development updates and the strong momentum we now have in this emerging business segment.

First

Speaker Change: Our biopharma partner, Acrobon Therapeutics, had a very promising Phase II Registrational Intent Clinical Trial update at the European Society of Medical Oncology, or ESMO, in September on the ACR368 therapy and the accompanying oncosignature assay deployed on our HD platform and run out of our CLIA lab.

Speaker Change: They showed incredibly promising results, and Akoya is increasingly confident that our partnership with Akrovan could yield our first commercially launched companion diagnostic. I would encourage you to watch their September 14th corporate R&D event to get a full update.

Speaker Change: Additionally, earlier this year we also announced our exclusive partnership with NaraCare.

to enable personalized therapy selection for early stage melanoma.

Naricare's immunoprint assay

Speaker Change: 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: This data demonstrates that the immunoparent high-risk patient group is ideally suited to potentially benefit from 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: Along with opportunities in the antibody drug conjugate market, Immunoprint has been a key driver of our rapidly expanding companion diagnostic partnership pipeline with our HC system reagents and our CDS capabilities as key enablers.

[inaudible]

Speaker Change: Should these partnerships be realized, they have the potential to yield meaningful revenue in the coming years and add significant shareholder value, as ECOIA realizes our clinical aspirations.

[inaudible]

Our priorities remain clear.

first

Speaker Change: continue to efficiently implement platform improvements and content menu expansion to drive system utilization, adoption, and revenue growth at increasing margins.

Second.

Speaker Change: Advance and accelerate our pipeline of clinical trial and companion diagnostic partnerships.

Third, drive to meet our profitability goals.

and as part of our ongoing commitment.

to maximize shareholder value. The company is also actively evaluating.

Speaker Change: A range of strategic alternatives to identify the best path forward.

Sustainable growth, profitability, and long-term success.

Speaker Change: With that, I will now turn the call over to Johnny to discuss our financials in more detail.

[inaudible]

Thanks, Brian.

Speaker Change: As Brian highlighted, total revenue for the third quarter of 2024 was $18.8 million, a 25% year-over-year decrease compared to the prior year period.

and John O'Neill. Thank you. Thank you.

Speaker Change: Product revenue, including instruments, reagents, and software, totaled $12.3 million for the third quarter.

Speaker Change: Instrument revenue totaled $5.7 million as we placed 35 instruments in the field this quarter, and a 53% year-over-year decrease compared to the prior year period.

Our industry-leading install base now totals 1,299 instruments.

including 388 phenocyclers and 911 phenoimagers.

Speaker Change: The PCF, the combination of a phenocycler and a fusion, totals 251 in the field, and there are now 376 HTs in the field.

Speaker Change: We delivered $6.3 million in reagent revenue in the third quarter, an 11% year-over-year increase from $5.7 million in the prior year period.

Speaker Change: Service and other revenue totaled $6.5 million for the third quarter, a 10% year-over-year decrease from $7.2 million reported in the prior year period.

Speaker Change: Services include instrument warranty and field service revenue in addition to our lab services.

Speaker Change: The decrease is primarily due to the underperformance on this year's instrument sales.

Speaker Change: Gross margin was 62.3% in the third quarter, compared to 60.6% reported in the prior year period.

Speaker Change: This increase in gross margin is the result of leveraging the full capacity of our recent manufacturing investments and executing on our operations optimization efforts.

Speaker Change: We expect to continue to expand our gross margin as we drive increases in our reagent revenue mix while realizing these operating efficiencies.

Speaker Change: Operating expenses were $20.1 million in the third quarter compared to $26.8 million in the prior year period, a 25% year-over-year reduction.

Speaker Change: Loss from operations were $8.3 million in the third quarter compared to $11.6 million in the prior year period, a 28% year-over-year decrease.

Speaker Change: As Brian noted, we made these cost improvement efforts throughout the year, which have enabled us to streamline our operating costs for the balance of this year.

Speaker Change: We ended the quarter with approximately $39.3 million in cash, cash equivalents, and marketable securities.

Speaker Change: Common Shares Outstanding and Fully Diluted Shares, including the Impact of Outstanding Options and Unvested Restricted Stock Awards, are 49.5 million shares as of September 30, 2024.

and John Eccleston. Thank you. Thank you.

Speaker Change: In summary, Equoia has implemented critical operational changes to optimize for short-term challenges while positioning a company for long-term success.

Speaker Change: Throughout the year, we have successfully proven our ability to enhance efficiency, drive gross margin improvement, and achieve cost advantages.

Speaker Change: Given the evolving challenges we've encountered this year, including a constrained end market, we expect revenue for the full year 2024 to now be in the range of $80 million to $85 million versus a prior range of $96 million to $104 million.

Speaker Change: Our improved expense profile, coupled with belief in the long-term market opportunity in Spatial,

provides an opportunity to evaluate a range of strategic alternatives

Speaker Change: to identify the best path forward for sustainable growth, profitability, long-term success and to maximize shareholder value.

Back to you, Brian.

Brian McKelligan: Thank you, Johnny. We look forward to executing on our strategic and financial objectives throughout the remainder of the year as we drive the business forward. We're thankful for the hard work of our fellow dedicated acquaintance, as well as for the continued support of our customers and shareholders. And at this point, we'll open the call up for questions. Operator.

Thank you.

Speaker Change: Ladies and gentlemen, as a reminder to ask the question, please press star 1 1 and then wait for your name to be announced.

Speaker Change: To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster

[inaudible]

Speaker Change: Our first question comes from the line of William Bonnello with Craig Holland, your line is open.

Speaker Change: Hey guys, thanks for taking the call. Julian, can you give us a sense of, there was no cash flow statement, so what the cash burn in the quarter was, and then your expectation for the burn over the next several quarters?

Speaker Change: That was for you, John, yeah. Sorry, it was cut out a little bit. Thank you. Yeah, sorry.

Speaker Change: Yeah, so we, while we didn't achieve, you know, on the top line as mentioned, but our ability to drive that growth margin really was allowed us to, to keep cash from ops, firm cash from ops.

that we've put in place.

Speaker Change: That's assuming sort of a midpoint of the new guide revenue number. And then, you know, we haven't spoken to

Speaker Change: to out into 25. But really what the way we see it is we've set ourselves up from a cost profile and a margin profile that as we see revenue start to return to growth into next year, we'll be able to crest that cash flow break even that we've talked about. Likely won't hit it as we exit this year, but we expect to have

Speaker Change: and adjusted EBITDA that's in the low single digits and then really start to achieve that cash break even going into next year.

Speaker Change: Okay, and is there anything, you know, meaningful in the quarter you just had or upcoming in terms of capital expenditures?

Speaker Change: No, the capital expenditures for the year are primarily behind us. We spent a bit in Q1 and Q2 really to finalize the build-out of our Center of Excellence.

Speaker Change: And so there's not a meaningful CapEx in the back half of the year. Not a lot in Q3 and not a lot expected in Q4.

Speaker Change: Okay, that's really helpful. And then just, can you remind us, I think your principal payments start to kick in in December of 2025 on maybe a monthly basis.

Please size that for us.

Speaker Change: Yeah, sure. So, you know, we continue to work closely with our lender and recently amended our agreement to push out that interest only period, and rework some of the financial covenants a bit. And so that that IO actually now is in March of 26. So push it out a quarter for now. And, and again, we'll continue to

Speaker Change: to work closely with our partners as we look at that debt in the next year.

Speaker Change: Okay and then just the last one and I'll hop back in the queue.

Speaker Change: You both mentioned you're exploring a range of strategic alternatives. Can you give us a sense of maybe what, you know, if there's anything off the table in those explorations?

Brian McKelligan: So, this is Brian. I'll take that. Maybe just a little bit of context around that to reiterate.

Brian McKelligan: I think as we look at that statement and put some color around it

Brian McKelligan: As we talked about in the script, we really tried to establish that we showed really high growth.

Brian McKelligan: all the way through the end of 2023. And as Johnny just articulated,

The commitments we made to securing the bottom line

Brian McKelligan: even with the top line constraints, really put us in a solid position. And when we think about that couple to kind of the robust clinical opportunity, we feel like we've got ourselves.

Brian McKelligan: in really a solid foundational position having a belief in the long-term value of the spatial market. So in short, no, there's nothing off the table. And as a public company, obviously

We've got a fiduciary responsibility.

to, and always are,

Brian McKelligan: Constantly evaluating these strategic opportunities and I would say we're also being evaluated and you know, so everyone is

Brian McKelligan: and in this current market environment that's absolutely heightened. So to your question again directly, no, nothing is off the table.

Okay, that's great. Thank you so much.

Thank you.

Please stand by for our next question.

Speaker Change: Our next question comes from the line of Mason Carrico with Stevens, your line is open.

[inaudible]

Speaker Change: Hey guys, thanks for taking the questions here. Could you guys just talk to I guess your level of confidence around reaccelerating the top line next year given the cost adjustments you've made over the next 12 months or last 12 months and if things were to improve what incremental investments do you think would need to be made to stay competitive, fuel the pipeline and really just to continue driving that momentum?

Speaker Change: Yes, I think as we look into 2025, kind of on a product line basis, areas where we have confidence and expect.

Speaker Change: And so that really is a byproduct of the Manufacturing Center of Excellence and some of the announcements you saw.

of the new product introductions of the IO60.

Speaker Change: of the mouse panels, and more to come. So we think as we get into 2025, we really become focused on application-driven selling, so reagent revenue, growth,

Speaker Change: With a strong foundational instrument install base and productivity I think that is area number one where we think growth will continue at strength

Speaker Change: incredible progress throughout 2024 to build a really robust clinical trial pipeline. And as we look at the deliverables on that into 2025, that's going to make meaningful contribution to our top line, probably more than historically.

Speaker Change: So I would, Mason, map it out in that order in terms of contribution to top line growth in 2025.

and John Eccleston. Thank you. Thank you.

Speaker Change: Okay, that's helpful. And then Brian, can you talk just a little bit about

Brian McKelligan: quarterly trends in instruments this year. I mean, I think Q3 in the revised guide is

Brian McKelligan: is a fair amount below your expectations in Q2. So what just changed during that time frame? Has the competitive environment changed at all or any incremental color you can give us there? Yeah, it's really interesting. And obviously, you know,

Speaker Change: You try to really be metric driven and, you know, what we look at across each region on a quarterly basis are sales cycles.

It's in-quarter conversion rates.

Speaker Change: And it's looking at on a region-by-region basis and a quarterly-by-quarterly basis.

Speaker Change: And what we've seen from Q1 to Q2 to Q3 is an incredible amount of volatility across all of those metrics relative to historical on sales cycle and conversion rates. So that is what's driven to really the challenging predictability.

Speaker Change: And so what we've tried to do in this quarter is look at the low points of those sales cycles, look at the low points of those conversion rates, and really baseline on that. And as you look at the areas where we've seen the most challenges in terms of the highest volatility,

Speaker Change: It's really been primarily in North America and really within the academic environment. So hopefully that gives you some color, Mason.

[inaudible]

It's not, I wouldn't say it's necessarily competition.

Speaker Change: additional competition out there from our colleagues at Lunafor. But I would say it really is the macro as you look at the volatility of those numbers. And what we're trying to do is we look at Q4 and into 2025, is look at that average across those volatile quarters and baseline off of that.

Got it. Thank you guys for the questions.

Thank you.

Please stand by for our next question.

Speaker Change: Our next question comes from the line of Kyle Mikeson with Canaccord. Your line is open.

Hey guys, thanks for the questions.

Speaker Change: I guess, Brian, you guys have the largest install base in Spatial, is it possible that you, you know, like it's so big you've just been trading so much of this market that it's, you know, very difficult to return the growth that you've made to the workforce? Like is that playing a factor here as well?

Speaker Change: Now, it's a good question, it's a good point, have we reached saturation?

Speaker Change: I just don't, I don't think at all, and I think if you pull

Pull the aperture back and just look across peer groups.

Speaker Change: in terms of the challenges in capital equipment in areas like NGS and others. It's not a saturation question. It's really primarily a funding question. So I think we're far from saturation.

Ciao!

Speaker Change: Yeah, that was exactly, that was the point. Okay, sounds good. And then just looking at the financials on, maybe we'll just bump into two here. So on consumables, I mean, pull-through looks like that continues to decline quarter over quarter, like a mid-single-digit decline.

, , , , , ,

Speaker Change: What are the bottlenecks there to getting Pulitzer up so far? Why does that continue to be kind of a thorn in your side despite launching all the new offerings and everything over the years? And what are your expectations for 25?

Speaker Change: I'll let Johnny speak to the service line, but just maybe a portion of that service line

Are our clinical services?

Speaker Change: And as we spoke about, I think in Q1, some of that was deferred and you'll see some of that step up in the Q4 number. But with respect to reagents, we calculate the pull-through on a rolling 12-month basis.

Speaker Change: And so just as you look at, for example, last year's quarterly reagent revenue.

It was generally in the mid to high fives.

in terms of million dollars per quarter.

And then Q4, we were just under seven.

Million dollars per quarter

Speaker Change: And in Q1 and Q2, we were around seven, and a slight step down here in Q3.

Speaker Change: That's a temporary dynamic, Kyle. As we look at how we started Q4, it's a pretty robust start compared to Q3.

Speaker Change: , and Joe F. . . . . . . . . . . . . .

Speaker Change: to 2023, we're in the mid-five range in terms of millions per quarter.

Speaker Change: That trend I don't think is declining in terms of pull-through. It's just very it's volatile along with the other numbers

[inaudible]

Speaker Change: and John Ossoff. Thank you for listening. I'm Brian McKelligon. I'm John Ossoff.

Speaker Change: And Kyle, I'll just jump in on the services line, as a reminder, that captures.

Speaker Change: The lab services we perform, freight, software, spare parts, warranty for the instruments sold. And so when every instrument is sold, we defer a portion of that sales price and recognize it over the first year of service. And so as in Q1, for example, we had a lower instrument number.

that didn't contribute to that service.

Speaker Change: Because the lab services line is as we expected. And as Brian mentioned, early on in Q1 and Q2, I think we mentioned that some of that lab service revenue pushed in the back half. And we still see that with an expectation in Q4. So to Brian's point, a bit of a step up in that in Q4.

Speaker Change: Really a bit a bit lumpy sometimes as we as we complete some of those service contracts as well. That's what all it is there

Got it. That's interesting. Okay. Thanks, guys. Appreciate it.

Thank you.

Please stand by for our next question.

Speaker Change: Our next question comes from the line of David Westenberg with Piper. Your line is open.

David Westenberg, John Sourbeer,

Speaker Change: Hey, guys. Yeah, thank you for taking the question. So first, let's maybe talk about some of the stuff that went in Q2 and then maybe as we go into Q3. Did you see any stocking in Q2? Because you did have a sequential step up from Q1 that might have impacted you in Q3. And then just can you talk about expectations for potentially a budget flush? And if you aren't going to see a budget flush,

Speaker Change: Can you maybe discuss, you know, pursuing rent-erradiant models? I know that's less effective in things that are outside of clinical diagnostics, but just, you know, how would you think about there in Q4? Yeah, so I think...

Speaker Change: To Kyle's question and to yours, we did see some stocking up.

Speaker Change: A little bit as we exited Q1 and into Q2, and I think a large part of that was...

Speaker Change: some of the behaviors that we actually help drive as we are transitioning from external manufacturing to internal throughout Q1. And we got that direct feedback from our customers. And I think we're through that, David, as we look at the start of Q4 in terms of our sort of first half of Q4 reagent numbers.

And then in terms of on the instrument side.

Speaker Change: Reagent rentals is not something that that you see people typically do on the on the life sciences, you know, discoveries and tools markets. It's more often than where you have you where you seek sort of external financing for your instrument. That's a more common theme.

Speaker Change: Okay, can you help us categorize what the sales cycle actually looks like, or give us maybe some color on this? I mean, are you just seeing...

Speaker Change: The customer they still want it They're you know, just you know, maybe next month. We're going to get some cash. Is it you know?

in the quarter.

Speaker Change: Yes, so let me give you some specific metrics. As we look at our sales cycle.

from call it a year ago.

It's grown by about 35%.

Speaker Change: in terms of the length of time it's taking from a conversion of an opportunity.

Speaker Change: So that's true across all geographies, that's accelerated a bit, and you're talking

Speaker Change: There's error bars here as you think about North America versus EMEA.

So call that kind of a baseline of

you know seven months plus or minus.

Brian McKelligon, John Ek

Speaker Change: of the length of time to convert. And then the other thing you have to date is the actual conversion rate, which is if you have an opportunity in the quarter, what's the probability that you get that close? And that's been incredibly volatile, particularly in North America, where the overwhelming variable in those conversion rates has been straight availability of funding.

Securing that funding, not that it goes elsewhere.

Speaker Change: So those are some of the metrics that you look at as you look at the sales cycles and the conversion rates across different geographies.

Speaker Change: Got it. This is kind of a continuation of Kyle's question on the size of the company, but I actually am curious just because consumables obviously have a better gross margin and you're being very thoughtful with the way you're spending. Can you talk about how your sales force is structured? And what I mean by this is do you have a farming function and then a hunting function? And is there a way to maybe get a little bit more into the farming function and kind of help up that pull through? And just thinking about like that in terms of an ability to do profitable, thoughtful growth with maybe some of that constrained capital.

Speaker Change: A thousand plus instruments, no. Yeah, it's a real insightful question, so.

Speaker Change: As I talked about our conversion from a company that's selling an instrument into a market and a technical sale of an instrument platform.

Speaker Change: We are now migrating, and I think so is the market, to an application-driven sale.

Speaker Change: where you have a panel of 60 biomarkers in immuno-oncology and you're targeting those researchers. You have a panel in mouse models. You're targeting the preclinical groups in pharma.

You have a neurobiology panel and you're targeting those customers.

Speaker Change: So right now, to go back to your question and tie that together.

Speaker Change: Our commercial sales team is generally set up on a territory basis.

and John Ossoff. Thank you. Thank you.

Speaker Change: And the farming function that you're talking about, you know, are quote reinvestments.

Speaker Change: commercial would likely be on something like an inside sales basis.

Speaker Change: to drive pipeline, to qualify leads, and then to hand those off to the Territory Sales Rep.

Speaker Change: So that is sort of the underlying structure that's both more economically efficient but also in line with how we're pivoting our kind of strategic commercial approach

and John Atkinson. Thank you. Thank you.

Thank you.

Thank you. Please stand by for our next question.

Speaker Change: Our next question comes from the line of T.J. Savant with Morgan Stanley. Your line is open.

Hey guys, thanks for the questions here.

Brian McKelligan: Brian, I want to start with a couple of cleanups in the quarter. Can you just elaborate a little bit on how much of the 3Q shortfall was due to capex pressures versus disruption from the RIF?

Brian McKelligan: You know, the press release made it sound like, you know, the latter dynamic also played some sort of a role in the shortfall. And then one for Johnny, can you just remind us how much of a contribution from those milestones that had gotten pushed out earlier in the year you guys expect to come through here in the fourth quarter?

Brian McKelligan: That said, when you do meaningful restructuring, it does present challenges across the org. So, there were certainly pockets.

Brian McKelligan: of coverage, particularly within the North America territory that contributed, I would say, I don't want to get into false precision, Tejas, but I would just say, as you look at the instrument,

Brian McKelligan: Expectation shortfall and in part the reagents because you're selling reagents on a project-driven basis You're probably talking about, you know, maybe, you know, 15-20% of the contribution was from some of that reorganization Which I think as we get through the remainder of this year, we'll sort of settle down and solidify

Tejas: Got it. Tejas, I'll just, so jumping in, yeah, so a reminder, in that services line is ongoing.

Speaker Change: business in our funnel sort of proof of concept type work that we do in our in our lab in addition to some contracted work that we have pretty good visibility to so we had spoken about that contracted work and it's it's a couple million dollars that that will land we expect to land in q4 pretty pretty uh confidently it's it's you know we complete the work and and the revenue is is in that quarter so i would say in the two to three million dollar range is is what we have

Okay.

Speaker Change: Not sort of to put you on the spot here, but what do you think are sort of implications from the election outcome, especially with the news that RFK may be the nominee for HHS Secretary? What does that mean for the NIH budget, you think, at this stage? Or stopping levels at the NIH, assuming he gets confirmed?

Speaker Change: That's a really tough and loaded question. I guess all I can speak to is the existing data that we know. You look at, you know, this first month in the NIH budget, and it's up.

Speaker Change: In terms of cash outlays, it's up 21%, but that's typical in a month one. I think as we look at back historically, I can't speak to the R. F. K. factor over over Trump's prior term. I think it was a five to six percent growth.

Speaker Change: So I think that's all we can that's all we can lay back and bank on right now

I think that's the most I could say.

Speaker Change: Got it. Fair enough. And then I guess my last question here is sort of a two-parter.

Speaker Change: First of all, I mean, are you running into any sort of issues with

Customer hesitancy around pulling the trigger on a purchase.

Speaker Change: You know, they've lived through, you know, disruption at NanoString and, you know, VisGen and Altiview are now one company, and I'm sure that created a degree of disruption as well.

Speaker Change: So whenever a company is in the midst of, you know, evaluating strategic options and has a, you know, relatively limited sort of cash runway situation going on, that can have an impact on how, you know, customers feel about, you know, tying themselves into that ecosystem. So that's the first part.

And then the second part really guys is

Speaker Change: You know, Brian, you've mentioned multiple times, you know, today, earlier forums as well, that, you know, spatial biology demand is still strong and you do believe it'll come back eventually.

Speaker Change: But the question is making sure that a COEA is around to see that day, right? Either as a standalone entity or as part of another larger parent, perhaps. So any color you can share on how far along are you in that process of evaluating strategic options and any sense of when we might get to see some resolution on that front?

Speaker Change: Look, those are very important and very fair questions, and I'll take the latter first.

Speaker Change: I think what we've said to date is probably the most that we can signal.

Speaker Change: But the reason why a company like Ekoia signals those is to assure our shareholders, our employees, and our customers

Speaker Change: that we're confident that we have a path to remove those concerns.

Speaker Change: I think that's the extent of which I can address that, but you don't put Tejas' statement out there lightheartedly.

Speaker Change: You only do so with confidence. So that's part one. Part two, I completely get your statement around disruption, and I think there's a scale there on potential impact.

I think when you have something like

Really hardcore litigation.

Bankruptcy events, I think those absolutely have material impact.

Speaker Change: I would say, where we are right now as a company, as we look at our historical performance,

Speaker Change: and our opportunities going forward, our current financial position, at least the visibility we have to our customers' decision-making process, that has not been a determinant.

Speaker Change: That doesn't mean it's not part of it, but it's not something that's risen to an area of concern.

Speaker Change: So I don't think we're at the level of some of the scenarios that our market has faced historically.

Fair enough. Appreciate the call, Brian. Thank you.

Please stand by for our next question.

Speaker Change: Our next question comes from the line of Saboon Namby with Guggenheim Securities. Your line is open.

Good evening. Thank you for taking my question.

Speaker Change: Your growth margin has improved to what we saw in first half of the year. Is this a function of bringing reagents manufacturing in-house?

Speaker Change: Is this product mix given placement of the instruments were light? I'm wondering if you've been able to maintain stable ASPs for your instrument. And I ask this in part because there are other companies in the space that have had to discount to place instruments in this challenging macro environment.

Speaker Change: Yeah, those are great questions, and Johnny, I think you could probably run with them.

Yeah, yeah, I do Yeah

Speaker Change: We are continuing to see sort of consistent and stable ASPs. Our ASPs are not something that's moving materially, that impact margins, really driven by...

Speaker Change: The realization of all the things we put in place in Q1, and we hoped and planned for that to happen, and we're seeing the realization. As we bring in-house...

Speaker Change: and the manufacturing of these reagents and our consumables, it really does make a difference as we're able to scale internally. Certainly there's an impact of mix in the current quarter. Absolutely. As you have lower instruments naturally that'll battle and more towards reagents, it will impact your margin. But that's what we've always sort of anticipated. But on a standalone basis, even.

We're seeing stable and strong margins on reagents and instruments.

Speaker Change: I think I just, I'm sorry, if you don't mind, one more kind of longer term view, as we get into 2025 and begin introducing new reagent offerings.

coming out of our in-house manufacturing.

Speaker Change: and being able to control much more tightly what we put on inventory.

Speaker Change: You know in the face of what we've seen historically here some of some of the challenges on selling capital, so I think Two additional things to think about as we look longer-term

Speaker Change: Thank you for that comment Brian. So just can I play it back to you? So it's okay the gross margins are expected to stay at this level heading into 2025. Did I hear that right?

Johnny, did you hear that?

Speaker Change: Sorry, muted. Yeah, that's what we've always sort of communicated that we thought we'd be in the low 60s sort of exiting the year, and then see a couple hundred basis point improvement sort of year on year going into the future, driven by the factors that Brian highlighted.

Speaker Change: Part of the efforts we took throughout the year in OPEX and in gross margin allow us to have pretty good visibility to margin and OPEX and ultimately to bottom line as we see return to growth on revenue.

Speaker Change: Got it. And Brian and Johnny, I hear you on the reagent dynamics that you previously responded to.

Speaker Change: But where did you see this mainly from the phenocycler franchise or the phenoimager and or was it for all of them? I only ask this because if it were Competitive dynamics is it more focused on phenocycler or phenoimager? That's what I'm getting it Oh, it was it was so most certainly the phenocycler reagents in the antibodies

As people are building out their larger panels,

Speaker Change: of their panels as they were accumulating them. Now, as we sit here today, if an order comes in for 60 antibodies, we're shipping all out, you know, in three to five days complete.

Speaker Change: So those were the prior dynamics versus the current dynamics today.

and John Eccleston. Thank you. Thank you.

Got it. Thank you for that.

Thank you.

Please stand by for our next question.

Thank you. Thank you. Thank you.

Speaker Change: Our next question comes from the line of Mark Massaro with BTIG. Your line is open.

Some challenging capital market conditions.

Speaker Change: Maybe I'll just ask it again. Are you seeing any competitive pressures from the product that was recently introduced in the market in Spatial? But I also more broadly wanna ask about to what extent are you competing for research dollars in other applications, like for instance, NGS or proteomics?

Speaker Change: Yeah, it's a good question. I would take those in reverse order so

In areas like

Core labs.

CROs, people that are providing shared services.

You are competing for dollars.

Speaker Change: versus competing head-to-head on, you know, should I buy a Spatial Proteomic Platform from Akoya or somebody else? So that is a different competitive dynamic and that most certainly exists because they're zero-sum dollars.

Speaker Change: And I think for us, one telltale sign is as we look at the contribution of core labs.

Speaker Change: to our revenue, that's been an area of meaningful weakness this year.

And that would be a dollar for dollar.

Speaker Change: And in terms of a head-to-head competitive dynamic, I would say,

where we are, where we are potentially losing

in the discovery side with the phenocyclic fusion.

is where we don't have content.

Speaker Change: And that's why we're investing in content. So not only do we drive.

But we get to application areas where content is ready-made.

So that is an area where the competition.

Speaker Change: is probably the most fierce in terms of the overall contribution to, if there were no competition, you know, how many more units would we have sold?

Speaker Change: I think, Mark, it doesn't get us back to the point where

Speaker Change: It does it's minor with respect to to the to the competitive to the headwinds are facing in terms of the funding environment

Speaker Change: Some of us noticed the press release you guys put out shortly after your quarter ended that you nominated Scott Mendel as the chairman of the board. I know Scott's been part of the board since 2021. Many of us know him and like him.

Speaker Change: I guess I want to ask just about whether or not if you could expand on why the change

Speaker Change: at the chair level, and could there perhaps be any philosophical differences?

Speaker Change: or maybe perhaps changes as we consider the coming quarters here with respect to cash flow, break-even targets, spending, and hiring.

Yeah, I really appreciate you asking that question.

Speaker Change: There's absolutely no difference philosophically. I think as a leadership team, we have a great board and we have a great dynamic with the board. I think the

Scott has been an operator in tough environments.

Speaker Change: and for me personally and for Johnny who's got a long-standing relationship with him, navigating environments like this, getting your company to become operationally efficient and proficient, getting your bottom line to be positive,

Those are experiences that Johnny has been through multiple times.

Scott has been through multiple times and so this indicates

Speaker Change: The Akoya company and leadership's desire to really lean on a member of our board that has been through scenarios like this.

Speaker Change: and signals a really active involvement for him personally to help us navigate through these challenging times.

and John Eccleston. Thank you. Thank you.

Thank you. We appreciate it.

Speaker Change: Yep, that's helpful. Maybe last one for me, just to clarify. Johnny, I think I heard you say that you're likely not going to hit your cash flow break-even target at the end of this year.

Speaker Change: Can you give us a sense now as to when you think that can happen? And then, I know you guys expect to return to growth in 2025.

Speaker Change: To what extent do we need to see a recovery in funding for you to get there? Thanks.

Speaker Change: Yeah, so yeah, we had previously mentioned we thought we would we would exit the year in Q4 at a break-even point

Speaker Change: Given the revenue we expect at the midpoint of the guide, call it for Q4, we don't quite get there, but we have...

Speaker Change: put the cost side, it's really right where we want it to be, where we think it's appropriate, so that once we get, we're not speaking specifically to when we think we would do that, but naturally Q1 is a cash heavier quarter, so even under our past

Speaker Change: sort of mid-low single-digit adjusted EBITDA exiting the year. The big movers as always is the case with a company at our

Speaker Change: , , , , , , , , , , , , , ,

Speaker Change: So that's really, I look into 25 and I'm confident I can get to that target because I have a cost structure in place, but not speaking any specific quarter right now.

So to your question on growth

Speaker Change: Returning to growth in Q1 first half of next year, we are not making an assumption.

Speaker Change: that that is reliant on external factors like a meaningful return to funding. What we're making, what we're relying on for that are our fundamentals on continued re-agent growth.

Speaker Change: Our opportunities in lab services and some incremental performance, for example, over Q1 where we sold 30 boxes.

Speaker Change: So, in that order, Mark, in terms of if you were to look at, you know, how Q1 would qualitatively shape up, that's how we would look at it.

It's all very helpful. Thanks guys. Thank you.

Thank you.

Speaker Change: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Brian for closing remarks.

Brian McKelligan: Listen, thank you all for your time. I know it's a challenging and complex market environment. We appreciate your question. We appreciate you giving us a chance to talk it through. And we look forward to following up with each of you individually and collectively. So thank you all for your time.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

John Sourbeer, John Sourbeer

executive producer and G writer.

and hard luck to one another.

Music Music Music Music Music Music Music Music

Speaker Change: Hello and thank you for standing by. Welcome to Akoya Biosciences.

3rd Quarter 2024 Earnings Conference Call

At this time, all participants are on a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

To withdraw your question, please press star 11 again.

Speaker Change: I would now like to hand the conference over to Priyam Shah, Head of Investor Relations. You may begin.

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 McKelligon, Chief Executive Officer, and John Ek, Chief Financial Officer.

Speaker Change: Earlier today, Equoia released financial results for the third quarter ended September 30th, 2024.

Speaker Change: A copy of the press release is available on the company's website.

Speaker Change: For a list and description of the risks and uncertainties associated with the Koya's business, please refer to the risks identified in her filings with the U.S. Securities and Exchange Commission, including in the Risk Factors section in the 10-Q filed today, November 14, 2024.

Speaker Change: 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.

Brian McKelligan: The audio portion of this call will be archived on the investors section of our website later today under the heading events And with that I will now turn the call over to Brian

[inaudible]

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

Brian McKelligan: During today's conference call, I will provide an overview of our performance in the third quarter, highlight our operational advancements, new products, recent partnerships, and strategic decisions aimed at positioning our company for long-term growth.

Brian McKelligan: Following that, Johnny will delve into our financials, key trends, and our outlook for the future.

First, let me make some important introductory and thematic comments.

Revenue for the third quarter came in below our expectations.

Largely due to ongoing capital equipment purchase constraints.

seen across the life sciences tools market.

Brian McKelligan: We remain optimistic in the long-term growth outlook of our industry and are actively addressing the temporary challenges the current macro environment imposes.

Brian McKelligan: That said, we expect to see continued pressure on customer spending and now expect full-year revenue in the range of $80 million to $85 million.

Brian McKelligan: The midpoint implies a minor step up in our fourth quarter revenue from this quarter's performance.

Brian McKelligan: 2024 has been an incredibly challenging year for ECOIA and the life sciences market.

Brian McKelligan: Throughout this year, we have built a strong foundation that we believe positions us for long-term success.

and a return to growth.

Brian McKelligan: We continue to advance our companion diagnostic pipeline and believe that it will be a significant contributor to our growth and value in the near term.

Thank you very much.

Speaker Change: We lead with the largest install base and supporting publications in the spatial biology market, a market that we believe is a current and future pillar of the life sciences research and diagnostics.

Speaker Change: Last week's Society for Immunotherapy of Cancer Conference, or CITSI, was a strong point of reference.

Speaker Change: where spatial biology as a theme was the most prominent we've seen to date.

We are a company solely dedicated to spatial biology.

Speaker Change: From our founding until the end of 2023, we realized the high growth potential and the benefits of being a leader in this rapidly emerging market and consistently delivered solid top line growth.

because of the improvements in our cost structure and margins.

Speaker Change: We remain confident that ECOIA's technologies will continue to be the preferred platform in the spatial biology market for the future.

from Discovery to Diagnostics.

Speaker Change: supporting a return to top-line growth in 2025 and beyond. And we remain committed to achieving our profitability goals.

Let me now walk through our quarterly revenue numbers.

Speaker Change: We reported top-line revenue of $18.8 million in the third quarter, a 25% year-over-year decrease compared to the prior year period.

Speaker Change: Much of the top-line miss was driven by instruments, where total revenue for the quarter was $5.7 million.

Speaker Change: We placed 35 instruments in the third quarter versus 30 in the first and 51 in the second quarter.

Speaker Change: As noted, the underperformance and volatility are driven primarily by extended sales cycles and limited capital equipment funding, especially in the North America's market.

Speaker Change: Akoya's total install base increased to 1,299 instruments, a 15% increase over the prior year period.

Speaker Change: Reagent revenue totaled $6.3 million, an 11% increase over the prior year period.

Speaker Change: Services and other revenue totaled $6.5 million, a 10% decrease over the prior year, primarily driven by underperformance on our instrument sales.

Speaker Change: Gross margin was 62.3 percent, an improvement on the 60.6 percent from the prior year period, and is a byproduct of our now fully operational Manufacturing Center of Excellence.

Speaker Change: Operating expenses were $20.1 million, a 25% decrease over the prior year period.

Speaker Change: Our loss from operations was $8.3 million, a 28% improvement over the $11.6 million in the prior year period.

Speaker Change: We ended the quarter with 251 combined phenocycler fusions or PCF.

Speaker Change: The industry's top-selling spatial proteomics platform for the discovery and trade translational markets.

Speaker Change: supporting both high plex tissue analysis and high throughput low to mid plex studies.

Our phenoimager HT systems, or just HT, now total 376.

Speaker Change: As a clinical grade system on the path for regulatory approval, the HT is at the forefront of establishing spatial biology as a technology that we believe can truly impact patient care.

Speaker Change: Akoya continues to lead the market in publication volume, having reached a total of 1,570 publications citing our platform technologies as of the third quarter, a 47% increase from the prior year.

Speaker Change: Over the last month, we have announced several important partnership and product introductions.

[inaudible]

Speaker Change: In early October, we announced that the Francis Crick Institute and the Royal Marsden NHS Foundation Trust

This multi-million dollar program, titled Manifest,

Speaker Change: which stands for Multionomic Analysis of Immunotherapy Features Evidencing Success and Toxicity.

Speaker Change: has the ambitious goal of identifying all the biomarkers predictive of response to immunotherapies.

Speaker Change: The initial testing will include 3,000 patients who have already started their treatment and at least 3,000 new patients in breast, bladder, kidney, and skin cancer over the subsequent four years.

Speaker Change: We are proud that the PCF and HT were chosen as the spatial proteomics platforms for this large-scale study.

Speaker Change: Okoye's platforms were also the leading spatial proteomic solutions with the PCF as the only ultra-high plex platform prominently featured in recent high-impact nature publications from the Humer Tumor Atlas Networks.

which trace the origins and evolution of 20 cancers.

across 2,000 individuals.

Speaker Change: and were highlighted by Eric Tobol in his popular media outlet, Ground Truths.

Speaker Change: This was on the heels of major initiatives such as HUBMAP and the Human Cell Atlas.

Speaker Change: which have now incorporated spatial profiling and preferentially selected ECOIA's platforms to analyze their samples.

Speaker Change: Akoya's inclusion in these programs is a strong endorsement driving visibility, adoption, scientific value, and a meaningful revenue stream for our platforms.

[inaudible]

Speaker Change: Because of the now robust content engine out of our Manufacturing Center of Excellence,

Speaker Change: We have the ability to rapidly and affordably produce additional high-value content to drive increases in system utilization, reagent revenue, and pull-through.

At last week's CITSEA meeting, which I previously referenced,

Akoya introduced several new reagent product offerings.

First, we announced our Phenocode I060 panel.

The IO60 panel is an immuno-oncology dedicated solution.

Speaker Change: enabling interrogation of whole tissue samples or multiple tissue samples per slide at scale and high resolution.

Speaker Change: with a ready-to-use and off-the-shelf panel that is pre-validated and pre-optimized.

Speaker Change: Researchers can quickly begin large-scale discovery and translational projects with little to no setup in panel development time.

Speaker Change: At CIPSE, our partner Precisions for Medicine, an industry-leading, high-volume, global contract research organization, and an early adopter of the HT, announced that they have now also incorporated the PCF as a spatial proteomics discovery platform of choice and will actively promote the IO60 panel.

Speaker Change: Based on the positive feedback from CITSE and our customers, we are confident that the I-060 will be a meaningful driver of PCF adoption and utilization.

and John Eccleston. Thank you. Thank you.

Speaker Change: Second, Akoya unveiled a new 24-plex mouse panel optimized for preclinical immunoecology applications to drive translational research and insights both biopharma and academia.

and John Eccleston. Thank you. Thank you.

Lastly, Okoye expanded our phenocode catalog of molecular barcodes.

to enable routine, ultra-high-plex, 100 biomarker spatial experiments.

Speaker Change: We will continue to strive to make 100Plex routine, fast, and affordable.

Speaker Change: Now, moving on from our core research business, let me provide some updates on the transformative clinical business we're building at ECOI.

Speaker Change: Throughout the year, we announced several significant late stage clinical development updates and the strong momentum we now have in this emerging business segment.

first

Speaker Change: They showed incredibly promising results, and Akoya is increasingly confident that our partnership with Akrovan could yield our first commercially launched companion diagnostic.

Speaker Change: I would encourage you to watch their September 14th corporate R&D event to get a full update.

Speaker Change: Additionally, earlier this year we also announced our exclusive partnership with NaraCare.

to enable personalized therapy selection for early stage melanoma.

Naricare's immunoprint assay

Speaker Change: 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: This data demonstrates that the immunoprotein high-risk patient group is ideally suited

Speaker Change: to potentially benefit from therapeutic options that would usually only be administered in later states.

Speaker Change: We believe that this would represent a significant expansion of the TAM for current melanoma therapies.

[inaudible]

Speaker Change: Should these partnerships be realized, they have the potential to yield meaningful revenue in the coming years and add significant shareholder value as ECOIA realizes our clinical aspirations.

Our priorities remain clear.

first

continue to efficiently implement platform improvements and content menu expansion.

Speaker Change: to drive system utilization, adoption, and revenue growth at increasing margins.

Second.

Speaker Change: Advance and accelerate our pipeline of clinical trial and companion diagnostic partnerships.

Third, drive to meet our profitability goals.

and as part of our ongoing commitment.

to maximize shareholder value. The company is also actively evaluating.

Speaker Change: A range of strategic alternatives to identify the best path forward.

Sustainable growth, profitability, and long-term success.

Speaker Change: With that, I will now turn the call over to Johnny to discuss our financials in more detail. Johnny?

Thanks, Brian.

Johnny: As Brian highlighted, total revenue for the third quarter of 2024 was $18.8 million, a 25% year-over-year decrease compared to the prior year period.

Johnny: Product revenue, including instruments, reagents, and software, totaled $12.3 million for the third quarter.

Our industry-leading installed bass now totals 1,299 instruments.

including 388 phenocyclers and 911 phenoimagers.

Johnny: The PCF, the combination of a phenocycler and a fusion, totals 251 in the field, and there are now 376 HTs in the field.

Johnny: We delivered $6.3 million in reagent revenue in the third quarter, an 11% year-over-year increase from $5.7 million in the prior year period.

Johnny: Service and other revenue totaled $6.5 million for the third quarter, a 10% year-over-year decrease from $7.2 million reported in the prior year period.

Johnny: Services include instrument warranty and field service revenue in addition to our lab services.

Johnny: The decrease is primarily due to the underperformance on this year's instrument sales.

Johnny: Gross margin was 62.3% in the third quarter, compared to 60.6% reported in the prior year period.

Johnny: This increase in gross margin is the result of leveraging the full capacity of our recent manufacturing investments and executing on our operations optimization efforts.

Johnny: We expect to continue to expand our gross margin as we drive increases in our reagent revenue mix while realizing these operating efficiencies.

Johnny: Operating expenses were $20.1 million in the third quarter compared to $26.8 million in the prior year period, a 25% year-over-year reduction.

Johnny: Loss from operations were $8.3 million in the third quarter compared to $11.6 million in the prior year period, a 28% year-over-year decrease.

Johnny: We ended the quarter with approximately $39.3 million in 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 shares as of September 30, 2024.

Johnny: In summary, Equoia has implemented critical operational changes to optimize for short-term challenges while positioning a company for long-term success.

Johnny: Throughout the year, we have successfully proven our ability to enhance efficiency, drive gross margin improvement, and achieve cost advantages.

[inaudible]

John Sourbeer, David Westenberg,

Johnny: Given the evolving challenges we've encountered this year, including a constrained end market, we expect revenue for the full year 2024 to now be in the range of $80 million to $85 million versus a prior range of $96 million to $104 million.

Johnny: Our expanding margins and gains in operational efficiencies throughout the year has enabled ECOIA to drive an improved bottom line with recent top line constraints.

Johnny: Our improved expense profile, coupled with belief in the long-term market opportunity and spatial, provides an opportunity to evaluate a range of strategic alternatives to identify the best path forward for sustainable growth, profitability, long-term success, and to maximize shareholder value.

Back to you, Brian.

Brian McKelligan: from our customers and shareholders. And at this point, we'll open the call up for questions. Operator?

Thank you.

Speaker Change: Ladies and gentlemen, as a reminder to ask the question, please press star 1 1 and then wait for your name to be announced.

Speaker Change: Our first question comes from the line of Wim Bonello with Craig Holland. Your line is open.

Speaker Change: Hey guys, thanks for taking the call. Joey, can you give us a sense of, there was no cash flow statement, so what the cash burn in the quarter was, and then your expectation for the burn over the next several quarters?

Speaker Change: That was for you, John. Yeah. Sorry, it was cut out a little bit. Thank you. Yeah, sorry.

Speaker Change: Yeah, so we, while we didn't achieve, you know, on the top line as mentioned, but our ability to drive that growth margin really was allowed us to to keep cash from ops, firm cash from ops.

Speaker Change: , and John Ek. We are in the 8-9 million range for Q3. We expect it to be meaningfully less in Q4. As we expect margin to continue to expand and be able to realize the full effect of the

that we've put in place.

Speaker Change: That's assuming sort of a midpoint of the new guide Revenue number and then you know we haven't spoken to

Speaker Change: to out into 25. But really what the way we see it is we've set ourselves up from a cost profile and a margin profile that as we see revenue start to return to growth into next year, we'll be able to crest that that cash flow break even that we've talked about. Likely won't hit it as we exit this year, but we expect to have an adjusted EBITDA that's been

Speaker Change: In the low single digits and then really start to achieve that cash break even go into into next year

Speaker Change: Okay, and is there anything, you know, meaningful in the quarter you just had or upcoming in terms of capital expenditures?

Speaker Change: No, the capital expenditures for the year are primarily behind us. We spent a bit in Q1 and Q2 really to finalize the build-out of our Center of Excellence.

Speaker Change: And so there's not a meaningful CapEx in the back half of the year, not a lot in Q3 and not a lot expected in Q4.

Please size that for us.

Speaker Change: Yeah, sure. So, you know, we continue to work closely with our lender and recently amended our agreement to push out that interest only period and rework some of the financial covenants a bit. And so that that IO actually now is in March of 26. So push it out a quarter for now. And, and again, we'll continue to, to work closely with our partners.

as we look at that debt in the next year.

Speaker Change: You both mentioned you're exploring a range of strategic alternatives. Can you give us a sense of maybe what, you know, if there's anything off the table in those explorations?

Brian McKelligan: So, this is Brian, I'll take that. Maybe just a little bit of context around that to reiterate, so...

Brian McKelligan: I think, as we look at that statement and put some color around it,

Brian McKelligan: As we talked about in the script, we really tried to establish that we showed really high growth.

Brian McKelligan: all the way through the end of 2023. And as Johnny just articulated,

[inaudible]

The commitments we made to securing the bottom line

Brian McKelligan: even with the top line constraints really put us in a solid position and when we think about that think about that couple to kind of the robust clinical opportunity we feel like we've got ourselves in really a solid foundational position having a belief in the long-term value of the spatial market so in short no there's nothing off the table and as a public company obviously

We've got a fiduciary responsibility.

to and always are.

Brian McKelligan: Constantly evaluating these strategic opportunities and I would say we're also being evaluated and you know, so everyone is

Brian McKelligan: and in this current market environment that's absolutely heightened. So to your question again directly, no, nothing is off the table.

Okay, that's great. Thank you so much.

Thank you.

Please stand by for our next question.

[inaudible]

Speaker Change: Hey, guys. Thanks for taking the questions here. Could you guys just talk to, I guess, your level of confidence around re-accelerating the top line next year, given the cost adjustments you've made over the next 12 months or last 12 months? And if things were to improve, what incremental investments do you think would need to be made to stay competitive, fuel the pipeline, and really just continue driving that momentum?

Speaker Change: Yes, I think as we look into 2025, kind of on a product line basis, areas where we have confidence and expect.

Speaker Change: growth to continue. I think with the recent reagent introductions really is the first time as a company we've pivoted our instrument sales and our commercial priorities around content.

Speaker Change: And so that really is a byproduct of the Manufacturing Center of Excellence and some of the announcements you saw.

of the new product introductions of the IO60.

Speaker Change: of the mouse panels and more to come. So, we think as we get into 2025, we really become focused on application-driven selling. So, reagent revenue, growth.

Speaker Change: With a strong foundational instrument install base and productivity I think that is area number one where we think growth will continue at strength

Incredible progress throughout 2024 to build a really robust

Speaker Change: clinical trial pipeline. And as we look at the deliverables on that into 2025, that's going to make meaningful contribution to our top line, probably more than historically.

Speaker Change: And then as we look at instruments, we'll be not surprisingly very conservative and metered, particularly in the first half, kind of having low expectations for growth on top of instruments, you know, even in light of sort of a pretty weak comp.

Speaker Change: So I would, Mason, map it out in that order in terms of contribution to top line growth in 2025.

Speaker Change: Okay, that's helpful. And then Brian, can you talk just a little bit about

Speaker Change #100: quarterly trends in instruments this year. I mean, I think Q3 in the revised guide is a fair amount below your expectations in Q2. So what just changed during that time frame? Has the competitive environment changed at all or any incremental color you can give us there? Yeah, it's really interesting. And obviously, you know,

Speaker Change #100: You try to really be metric-driven, and what we look at across each region on a quarterly basis are sales cycles.

It's in-quarter conversion rates.

Speaker Change #100: and it's looking at on a region-by-region basis and a quarterly-by-quarterly basis.

Speaker Change #100: And what we've seen from Q1 to Q2 to Q3 is an incredible amount of volatility across all of those metrics.

Speaker Change #100: relatively historical on sales cycle and conversion rates. So that is what's driven to really the challenging predictability.

Speaker Change #100: And so what we've tried to do in this quarter is look at the low points of those sales cycles, look at the low points of those conversion rates, and really baseline on that. And as you look at the areas where we've seen the most challenges in terms of the highest volatility,

Speaker Change #100: It's not, I wouldn't say it's necessarily competition, I think the macro is the overwhelming driver. You know, that said, you know, we do see...

Speaker Change #100: additional competition out there from from our colleagues at Lunafor. But I would say it really is the macro as you look at the volatility of those numbers. And what we're trying to do is we look at Q4 and into 2025, you know, is look at at that average across those volatile quarters and baseline off of that.

Got it. Thank you guys for the questions.

Thank you.

Please stand by for our next question.

John Sourbeer, David Westenberg,

Speaker Change #101: Our next question comes from the line of Kyle Mikeson with Canaccord. Your line is open.

Speaker Change #102: Hey guys, thanks for the questions. I guess, Brian, like you guys have the largest install base in Spatial, is it possible that you, you know, like it's so big, you've just been trading so much of this market that it's, you know, very difficult to return the growth of the cuts that you've made to the workforce? Like is that playing a factor here as well?

Brian McKelligan: No, it's a good question. It's a good point. Have we reached saturation? I just don't think at all. And I think if you pull.

Pull the aperture back and just look across peer groups.

Thank you for your time.

Speaker Change #103: Yeah, that was exactly, that was the point. Okay, sounds good. And then just looking at the financials on, maybe I'll just lump in two here. So on consumables, I mean, pull-through looks like that continues to decline quarter over quarter, like a mid-single-digit decline.

Speaker Change #103: If I'm doing the math right, and then, I mean, I guess based on the guidance, if instruments remain flat and then service remains flat quarter over quarter, Pulter needs to, like, increase, like, you know, like $10,000 basically to beat the guidance team, so, you know, what's

Speaker Change #104: What are the bottlenecks there to getting Pulitzer up so far? Why does that continue to be kind of a thorn in your side despite launching all the new offerings and everything over the years? And what are your expectations for 25?

Speaker Change #105: I'll let Johnny speak to the service line, but just maybe a portion of that service line

Are our clinical services?

Speaker Change #105: And as we spoke about, I think in Q1, some of that was deferred and you'll see some of that step up in the Q4 number. But with respect to reagents, we calculate the pull-through on a rolling 12-month basis.

Speaker Change #105: And so just as you look at, for example, last year's quarterly reagent revenue.

It was generally in the mid to high fives.

In terms of million dollars per quarter

And then Q4, we were just under seven.

Million dollars per quarter

Speaker Change #105: And in Q1 and Q2, we were around 7, and a slight step down here in Q3.

Speaker Change #106: That's a temporary dynamic, Kyle. As we look at how we've started Q4, it's a pretty robust start compared to Q3.

Speaker Change #106: And I think the underlying dynamics of the slight step down in Q3.

Speaker Change #106: to 2023, we're in the mid-five range in terms of millions per quarter. That trend, I don't think, is declining in terms of pull-through. It's just very, it's volatile along with the other numbers.

[inaudible]

Speaker Change #107: And Kyle, I'll just jump in on the services line as a reminder that captures

Speaker Change #107: The lab services we perform, freight, software, spare parts, warranty for the instruments sold. So when every instrument is sold, we defer a portion of that sales price and recognize it over the first year of service. And so as in Q1, for example, we had a lower instrument number.

that

didn't contribute to that service.

Speaker Change #107: baseline that then would be recognized through the year. So it's really a derivative factor of the instrument because the lab services line is as we expected. And as Brian mentioned early on in Q1 and Q2, I think we mentioned that some of that lab service revenue pushed in the back half, and we still see that with an expectation in Q4. So to Brian's point, a bit of a step up in that in Q4. It's really a bit lumpy sometimes as we complete some of those service contracts as well. That's really all it is there.

got it that's interesting okay thanks guys appreciate it

Thank you.

Please stand by for our next question.

Speaker Change #108: Our next question comes from the line of David Westenberg with Piper. Your line is open.

David Westenberg: Hey guys, yeah, thank you for taking the question. So first let's maybe talk about some of the stuff that went in Q2, and then maybe as we go into Q3, did you see any stocking in Q2? Because you did have a sequential step up from Q1 that might have impacted you in Q3, and then just can you talk about expectations for potentially a budget flush? And if you aren't going to see a budget flush,

David Westenberg: Can you maybe discuss, you know, pursuing rent-erradiant models? I know that's less effective in things that are outside of clinical diagnostics. But just, you know, how would you think about there in Q4? Yeah. So I think...

Speaker Change #110: So to Kyle's question and to yours, we did see some stocking up.

Speaker Change #110: A little bit as we exited Q1 and into Q2, and I think a large part of that was...

Speaker Change #110: Some of the behaviors that we actually help drive as we are transitioning from external manufacturing to internal throughout Q1.

Speaker Change #110: And we got that direct feedback from our customers, and I think we're through that, David, as we look at the start of Q4, in terms of our sort of first half of Q4 reagent numbers, and then in terms of on the instrument side.

Speaker Change #110: Reagent rentals is not something that that you see people typically do on the on the life sciences you know discoveries and tools markets. It's more often than where you have you where you seek sort of external financing for your instrument. That's a more common theme.

Speaker Change #111: Okay, just can you help us categorize what the sales cycle actually looks like or give us maybe some color on this? I mean, are you just seeing...

Speaker Change #112: The customer they still want it They're you know, just you know, maybe next month we're going to get some cash. Is it

Speaker Change #112: Stomp in the middle. You had something in all of a sudden, you see a customer coming around. I mean, sorry, a competitor coming around. If you could maybe just categorize it as far as is this just purely extension of length of the sales cycle, or is there actually some of that dropping out? And then I don't know if you've never in the past given color on kind of booked a bill, but how that's maybe trending as we have that trend in the quarter.

Speaker Change #113: Yes, so let me give you some specific metrics. As we look at our sales cycle.

from, call it a year ago.

It's grown by about 35%.

Speaker Change #113: in terms of the length of time it's taking from a conversion of an opportunity.

Speaker Change #113: So that's true across all geographies, that's accelerated a bit, and you're talking

Speaker Change #113: There's error bars here as you think about North America versus EMEA So call that kind of a baseline of you know seven months plus or minus You know plus the 35% in terms of the extension of the length of time to convert and then the other thing you have The data is the actual conversion rate, which is if you have an opportunity in the quarter What's the probability that you get that close?

Speaker Change #113: And that's been incredibly volatile, particularly in North America, where the overwhelming variable on those conversion rates has been straight availability of funding.

Securing that funding, not that it goes elsewhere.

Speaker Change #113: So those are some of the metrics that you look at as you look at the sales cycles and the conversion rates across different geographies.

Speaker Change #113: And I think that directionally probably consistent with some of our peers as well in terms of the trends over the last year.

Speaker Change #114: Got it. This is kind of a continuation of Kyle's question on the size of the company, but I actually am curious just because consumables obviously have a better gross margin and you're being very thoughtful with the way you're spending. Can you talk about how your sales force is structured? And what I mean by this is do you have a farming function and then a hunting function? And is there a way to maybe get a little bit more into the farming function and kind of help out that pull through? And just thinking about like that in terms of an ability to do profitable, thoughtful growth with maybe some of that constrained capital.

Speaker Change #115: A thousand plus instruments, no, yeah, it's a really good question. So

Speaker Change #115: As I talked about our conversion from a company that's selling an instrument into a market and a technical sale of an instrument platform.

Speaker Change #115: We are now migrating, and I think so is the market, to an application-driven sale.

Speaker Change #115: Where you have a panel of 60 biomarkers in immuno-oncology and you're targeting those researchers. You have a panel in mouse models You're targeting the preclinical groups in pharma

You have a neurobiology panel and you're targeting those customers.

Speaker Change #115: So, right now, to go back to your question and tie that together,

Speaker Change #115: Our commercial sales team is generally set up on a territory basis.

Speaker Change #115: And the farming function that you're talking about, you know, are quote reinvestments.

Speaker Change #115: commercial would likely be on something like an inside sales basis.

Speaker Change #115: where you're identifying all the researchers and PIs across these therapeutic areas and farming that way. So it's an incredibly cost-effective way

Speaker Change #115: to drive pipeline, to qualify leads, and then to hand those off to the territory sales reps. So that is sort of the underlying structure that's both more economically efficient, but also in line with how we're pivoting our kind of strategic commercial approach.

and John Eccleston. Thank you. Thank you.

Thank you.

Thank you. Please stand by for our next question.

Speaker Change #116: Our next question comes from the line of Tejas Savant, Morgan Stanley. Your line is open.

Tejas Savant: Hey guys, thanks for the questions here. Brian, I want to start with a couple of cleanups in the quarter. Can you just elaborate a little bit on how much of the 3Q shortfall was due to capex pressures versus disruption from the RIF?

Tejas Savant: You know, the press release made it sound like, you know, the latter dynamic also played some sort of a role in the shortfall. And then one for Johnny, can you just remind us how much of a contribution from those milestones that had gotten pushed out earlier in the year you guys expect to come through here in the fourth quarter?

Tejas Savant: You know, that said, when you do meaningful restructuring, it does present, you know, challenges across the org. So there were certainly pockets.

Speaker Change #118: of coverage, particularly within the North America territory, that contributed, I would say, I don't want to get into false precision, Tejas, but I would just say, as you look at the instrument,

You're probably talking about, you know, maybe

will sort of settle down and solidify.

Speaker Change #119: Got it, I'll just jumping in. Yeah. So a reminder in that services line is ongoing.

Speaker Change #119: business in our funnel sort of proof-of-concept type work that we do in our in our lab in addition to some contracted work that we have pretty good visibility to. So we had spoken about that contracted work and it's it's a couple million dollars that that will land we expect to land in Q4 pretty pretty confidently. We complete the work and the revenue is in that quarter so I would say in the two to three million dollar range is what we have.

Thank you.

OK.

not not not sort of to put you

Speaker Change #119: on the spot here. But, you know, what do you think are sort of implications from the election outcome, you know, especially with the news that RFK may be the nominee for HHS secretary? What does that mean for the NIH budget, you think, at this stage? Or, you know, stopping levels, you know, at the NIH, assuming he gets confirmed?

Speaker Change #120: That's a really tough and loaded question. I guess all I can speak to is the existing data that we know. You look at this first month in the NIH budget, and it's up.

Speaker Change #120: In terms of cash outlays, it's up 21%, but that's typical in a month one. I think as we look back historically, I can't speak to the RFK factor. Over Trump's prior term, I think it was a five to six percent growth.

Speaker Change #120: So I think that's all we can that's all we can lay back and bank on right now

I think that's the most I could say.

Speaker Change #121: Got it. Fair enough. And then I guess my last question here, it's sort of a two-parter.

Speaker Change #121: First of all, I mean, are you running into any sort of issues with...

Customer hesitancy around pulling the trigger on a purchase

Speaker Change #122: You know, they've lived through, you know, disruption at NanoString and, you know, VisGen and Altiview are now one company and I'm sure that created a degree of disruption as well. So whenever a company is in the midst of, you know, evaluating strategic options and has a, you know, relatively limited sort of cash runway situation going on, that can have an impact on how, you know, customers feel about, you know, tying themselves into that ecosystem. So that's the first part.

And then the second part, really, guys, is...

Speaker Change #123: You know, Brian, you've mentioned multiple times, you know, today, earlier forums as well, that, you know, spatial biology demand is still strong and you do believe it'll come back eventually.

Speaker Change #124: But the question is making sure that a Koya is around to see that day, right? Either as a stand-alone entity or as part of another larger parent, perhaps.

Speaker Change #125: So, any color you can share on how far along are you in that process of evaluating strategic options and any sense of when we might get to see some resolution on that front?

Speaker Change #126: Look those are those are very important and very fair questions and I'll take the latter first.

Speaker Change #127: I think what we've said to date is probably the most that we can signal.

Speaker Change #127: that we're confident that we have a path to remove those concerns.

Speaker Change #127: I think that's the extent of which I can address that, but you don't put Tejas' statement out there lightheartedly.

Speaker Change #127: You only do so with confidence, so that's part one. Part two, I completely get your statement around disruption, and I think there's a scale there on potential impact.

I think when you have something like

Speaker Change #127: Really hardcore litigation, bankruptcy events. I think those absolutely have material impact material impact.

Speaker Change #127: I would say where we are right now as a company, as we look at our historical performance and our opportunities going forward, our current financial position, at least the visibility we have to our customers' decision-making process, that has not been a determinant.

Speaker Change #127: That doesn't mean it's not part of it, but it's not something that's risen to an area of concern.

Speaker Change #127: So I don't think we're at the level of some of the scenarios that our market has faced historically.

Fair enough. Appreciate the call, Brian. Thank you.

Please stand by for our next question.

Speaker Change #127: Our next question comes from the line of Saboon Namby with Guggenheim Securities. Your line is open.

Good evening. Thank you for taking my question.

Speaker Change #127: Your gross margin has improved to what we saw in the first half of the year. Is this a function of bringing reagents manufacturing in-house? Is this product mix given placement of the instruments or light? I'm wondering if you've been able to maintain stable ASPs for your instruments, and I ask this in part because there are other companies in the space that have had to discount to place instruments in this challenging macro environment.

Speaker Change #127: Yeah, those are great questions, and Johnny, I think you can probably run with them.

Johnny: Yeah, yeah. Hi, Subbu. Yeah, we are continuing to see sort of consistent and stable ASPs. ASPs are not something that's moving materially, that impact margins, really driven by

Speaker Change #128: The realization of all the things we put in place in Q1, and we hoped and planned for that to happen, and we're seeing the realization as we bring in-house.

Speaker Change #128: the manufacturing of reagents and are consumable, it really does make a difference as we are able to scale internally. Certainly there is an impact of mix in the current quarter, absolutely, as you have lower instruments and more towards reagents, it will impact your margin. But that is what we always anticipated, but on a stand-alone basis even.

We're seeing stable and strong margins on reagents and instruments.

Speaker Change #129: I think I just, I'm sorry, if you don't mind one more kind of longer term view as we get into 2025 and begin introducing new reagent offerings.

[inaudible]

coming out of our in-house manufacturing.

looking to kind of renegotiate our

Speaker Change #129: instrument manufacturing supply agreements that will also give us an opportunity throughout 2025 to also improve the working capital on the instruments, you know, in the face of what we've seen historically here, some of the challenges on selling capital. So I think two additional things to think about as we look longer term.

Speaker Change #130: Thank you for that comment, Brian. So just can I play it back to you? So it's okay. The growth modules are expected to stay at this level heading into 2025. Did I hear that right?

[inaudible]

Johnny, did you hear that?

and John Eccleston. Thank you. Thank you.

Speaker Change #130: Sorry, I had muted. Yeah, that's what we've always sort of communicated that we thought we'd be in the low 60s, sort of exiting the year, and then see a couple hundred basis point improvement sort of year on year going into the future, driven by the factors that Brian highlighted. So, you know, part of the efforts we took throughout the year in OPEX and in gross margin allow us to have pretty good visibility to margin and OPEX, and ultimately to bottom line as we see return to growth on revenue.

Speaker Change #131: Got it. And Brian and Johnny, I hear you on the reagent dynamics that you previously responded to.

As people are building out their larger panels,

Speaker Change #132: of their panels as they were accumulating them. Now, as we sit here today, if an order comes in for 60 antibodies, we're shipping all out, you know, in three to five days complete.

Speaker Change #132: So those were the prior dynamics versus the current dynamics today.

[inaudible]

Carter. Thank you for that.

Thank you.

Please stand by for our next question.

Speaker Change #132: , , , , , , , , , , , , , ,

Speaker Change #133: Our next question comes from the line of Mark Massaro with BTIG. Your line is open.

[inaudible]

Speaker Change #134: some challenging capital market conditions. I guess, you know, there are there have been questions about competition within spatial biology. Maybe I'll just ask it again. Are you seeing any competitive pressures from you know, the product that was recently introduced in the market in spatial, but I also more broadly want to ask about to what extent are you competing for research dollars in other applications, like for instance, NGS or proteomics?

Speaker Change #135: Yeah, it's a good question. I would take those in reverse order. So.

in areas like

core labs

and John Eccleston. Thank you. Thank you.

CROs, people that are providing shared services.

You are competing for dollars.

Speaker Change #135: versus competing head-to-head on, you know, should I buy a Spatial Proteomic Platform from Akoya or somebody else? So that is a different competitive dynamic and that most certainly exists because they're zero-sum dollars.

Speaker Change #135: And I think for us, one telltale sign is, as we look at the contribution of core labs,

Speaker Change #135: to our revenue. That's been an area of meaningful weakness this year.

and that would be a dollar for dollar.

where we are potentially losing

in the discovery side with the phenocyclic fusion.

is where we don't have content.

Speaker Change #135: And that's why we're investing in content. So not only do we drive.

Higher pull through on existing systems

But we get to application areas where content is ready-made.

So that is an area where the competition

Mark Massaro: I think, Mark, it doesn't get us back to the point where.

Mark Massaro: It does it's minor with respect to to the to the competitive to the headwinds are facing in terms of the funding environment

Yep, that makes sense.

Um.

Speaker Change #137: Some of us noticed the press release you guys put out shortly after your quarter ended that you nominated Scott Mendel as the chairman of the board. I know Scott's been part of the board since 2021. Many of us know him and like him.

Yeah, I really appreciate you asking that question.

Speaker Change #138: There is absolutely no difference philosophically. I think as a leadership team, we have a great board and we have a great dynamic with the board. I think the

Speaker Change #138: and for me personally and for Johnny who's got a long-standing relationship with him, navigating environments like this...

Speaker Change #138: Getting your company to become operationally efficient and proficient. Getting your bottom line to be positive.

Those are experiences that Johnny has been through multiple times.

Scott has been through multiple times and so this indicates

Speaker Change #138: The Akoya company and leadership's desire to really lean on a member of our board that has been through scenarios like this and Signals a really active involvement for him personally to help us navigate through these challenging times

Speaker Change #139: Yep, that's helpful. Maybe last one for me, just to clarify. Johnny, I think I heard you say that you're likely not going to hit your cash flow break-even target at the end of this year.

Speaker Change #140: Can you give us a sense now as to when you think that can happen? And then, I know you guys expect to return to growth in 2025.

Speaker Change #140: To what extent do we need to see a recovery in funding for you to get there? Thanks.

Speaker Change #141: Yeah, so yeah, we had previously mentioned we thought we would we would exit the year in Q4 at a break-even point given our The revenue we expect at the midpoint of the guide call it for Q4. We don't quite get there, but we have

Put the

The cost side.

Speaker Change #141: It's really right where we want it to be where we think it's appropriate so that once we get we're not speaking specifically to when we think we would do that but naturally Q1 is a cash heavier quarter so even under our past

Speaker Change #141: statements. We knew Q1 cash ticks up and then you start to turn back to cash flow positivity and into the mid of next year. We still sort of see that as our view. A reminder, with the bottom line, you know, adjusted EBITDA target that I sort of mentioned exiting the year, I still think that's

Speaker Change #141: sort of mid-low single-digit adjusted EBITDA exit in the year. The big movers as always is the case with a company at our

Dave Vellante, The Big Game Hunters, www.TheBigGameHunters.com

Speaker Change #141: So, that's really, I look into 25 and I'm confident I can get to that target.

Speaker Change #141: because I have a cost structure in place, but not speaking to any specific quarter right now.

So to your question on growth

Thank you.

Speaker Change #142: Returning to growth in Q1 first half of next year, we are not making an assumption.

Speaker Change #142: that that is reliant on external factors like a meaningful return to funding.

Speaker Change #142: What we're what we're making what we're relying on for that are our fundamentals on continued reagent growth our opportunities in lab services and Some incremental performance for example over over q1 where we sold 30 boxes So in that order mark in terms of if you were to look at

Speaker Change #142: you know, how Q1 would qualitatively shape up. That's how we would look at it.

All very helpful. Thanks, guys. Thank you.

David Westenberg, John Sourbeer,

Thank you.

Speaker Change #143: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Brian for closing remarks.

Brian McKelligan: Listen, thank you all for your time. I know it's a challenging and complex market environment. We appreciate your question. We appreciate you giving us a chance to talk this through. And we look forward to following up with each of you individually and collectively. So thank you all for your time.

Speaker Change #144: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Q3 2024 Akoya Biosciences Inc Earnings Call

Request a DemoDemo

AKYA

Akoya Biosciences

Earnings