Q2 2025 Quanterix Corp Earnings Call

Speaker #3: Good day, everyone, and thank you for standing by. My name is Arji, and I will be your conference operator today. At this time, I would like to welcome everyone to the Quarterix Corp Q2 2025 earnings call.

Speaker #3: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

Speaker #3: If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Joshua Young, head of investor relations.

Speaker #3: Please go ahead.

Speaker #4: Thank you and good afternoon. With me on today's call are Masoud Toloue, Quarterix President and CEO, and Vandana Sriram, Quarterix Chief Financial Officer. Today's call is being recorded, and a replay of the call will be available on the Investors section of our website.

Speaker #4: During the course of today's presentation, we will make forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act. These forward-looking statements are based on management's beliefs and assumptions as of today, August 7, 2025.

Speaker #4: We may not actually achieve the plans and tensions or expectations disclosed in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

Speaker #4: To supplement our financial statements presented on a gap basis, we have provided certain non-gap financial measures. These non-gap financial measures are used to evaluate our operating performance in a manner that allows for meaningful period-to-period comparison and analysis of trends in our business and our competitors.

Speaker #4: We believe that such measures are important in comparing current results with other periods' results and assessing our operating performance within our industry. Non-gap financial information presented herein should be considered in conjunction with and not as a substitute for the financial information presented in accordance with gap.

Speaker #4: Investors are encouraged to review the reconciliations of these non-gap measures to their most directly comparable gap financial measures set forth in the presentation posted to our website and in the earnings release we issued today.

Speaker #4: Finally, any percentage changes we will discuss will be on a year-over-year basis unless otherwise noted. Now, I'd like to turn the call over to Masoud Toloue.

Speaker #4: Masoud?

Speaker #5: Thank you, Joshua. I'd like to thank the entire Quarterix team for their dedication to our mission. We made significant progress during the quarter and have positioned the company for long-term growth.

Speaker #5: And value creation. Highlights since our last call include completing the transformative Equity Acquisition, investing in strategic drivers to support sustainable double-digit revenue growth and margin improvement, generating $24 million of revenue in a difficult market environment, this was below our ectation, due to temporary headwinds in academic funding and biopharma spending, I will discuss taking.

Speaker #5: Managing our cash diligently to preserve continued financial flexibility, and taking decisive action to help ensure we are cash flow positive in 2026. There's been just one month since completed the Equity quisition, and we're thrilled with both the long-term growth potential of Equity's exciting spatial technology and the ity of the talented team.

Speaker #5: The specific actions we are combined Quarterix Equity Management teams took a clean sheet of paper look at how to build an organizational structure for the future that allows us to be lean, and nimble, but with the resources available for investments needed sustain and grow our business.

Speaker #5: The conclusion is a structure that ensures a break-even position in 2026, a double-digit growth trajectory for the coming years, and our core markets and the additional opportunity to pursue significant upside potential in diagnostics.

Speaker #5: We expect to achieve approximately $85 million in synergy savings and cost reductions within this timeframe. As of today, we've already implemented 75% of these expense reductions on a run-rate basis.

Speaker #5: We've outlined a roadmap in the slides which we'll iew quarterly that shows synergies realized per quarter along with our path to cash flow positivity in 2026.

Speaker #5: The life science tools market and Quarterix's position with it remain highly attractive in the long term. With Proteomics offering one of the most transformative opportunities in our sector today.

Speaker #5: Proteomics is increasing in importance, and we believe it is poised to reshape how we understand, diagnose, and treat disease. Proteomics is where genomics was two decades ago, and just as advancements in genomics unlocked a wave of high-throughput discovery, that led to the rise of specialized diagnostic labs, and precision therapies, Proteomics is now beginning to reveal novel clinically relevant biomarkers.

Speaker #5: At the center of this shift is Quarterix, with the most sensitive protein detection platform commercially available. This unparalleled sensitivity enables our platform to detect low-abundance biomarkers that are often invisible to other technologies.

Speaker #5: Particularly in complex diseases like neurodegeneration and cancer. What sets Quarterix apart is our unique ability to translate these discoveries into actionable assays for clinical trials and diagnostic testing through our SEMOA, and now spatial platforms.

Speaker #5: This convergence between groundbreaking Proteomics discovery and real-world clinical utility creates a powerful value opportunity positioning us to lead the next wave of innovation in advanced disease detection and therapeutic development.

Speaker #5: Our strategic priorities and investments are designed to position the company to fully capitalize on this opportunity. First, we've meaningfully expanded our addressable market. With the acquisition of Equity and our expanded menu and immunology, we now serve a $5 billion total market across neurology, immunology, and oncology.

Speaker #5: This broader reach is already reflected in our pro-pharma revenue mix now $53% neurology and 47% immunology and oncology. We've built a franchise that is generating approximately $100 million of consumables revenue and demonstrating resiliency in this macro environment.

Speaker #5: Importantly, both our SEMOA and spatial biology platforms rank amongst the highest pull-through systems in life science tools generating strong reoccurring revenues across an install base of over 2,400 instruments.

Speaker #5: As we continue to expand assay content, we're increasing the utility and productivity of each instrument placed, deepening customer engagement and maximizing return on the install base.

Speaker #5: Second, we're celebrating our vision to bring SEMOA into every lab. As we've shared last quarter, we're launching SEMOA 1, our next-generation platform, by the end of 2025, with reagents that are compatible with a large existing base of flow cytometers in 2026.

Speaker #5: And can be used with SEMOA 1 instruments for even higher sensitivity. This creates a substantial high-margin growth opportunity while significantly reducing the need for capital equipment purchases.

Speaker #5: By enabling SEMOA-level sensitivity on a broad range of instruments, we can expand our addressable install base by 20x to over 20,000 systems globally. Third, we're building the foundation for our Alzheimer's diagnostic franchise.

Speaker #5: Since our earnings call, we've unveiled several new partnerships, expanded our international regulatory footprint, doubled test volumes, tripled revenues, and we remain on track to secure a Medicare pricing recommendation this year—all critical milestones as we move from research to clinical impact.

Speaker #5: The investments we're making in innovation are among the most significant in the company's history. With approximately 30% of our revenues allocated to R&D, which is at the high end of our peers.

Speaker #5: Our commitment to innovation will strengthen our competitive advantage and position the company to achieve sustained double-digit growth. As Proteomics drives the discovery of previously undetectable yet clinically meaningful biomarkers, Quarterix is uniquely poised to translate those discoveries into scalable tools for drug development, and diagnostics.

Speaker #5: Anchoring our leadership in a rapidly expanding and clinically relevant market. Now, I'll turn the call over to Vandana.

Speaker #2: Thank you, Masoud. And good afternoon. Total revenue for Q2 was $24.5 million, down 29% year-over-year. Temporary funding pauses and uncertainty in the US academic and pharmaceutical end markets caused a decline in revenue in Q2.

Speaker #2: Our customer mix was evenly split between pharma and academia in the quarter, academic sales declined 18%, and pharma sales declined 38% in the quarter.

Speaker #2: Consumable revenue was $14.9 million, and instrument revenue was $2 million. We placed $10 instruments in quarter as compared to 22 instruments in the second quarter of 2024.

Speaker #2: Accelerator lab revenue was $4 million, down 60%, driven by a decline in large multi-million dollar projects from pharma customers. While we're seeing smaller deal sizes come through accelerator, we're encouraged by an increase in the number of customers as well as increased quoting activity and orders pipeline.

Speaker #2: And finally, sales to our diagnostics partners totaled $2.6 million for the quarter, up from $700,000 in the prior year period. Gross profit and margin were $11.3 million and $46.2% respectively.

Speaker #2: Non-gap gross profit was $10.2 million, and non-gap gross margin was $41.8%. The decrease in gross profit and gross margin was primarily the result of lower output and fixed cost leverage in response to reduced demand, which led to lower cost absorption.

Speaker #2: We also had higher inventory reserves as compared to prior year. I'd also note that this year-over-year decline is primarily non-cash. Operating expenses for the quarter were $48.4 million, up $15.2 million.

Speaker #2: Included in operating expenses are approximately $9.6 million of costs, related to acquisition, integration, restructuring, and purchase accounting. And $1.3 million of shipping and handling costs.

Speaker #2: In addition, our operating expense includes a $6.4 million one-time charge for Goodwill impairment. Non-gap operating expenses were $31.1 million, flat to last year, and down $2.7 million sequentially.

Speaker #2: Our adjusted EBITDA was a loss of $13.7 million, as compared to a loss of $4.1 million in the second quarter of the prior year.

Speaker #2: We ended the quarter with $263.8 million of cash, cash equivalence, marketable securities, and restricted cash. Adjusted cash usage during the quarter was $2.6 million, compared to $5.1 million in the prior year, an improvement of $49.9% driven by improved working capital and cost reductions.

Speaker #2: During the quarter, we paid $3.1 million in severance and deal-related costs. Total cash usage during the quarter $5.7 million. The combined company commenced the second half of 2025 with approximately $163 million in cash and no debt.

Speaker #2: Finally, as Masoud mentioned, we closed Equity on July 8th, so the results are not in our consolidated numbers for the second quarter. Equity generated $18.2 million in Q2, led by a record consumables quarter, and used approximately $9 million in cash in the quarter.

Speaker #2: I will now turn to our updated guidance for the year. With the acquisition Equity, our 2025 guide will now reflect nearly two quarters of Equity results.

Speaker #2: We will refer to core Quarterix revenues as SEMOA, and Equity revenues as spatial biology. For combined company, we expect to report $130,000 to $135 million of revenue for 2025.

Speaker #2: This assumes approximately $100,000 to $105 million of SEMOA revenue, and implies pro-pharma revenue of $165 to $170 million, assuming the two companies were combined for the full year.

Speaker #2: We expect gap gross margin to range between $49 and $53 percent, and non-gap gross margin to be in a range of $45 to $49 percent.

Speaker #2: And finally, onto cash. We started the year with $292 million of cash. We expect adjusted cash usage to be $34 to $38 million for the full year.

Speaker #2: We will incur $136 million for the Equity and emission acquisitions and restructuring costs, net of cash acquired, this brings us to a closing cash balance of approximately $120 million, with no debt.

Speaker #2: Since the beginning of the year, we have moved swiftly to align our cost base with our revised revenue expectations, and have been planning ahead to realize deal synergies.

Speaker #2: We expect that these actions will result in approximately $85 million of cash savings on an annualized basis in 2026. Which is $30 million more than our previous target.

Speaker #2: As Masoud mentioned, we have already completed initiatives amounting to $75 percent of our 2026 target. These savings are being realized from three key areas.

Speaker #2: First, we have realigned the two sales and services teams into one commercial team, capable of connecting technology from tissue to blood. Second, we are moving fast to rationalize and combine overlapping manufacturing and lab footprints.

Speaker #2: And lastly, we've eliminated duplicate administrative and public company costs. At the same time, we are continuing to invest in growth, with capital allocated to instrument development, and development of the diagnostics franchise, for both SEMOA and spatial.

Speaker #2: We also reiterate our commitment to achieving cash flow break-even in 2026, even in the midst of challenging market conditions. Our early success in realizing and exceeding our synergy expectations has increased our confidence in our ability to deliver this target.

Speaker #2: I will now turn it back over to Masoud.

Speaker #5: Thank you, Vandana. Operator, let's take some questions.

Speaker #3: Thank you. At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad.

Speaker #3: We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Puneet Sudha of Learink Partners.

Speaker #3: Please go ahead.

Speaker #6: Hi. Thanks for taking my question. You have Michael on for Puneet today. I was wondering if you uld touch on accelerator. So we've been hearing from various CROs about a lot of companies moving forward with their clinical trials and order bookings improving, but cancellations being somewhat elevated.

Speaker #6: I was curious what you're seeing given your focus on neurology and if you have any similarities or differences you're seeing in this sort of the clinical research space.

Speaker #5: Hi, Michael. Yeah, you know our accelerator business, you know, continues to show good vitality. Our business grew approximately 40% year-on-year since last year. Or, you ow, in 2024.

Speaker #5: And you know we're seeing a net new increase in customers. But the project sizes are a lot smaller than they were last year. So as I said, while vitality is strong, we expect that, you know, when budgets improve, those project sizes will increase.

Speaker #5: And we should get some lift in accelerator.

Speaker #6: Great. And then on the academic side, I reciate obviously a lot of negative headlines in Q2, but it seems like potentially funding will be somewhat more positive than initially feared.

Speaker #6: I'm ind of curious what ou think the academic customers are looking for to gain confidence in the look ahead. And what could get them to start moving forward with their projects and spending?

Speaker #5: Yeah. The, you know, one thing related to academic customers, we've en strong resiliency in our consumables franchise. I mentioned in the call that we're now pro-pharma generating approximately $100 million of consumables revenue.

Speaker #5: That has been pretty stable, approximately flat first half of '25 versus the prior period. So, while the market's challenged, consumables on a year-over-year basis are promising.

Speaker #5: And we look at what the '25 outlook was going to be and set a guide based on current visibility. There are some green shoots and some positivity that we're seeing but we're basing our '25 outlook on what's visible today.

Speaker #6: Great. Thank ou.

Speaker #3: Again, as a reminder, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Thomas Liborsi of Nefron Research.

Speaker #3: Please go head.

Speaker #7: Hey, guys. Thanks for taking the estion. So I just want to touch on, I guess, cost actions of, I ess, '85 billion, which I think is a step up from prior expectations.

Speaker #7: And just in terms of additional cuts or additional savings that you're seeing are you able to serve customers in the way that you want while still, I guess, addressing the combined cost basis and how you think about kind of longer-term growth of the combined company once I guess we're through the current situation?

Speaker #7: Thank you.

Speaker #2: Yeah. Hey, Tom. I'll take this one. So our philosophy with the integration from the beginning has been that we would operate as one company making sure we have deep focus on the customer, but really running as one company with multiple product lines.

Speaker #2: To that end, we've incorporated spatial as a product line and eliminated a significant amount of structure. So, as we got into planning the integration, we had earmarked commercial operations and administrative really being the three areas of focus.

Speaker #2: The commercial area of focus has largely played out in line with our ectations. Where we saw additional savings as we started to really dig in was on the operation side.

Speaker #2: You know, there's significant overlap in both our operations as well as our lab processes. And that's really where we were able to realize significant synergies.

Speaker #2: So we feel really good about our ability to serve the combined portfolio with the cost structure that we have right now. And as Masoud mentioned, we've also very carefully ring-fenced the growth areas across both SEMOA and spatial.

Speaker #2: On both sides, you know, there's definitely exciting opportunities on the instrument side as well as on the diagnostic side. And in our construct, we made sure that we've provided for those adequately as well.