Bionano Genomics, Inc.

Good day, and welcome to the Bionana Fourth Quarter 2024 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to David Holmes from Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to the Bionana Fourth Quarter 2024 Financial Results Conference Call. Leading the call today is Dr. Eric Holman, CEO and Principal Financial Officer of Bionana. and he is joined by Mark Adamczyk, Bionano's Vice President of Accounting and Principal Accounting Officer. After market closed today, Bionano issued a press release announcing its financial results for the fourth quarter of 2024. A copy of the release can be found on the investor relations page of the company's website. Certain statements made during this conference call may be forward-looking statements including statements about BioNano's revenue outlook, margins, profitability, cash runway, cost savings initiatives, and commercialization and product plans. Such statements are based on current expectations, and there can be no assurances that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to several factors, including risks, identified in BioNano's press release and BioNano's reports filed with the SEC. These forward-looking statements are based on information available to BioNano today, March 31, 2025, and the company assumes no obligation to update statements as circumstances change. In addition, to supplement BioNano's financial results reported in accordance with U.S. generally accepted accounting principles or GAAP, the company reports certain non-GAAP financial measures. A description of these non-GAAP financial measures, as well as a reconciliation to the nearest GAAP financial measures, are included at the end of the company's earnings release issued earlier today, which has been posted on the investor relations page of the company's website. These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. should be read in conjunction with the company's consolidated financial statements prepared in accordance with GAAP and have no standardized meeting prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. An audio recording and webcast replay from today's conference call will also be available online on the company's investor relations page. With that, I'll turn the call over to you, Eric.

Thank you, David, and good afternoon, everyone. I'm pleased to provide you with an update on the fourth quarter of 2024 as well as the full year 2024. While we continue to find ourselves in unprecedented times in our industry, our core business based on sales of instruments, consumables, software, and optical genome mapping services is progressing well. I'd like to start off by taking everyone through our results for the quarter. Total revenue for the fourth quarter of 2024 was $8.2 million, a decrease of 24% compared to the fourth quarter of 2023, which included $2 million from discontinued clinical services compared to no revenues from such clinical services in Q4 2024. Gap gross margin for the fourth quarter of 2024 was 42%, which is significantly higher than the 23% gap gross margin reported in the fourth quarter of 2023. Non-gap gross margin for Q4 2024 was also 42%, compared to 24% for the fourth quarter of 2023. Fourth quarter 2024 gap operating expense was $15.4 million compared to $27.4 million in the fourth quarter of 2023. The year-over-year decrease was primarily due to a decrease in the fair value of contingent consideration of Purigen milestones and, importantly, reduced headcount-related expense attributed to the cost savings. initiatives that have been outlined in our Q2 2023 and Q3 2023 earnings releases. Fourth quarter 2024 non-GAAP operating expense was $10.6 million compared to $26.6 million in the fourth quarter of 2023. Cash, cash equivalents and available for sale securities As of December 31, 2024, we're $20.9 million, of which $11.4 million was subject to certain restrictions. We raised net proceeds of $3.6 million from ATM sales during the fourth quarter of 2024. Additionally, we modified the terms of our senior secured convertible ventures, among other things, which deferred the $1 million December 2024 amortization payment and reduced the monthly payments from January 2025 to July 2025 by 50%. And we completed a $10 million registered direct offering in January 2025, along with raising net proceeds of $3.2 million through ATM sales during the first quarter of 2025. We now believe our cash runway extends into the first quarter of 2026. Product revenues, instruments, consumables, and software for the full year was $27 million, an increase of 1% compared to $26.7 million in 2023, despite a reduction in instrument sales of nearly $2 million. Consumables sales were $12.8 million, an increase of 14% from $11.2 million in 2023, and software sales for the full year were $6.2 million, an increase of 11% from $5.6 million in 2023. Sales in the Americas region were up 9% in 2024, and sales in the Europe, Middle East, and Africa region were up 10% in 2024 compared to 2023. We sold 30,307 nanochannel array flow cells during 2024, including 8,058 in the fourth quarter, which represents a 15% increase over the 26,444 flow cells sold in the full year of 2023, and an increase of 1% over the 7,980 flow cells sold in the fourth quarter of 2023. Full year 2024 GAAP gross margin was 1%, which is down from 26% in 2023, but that was after a series of one-time non-cash adjustments. Non-GAAP gross margin for the full year of 2024 was 35%, which is up from 28% in 2023. Finally, full year 2024 GAAP operating expense was $104.4 million and non-GAAP operating expense for the full year of 2024 was $68.9 million. The tremendous progress across the business absolutely reflects the heroic and stellar efforts of our associates whom we affectionately call transformers for the impact they are making around the world. They have our most heartfelt and sincere thanks for these incredible contributions. I would like to use the remainder of the call to discuss the plan going forward. We believe that along with other companies in the life sciences and tools industry, we are in a period of recalibration in how the market will embrace novel technologies like ours for medical research. Keep in mind, our major economic engine is optical genome mapping, or OGM for short. OGM is used to transform the cytogenetic workflow in four key areas, hematologic malignancies, constitutional genetic disorders, solid tumors, and cell and gene therapy. applications of optical genome mapping in solid tumors are emerging and relatively novel to our list, but publications from users are demonstrating the utility. And so, we now see them as a key driver alongside the other three going forward. Now, in September of 2024, we implemented a shift in our go-to-market strategy that moved away from the relatively heavy spending on growing the optical genome mapping installed base through customer acquisition toward a focus on conserving cash and concentrating on those customers who use their SAFIRE and STRATIS systems routinely in cytogenomics. This strategy has four key pillars, which are to support and sustain the installed base of these routine optical genome mapping, and importantly, VIA software users, to drive utilization and increase it through the adoption of VIA software across our routine optical genome mapping user sites, which we believe will facilitate menu expansion, to continue building the support needed for optical genome mapping reimbursement and inclusion in medical society recommendations and guidelines, and to improve profitability and scalability with lowering costs and increasing sales volumes. The first pillar is critical. What we see is consistent growth of consumable sales, even as our focus has turned away from aggressively adding new customers, and new instruments. The reason for this pattern is that a core group of users, approximately 118 customers, account for more than 80% of consumables purchases and growth that we've seen over the previous two years. These customers are primarily in the United States, Canada, Europe, and Israel, And this group tends to use optical genome mapping routinely as an alternative to traditional cytogenetic methods, meaning they have a steady flow of samples to run that is not solely dependent on grant or project funding. These routine users are where we concentrate our efforts, which is more cost effective for us. And on average, they generate a higher rate of revenues per customer compared to others that are not in that routine use group. We expect this routine use group to grow over time and to expand its use of optical genome mapping consumables and therefore be the primary driver of the expansion of the menu of applications of optical genome mapping to promote revenue growth. We have an ability to encourage this growth by enabling the customers to use our VIA software, which streamlines their workflows and increases their capacity to run more samples. VIA software is used by 133 customers for analysis of non-OGM data types and provides a significant source of revenues. VIA has now been installed at over 160 OGM customers, which is up from just 40 at the end of 2023. This expansion in VIA installations creates the opportunity for us to get them proficient in using VIA, which we believe will increase their productivity and potentially be a source of consumables revenue growth on a per-site basis. Now, to continue building the support needed for optical genome mapping reimbursement and drive inclusion in medical society recommendations and guidelines, we need to remain active in encouraging and supporting, where possible, the publication of OGM data. Publications have continued to increase impressively, including 19 percent growth in 2024 of total publications. and 39 percent growth of publications in combined clinical research and cell and gene therapy. We have also seen an ongoing increase in published clinical research genomes, which we believe reflects the expanding adoption and use of OGM, and in turn has the potential to influence people and agencies responsible for reimbursement and guidelines showing this critical mass of adoption and utilization. We have already seen what we believe is a benefit to these publications with the decision by the American Medical Association to establish a Category 1 CPT code for OGM use in hematologic malignancies. This CPT code became effective on January 1st of this year, and to our knowledge, it's being used. Lastly, our focus must remain on a disciplined approach to keep costs down. We have been successful in reducing costs and maintaining the momentum in the business, and we are seeing benefits in another key area, which is our gross margin. Over the past eight quarters, we have seen non-GAAP gross margin increase from 22% in the first quarter of 2023 to 42% in the fourth quarter of 2024. We do expect ongoing volatility in margin going forward, and for that reason, we won't be providing guidance on margin at this time, but we are encouraged with what we are seeing. To wrap up, I would like to provide our outlook on 2025. With our key strategic pillars as the underpinning of our streamlined business focus, we expect full year revenues for 2025 to be in the range of $29 to $32 million. First quarter revenues for 2025 are expected to be in the range of $6.2 to $6.3 million. And we expect to install 15 to 20 new optical genome mapping systems, primarily at routine use sites, including at existing customer sites, as well as adding new customers that fit into this routine use group. With that, operator, please go ahead and open the line for questions.