Bionano Genomics, Inc.

the BioNano Second Quarter 2025 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kelly Gura from Investor Relations.

Please go ahead. Thank you and good afternoon, everyone. Welcome to the BioNano Second Quarter 2025 financial results conference call. Leading the call today is Dr. Eric Homelin, CEO and Principal Financial Officer of BioNano, and he is joined by Mark Adamczak, 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 second quarter of 2025. 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. Actual results may differ materially from such statements due to several factors and risks, some of which are 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, August 14th, 2025, and the company assumes no obligation to update statements as circumstances change. During our call, we may reference certain non-GAAP financial measures, which we believe provide useful information for investors. Reconciliation of these measures to GAAP can be found in our press release and slide deck. An audio recording and webcast replay for today's conference call will also be available online on the company's Investor Relations page. With that, I will turn the call over to Eric.

Thank you, Kelly, and good afternoon, everyone. The second quarter of 2025 was solid. Today, in addition to discussing our quarterly results, we wanna highlight several signs that we believe indicate the strategic shift we implemented in September of 2024, moving our focus from heavy spending on customer acquisition associated with new instrument placements toward those customers who use our optical genome mapping or OGM products and our VIA software routinely insider genetics is having a positive impact on our business. I would like to start off by discussing the broader markets where our opportunities lie. In general, our focus is on bringing solutions to pathology, which is the broad field that investigates disease, including its causes, developments, and effects. In fact, BioNano has become a digital pathology company. While there are many branches and subspecialties of pathology, our solutions concentrate primarily on cytogenetics and molecular pathology, and we can see an opportunity to expand into clinical and anatomic pathology over time. Clinically, these branches of pathology, globally, these branches of pathology currently rely on multiple technology platforms to function. The mainstay in cytogenetics, for example, is karyotyping. It's the standard for first line analysis in hematologic cancers in nearly every country around the world, and it hasn't changed in the past 50 years. Other techniques such as FISH and microarrays are similarly antiquated and limited. Optical genome mapping consolidates these workflows and the fusion analysis from molecular pathology into one digital workflow. Sequencing is also impacting pathology with multiple workflows already adapted to sequencing, and techniques like single cell, spatial, and protein analysis showing promise for standardized sequencing readout that may eventually reach clinical scale. It's possible to imagine a large consolidation across molecular, anatomic, and clinical pathology into sequencing as well. One critical component that will underpin this transformation and consolidation in the future is AI-driven software, such as our VIA software. VIA streamlines the visualization, interpretation, annotation, and reporting of variants in a format that is easy for clinical researchers to use. VIA is best in class for OGM analysis and widely accepted as a gold standard for CNV analysis from microarrays and sequencing. Some labs running long-read sequencing have shared their excitement about using VIA for their data analysis as well, which is particularly encouraging. Our mission is to make our technology and workflows easy for customers to use. While we still have a lot of work to do, we have made tremendous progress and see substantial opportunity to advance this area of digital pathology both now and in the future. With that overview, I'd like to shift gears and talk about our current strategy, where we are concentrated on driving utilization of our solution within a subset of our OGM and VIA user base. We call these users routine users. These customers tend to have an established flow of samples to run on our systems, and we believe this group will drive most of our revenue and profit growth in the near term. Our strategy to address them has four pillars, which form the basis of how we execute. First, we support and sustain the installed base of routine OGM and VIA software users. Second, we drive utilization through adoption of VIA software across the routine OGM user base and facilitate their menu expansion. Third, we build support needed for optical genome mapping reimbursement and inclusion in medical society guidelines and recommendations. And fourth, we focus on improving profitability and scalability with lowering costs and driving higher volumes. Now taking a closer look at our results in the second quarter, where we have made excellent progress against this new strategy, total revenue for the second quarter was $6.7 million, a decrease of 13% when compared to the second quarter of 2024, which included $700,000 in revenues from discontinued services, which do not contribute to our second quarter. And then we have the second quarter 2025 revenues. When adjusting for these discontinued clinical services, the revenue decrease was 5% year over year. Now we sold 7,233 flow cells in the second quarter of 2025. This amount reflects a 17% increase compared to the same period last year. We're extremely pleased to see this double digit growth in flow cell sales year over year. And we believe it's a result, is a strong indicator for our efforts towards driving utilization within this routine customer group, routine use customer group. Now, non-GAAP gross margin for the second quarter of 2025 was 52%, which is significantly higher than the 35% non-GAAP gross margin reported a year ago. Second quarter 2025 non-GAAP operating expenses were 8.8 million compared to 18.8 million in the second quarter of 2024, which reflects a 53% reduction year over year. And we installed seven new optical genome mapping systems in the quarter and brought back eight for a net decrease of one in the install base to 378 systems installed. That reflects a increase of 4% over the 363 systems installed as of June 30th, 2024. In the first half of 2025 through June 30th, we have installed 16 new systems. And we ended the quarter with 27.4 million in cash, cash equivalents and available for securities, available for sale securities, of which $11 million was subject to certain restrictions. Now, the fundamental thesis of our current strategy is that we can support a committed group of routine users who repeatedly purchase and use our consumables and software at higher rates overall. When taking a closer look at two metrics, the number of flow cell sold and revenues for consumables and software combined, we can see support for this idea. Flow cells, as we reported, grew 17% in the quarter compared to last year. And we can look deeper into that number by removing the number of flow cells sold to new customers in the second quarter of 2024 and 2025. And in so doing, the number of flow cells sold to the remaining existing customers grew by 14%. So growth for flow cells sold to the existing customers in the first half of 2025 compared to the first half of 2024 overall has grown by 7%. We believe these data suggest that existing customers are using the product and repurchasing it at higher volumes. We intend to continue our efforts to expand this growth. For recurring routine use revenue, we looked at the combination of consumables and software sales, which grew 16% year over year in the second quarter of 2025 and 8% year over year for the first half of 2025. As a percentage of the total product mix, consumables and software revenue increased from 55% in the second quarter of 2024 to 73% in the second quarter of this year. And for 57% in the first half of 2024 to 77% in the first half of 2025. We believe this shift is driven by growth and utilization as well as a reduction in new instrument sales, both of which are key elements to our strategy. Moving down the P&L, we're also focused on operating efficiently to reduce costs and improve our gross margins to make the business more profitable. We have made noticeable progress reducing our non-GAAP operating expenses really since the first half of 2023. In fact, we have taken out over $100 million of annual non-GAAP operating expense and materially reduced headcount over that period by more than 300 people since the second quarter of 2023. In the first half of this year, non-GAAP operating expense was roughly flat at 8.5 million for Q1 and 8.8 million for Q2, with Q2 representing a 53% year over year reduction. Turning to non-GAAP gross margin, cost reduction along with improvements to our product manufacturing costs have enabled margin expansion from 23% back in the first quarter of 2023 steadily to 52% this quarter. It's the first time that we're reporting a margin in this range for this product mix. We expect to see continued margin expansion over time, but expect to remain around the current levels for the near term. Importantly, these improvements in cost and margin are strong indicators that we are improving our financial profile. Turning now to a few key milestones in the quarter, which we believe are tied to our strategy and will enable our customers to more easily adopt and increase their use of OGM. We released an incredibly powerful update to our software suite and compute solutions with VIA 7.2, Solve .8.3, and updates to the software that enable our GPU based Stratus Compute platform. They have all been released in a first wave to select customers and we expect a broad commercial release later this year. In fact, installations have begun. Amongst key features, VIA 7.2 now offers the same transformative AI driven workflow users have adopted for hematologic malignancies to the workflow for analysis of constitutional genetic disorders, which we believe can be a game changer for analysis of these conditions. Solve updates and expands its database substantially and improved the accuracy of structural varied detection while updates to the Stratus Compute are expected to double its capacity for weekly analysis of cancer samples. We are making the OGM workflow easier with these advancements. Now in building the support needed for OGM reimbursement, we believe a growing number of publications illustrating the utility of optical genome mapping and cytogenetics and the number of clinical research genomes published are positive leading indicators. The second quarter of 2025 had the highest number of publications of any quarter in the history of optical genome mapping. And the optical genome mapping community has now surpassed 10,000 published clinical research genomes which is an incredible milestone. These publications provide the support for new customers to adopt, existing customers to expand applications and for third parties to support OGM in reimbursement. This June, in fact, the editorial board of the American Medical Association established a second category one CPT code for OGM. This one for use of OGM in evaluation of constitutional genetic disorders, which is yet another incredible milestone for our community. We believe the CPT code may pave the way for even more routine use of optical genome mapping and cytogenetics as part of this digital pathology strategy. To wrap up, I would like to provide our outlook for the remainder of the year. We are reiterating our full year revenue guidance of 26 to 30 million. We expect Q3 revenues to be in the range of 6.7 to 7.2 million. And given the 16 new OGM systems installed already in the first half of the year, we are raising our expectations for new OGM installations in 2025 to be in the range of 20 to 25 compared to the prior range of 15 to 20. So with that, Dee Dee, please go ahead and open the line for questions.