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.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. And our first question comes from Jason McCarthy of the Maxim Group. Your line is open.

Hey, guys, this is Michael Kuciniewicz on the line for Jason. Thank you so much for taking my questions today. Congrats on the great progress. Thanks, Michael. So I guess I wanted to ask with regards to VIA, how universal is the use of VIA software among the OGM users? Is it fairly -to-one over there, or are there some opportunities to expand VIA use among your existing OGM base?

So the answer is when we look at, across the whole install base of OGM systems, VIA is probably installed in less than, maybe around a third of them. But when we look at our routine use customers, that adoption rate is much higher. There still remains the opportunity to drive that adoption. And so that is something that we see can enable us to expand utilization. And even amongst the sites that have adopted it, they haven't all put it into their own routine use. And so that's a big focus for us from a training perspective. And we think that these new updates are going to help by introducing this workflow for constitutional genetic disorder. So I think the answer is that adoption is plentiful amongst the customers that we're really focused on right now in this routine use regime. But there remains a significant opportunity to install it at more sites and to increase the utilization amongst all of those sites.

Are you putting any effort towards marketing VIA in a non-OGM user? As you mentioned, there are a couple of people out there using VIA for applications like long read sequencing. And do those customers represent an opportunity for cross-selling to place OGM units without the high acquisition costs of going out and then finding completely new users?

I think the answer is yes. And let me just be clear, in the quarter, and over the course of the year, we do sell a substantial amount of software for non-OGM applications, structural variation detection analysis reporting off of NGS and microarrays. So that's a significant portion of the business. And we do believe that those customers who are using VIA for non-OGM applications can expand their relationship with the company and become OGM users. And so, yes, maybe you could say it's a little bit of a Trojan horse. There are some intricacies about how labs within the pathology universe are constructed and how samples flow. And so it's not a -for-one where you would expect to see direct adoption, but it certainly is an opportunity. And I think really, VIA performs incredibly well for these applications. And so it's a way for the BioNanner name to be present at institutions.

All right, thank you. And then just one last one from me, and I'll hop back into the queue. You did mention that the newest iteration of VIA does include an AI component. So what role does AI play in the VIA software?

You know, when you think about what happens in this workflow, and I think you have probably worked on some of these projects, when variants are identified, you know, it's possible that they have been seen before and so that there are publications associated with them. Similarly, there may be other labs that are looking for variants of this type. And then there are a variety of databases that exist that can score and categorize these variants and help researchers to determine ways in which they want to report these variants. And so this type of, you know, analysis of these databases is an example where, you know, the computational power that, you know, AI brings can accelerate and, you know, improve the results that are generated through this analysis.

All right. Thank you for the insightful answers and congrats on the great progress this quarter.

Thank you, Michael.

Thank you. And our next question comes from Yi Chen of HC Wainwright & Company. Your line is open.

Thank you for taking my questions. So your press release mentioned that you brought back eight systems during the quarter and placed and installed seven new systems. So I assume the eight systems you brought back are users that are not routine users, correct?

Yes. You know, we have a Reagent Rental Program and so labs can bring a system on and test it out and evaluate it. And, you know, in the cases of these examples, they, you know, went through their rental contract and at the end, you know, decided that they were not going to move forward. I think that, you know, one common theme amongst the majority of the systems that are returned is that they, you know, the initial application is much more of a research oriented application. And so I think, you know, in the current environment where, you know, there are a lot of constraints around funding, you know, I think that that may be one of the effects, but we shouldn't think of that as a reduction to the routine use customer pool.

So the new systems you placed in as the second quarter, all the coming quarters, they have all go through the, they have to go through the evaluation period too. And at the end, they have to determine whether they want to keep the system or they want to return the system. Is that the right idea?

Well, it depends a little bit on the way in which the customer contracts with the company. So if they rent the instrument, which means they commit to a consumables volume over time, certain number of consumables purchased, you know, per year, you know, they can, you know, have it for the minimum would be one year. Now, these deals that we're doing and there is the potential that they could return it after that year. But if they buy the system from us, then, you know, they own the system and it's theirs. The question is whether they choose to utilize it going forward or not. And we have a mixture of these rentals and purchases. And, you know, since we're doing fewer deals now, you know, it's kind of interesting. It's about it's about 50 50 purchase versus rental. But it is true that, you know, somebody who rents the system does have the option to, you know, basically discontinue their rental at the end of the contract period, which I think is quite common in in the industry.

Got it. So at this point, I don't know if you can provide a rough estimate as to the return rate among the new systems place or attrition rate, like what percentage of new and new system place will eventually be returned.

Yeah, I mean, I think it's a very good question. And, you know, when we look at the new systems that are going in, you know, it's kind of it's a little bit premature to talk about the the return rate amongst these current adopters because they really reflect this shift in strategy. And so, you know, we're not selling the system to a lab that's going to be doing speculative research. And so our expectation is that, you know, these systems are not coming back. I mean, I'm sure that it will happen potentially. But it's a little bit premature for us to give a return rate amongst this segment of customers. It's it's not zero. We have taken some back. But, you know, it's very close to it's very close to zero. I see.

And with respect to the second category one CPT code from AMA, could you tell us how is it different from the first code? And how is it going to facilitate the reimbursement going forward?

Yeah, it's an excellent question. So, I mean, if you think about the sort of digital pathology campaign that we're on to really consolidate cytogenetics onto optical genome mapping within that effort, you've got two very distinct applications, analysis of samples for hematologic malignancies and analysis of samples for constitutional genetic disorders. And the way that the CPT codes work is that even though the methodology itself is fairly similar, there are differences in the workflows such that, you know, it's appropriate to have different codes. And I think that there is a chance for there to be differences in pricing. We don't know what the constitutional genetic condition code will be priced at. We would expect to see the draft pricing probably sometime in September. You know, the hematologic malignancy code was priced at one thousand two hundred and sixty three dollars. We understand that some of our customers have petitioned CMS to increase that price. And so I think that, you know, while we would have liked for one code to exist from the very start, now that we've gone through the process, I think it's beneficial to have a code dedicated to each of these major applications, because for the reason that somebody might be doing that analysis, it's fairly unique and different. It's a different body of literature that supports it. And hopefully, you know, let's just say could potentially drive differences in pricing. So we'll want to pay attention to that in the next weeks.

Got it. Thank you very much.

Thank you. And our next question comes from Mark Macero of BTIG. Your line is open.

Yes, this is Vivian for Mark. Thanks for taking the questions. So I think the instrument placement guidance assumes a slight de-cell in the back half. Should we just think of that as conservatism? I would think that there might be a slight budget flush dynamic in Q4. So just how should we be thinking about that?

Thanks. I think that. Probably yes, conservatism, right? If you double if you double the first half, you would get 32. On the other hand, you know, it's probably appropriate to be conservative, because even if you get a budget flush and there are orders and so forth, you're actually getting them installed could spill over into the first quarter of 2026, for example. So, you know, I think I would say that I feel very confident that will sort of meet this new raised guidance.

That's perfect. And then just to follow up on the flow cells, I think you beat us there. You alluded to it in the prepared remarks, but could you just discuss one more time what you think drove that? And do you have a sense on how long it takes the newer customer group to reach maturity and kind of ramp their utilization there?

Yeah, really good questions. I mean, I think that. To be fair to you and to us and to everybody who's, you know, following the trajectory here. You know, we expect there to be lumpiness, you know, and the sort of routine use user base is sizable, but it's not so big that, you know, it's not going to, it'll be just smooth. So we expect there to be some lumpiness. Having said that, you know, we have really focused on supporting customers to make sure that they're, you know, up and running and, you know, addressing those customers with the highest potential for utilization. You know, our training programs on the VIA software and other aspects of the workflow in key applications like hematologic malignancies are underway and this is a big concentration for us. And so I think that there have been a lot of good execution oriented actions that we've taken and that those are paying off. And that's why we're seeing that growth. You know, in addition, you know, in sort of, you know, transitioning to your question a little bit about the time to get up to speed. You know, we had a pretty substantial number of systems get installed and people get trained towards the end of last year. And so we're probably starting to see that that utilization and you know, I think that the time to, you know, a lab getting into a routine use situation with OGM. It's going to be variable. It's without a doubt a minimum of three months. But I think, you know, six to nine months is a healthy timeframe to be thinking about. You know, there's just a lot of stuff that needs to happen, you know, after install that is related to requirements that the lab needs to follow depending on what their desired application is and so You know, it takes some time. Having said that, almost every system, you know, that goes out buys consumables up front. And, you know, so they're turning through a wave of consumables to begin with. And it's like, when do we get them to get them to that point of their first, you know, repurchase. Again, I think that that's likely in that, you know, six month timeframe, maybe six to nine months is Is is a good way to think about it.

Okay, that's very helpful. Thanks. I'm going to squeeze in one last one, maybe a higher level question. There has been some pickup of deal making and space, a little more recently. Just, how are you thinking about strategic or partnerships here.

Well, look, I mean, I think that There's the cliche answer, you know, every, every day between the hours of 930 and for Eastern time the company is definitively for sale and you know we're a well known entity out there. And so I would expect that bio nano is certainly on the radar screen of strategic and we have a variety of discussions that You know, our, our ongoing all the time. And I think what's unique about bio nano across the space of companies, let's say that are similarly situated to us, you know, early commercial stage. You know, maybe feeling some of the constraints and difficulties of the current equity capital markets. I think bio nano is Pretty far advanced. So, you know, even, even with everything that we've gone through, you know, we're we're printing a $6.7 million quarter and guiding You know, $6.7 to $7.2 million for the next quarter. I think, you know, $26 to $30 million on the top line 52% gross margin. With expenses that are no longer so significant that folks can't, you know, see a way to, you know, folding bio nano in having said that, I think we're very committed to our strategy. Of this digital pathology transformation. We know it's going to be incredibly valuable and that there's so much upside for our business. So, you know, You know, we sort of stick to our knitting, if you will.

Thanks. Thanks so much for the time.

Thank you, Vivian.

Thank you. This concludes our question and answer session. I'd like to pass it back to Eric Homeland for closing remarks.

Okay. Thank you, DD. And thank you to everyone who joined. We're very happy with this quarter. We look forward to updating you on our Q3 conference call. Thank you very much.

This concludes today's conference call. Thank you for participating and you may now disconnect.