Champions Oncology, Inc.

Greetings and welcome to the Champions Oncology second quarter fiscal year 2019 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ronnie Morris, CEO. Please go ahead.

Good afternoon. I am Ronnie Morris, CEO of Champions Oncology. Joining me today is David Miller, our Chief Financial Officer. Thank you for joining us for our quarterly earnings call. Before we begin, I will remind you that we will be making forward-looking statements during today's call and that actual results could differ materially from what is described in those statements. Additional information on factors that could cause results to differ is available in our Forms 10-Q and Form 10-K. A reconciliation of non-GAAP financial measures that may be discussed during the call to Gap Financial Measures is available in the earnings release. I'll start by pointing out we will continue the call format started last quarter where we minimize some of the repetitive messaging and information easily obtained by reading our earnings release and financial statements. Instead, we will provide a more general overview with quarterly highlights and other strategic initiatives when applicable. With regards to the quarter, we extended our string of successful quarters continuing our trend of record revenue and Robert Brainin. Our Exvivo platform and CLIA approved clinical flow cytometry to expand and enhance our growth beyond our core products. The Exvivo platform and services will leverage our large tumor bank to support large screening studies and assist our customers with their early preclinical work. We had an early launch of Exvivo services which yielded promising results and we've just recently officially launched our Exvivo platform. While we are not altering our financial projections based on this product launch, We look forward to sharing some preliminary results over the next quarter or two. We expect a very modest increase in bookings from clinical cytometry services that will begin toward the end of this fiscal year and a slow but steady increase in the first half of next year. We expect revenue contribution from cytometry services to start only toward the end of our next fiscal year. As you all know, we completed the movement to our own state-of-the-art lab facility in June of 2017. The results have been as expected, creating operational efficiencies, lowering our costs, and providing capacity for additional revenue growth. The lab still provides us the runway to more than double our current revenue run rate with our core PDX services. However, with the launch of our new offerings, we have expanded into additional lab space in a nearby facility where we will house our ex vivo platform and flow cytometry services. We feel this will maximize the capabilities of both locations, both operationally and financially. In summation, it was a good quarter for the company, and we continue to be encouraged by the large market opportunity for our new products, along with the growing demand for our core PDX services. Now let me turn the call over to David Miller for the highlights of our financial results.

Thanks, Ronnie. Our full results on Form 10Q will follow with the SEC later today. As mentioned, We have altered the format of our quarterly calls to highlight noteworthy financial results. Additional details, comparisons to prior periods, and the primary drivers of any variances can be found in our press release and 10-Q. I will move through some of the highlights of the financial notes quickly so we can get to your questions. Most notably, our total revenue for the second quarter of fiscal 2019 was $6.7 million, another quarterly record high and an increase of 28%. Thank you very much. Our total operating expenses were $6.2 million for the quarter ended October 31, 2018, compared with $5 million in the year ago period, an increase of $1.2 million, or 24%. The increase in total expenses is mostly due to the $800,000 increase in cost of sales. Our cost of sales increased due to a combination of factors. While we don't disclose our booking numbers, the demand for our services continues to grow. As we've mentioned repeatedly, We incur costs in advance of revenue, and rising costs for sales is often a precursor to growing revenues. Our second quarter bookings were particularly strong, and the increase in cost of sales is partially a direct result of that strength. The other bucket for increased cost of sales is the result of our new products that Ronnie had previously mentioned. We have been gearing up to offer these new services, which includes hiring staff and performing study work to test our operational capabilities. We believe that the costs associated with new offerings will come down with time as we decrease the need for testing and become operationally efficient with our new offerings. We will continue to monitor these costs and will do our utmost to ensure that increases will primarily be the direct result of sales growth. For the second quarter of fiscal 2019, we recorded our second consecutive profitable quarter on both an operating and gas basis. on a GAAP basis reported second quarter income from operations of $275,000 compared with a loss of $70,000 in the same period last year. Excluding stock-based compensation and depreciation, we achieved net income of $514,000 versus income of $175,000 in the same period last year. We remain confident that we will maintain profitability on a quarterly basis as we progress throughout the year. Now turning to cash. Net cash generated by operating activities was $400,000 for the six months ended October 31, 2018, compared to net cash used in operating activities of $1.7 million for the same period last year. At the end of the second fiscal quarter, we had approximately $2 million of cash, continuing the expectation of a strengthening cash position and overall balance sheet, which we expect will continue. We remain confident that our cash on hand is sufficient to fund our operating activities. In summary, we had another rapid high quarterly revenue, our sales pipeline remained strong, and we're on track to deliver revenue growth in excess of 20% for fiscal 2019. We are profitable on both a gap and non-gap basis and expect this trend to continue in the coming quarters. I would now like to open the call for your questions.