Champions Oncology, Inc.

Welcome to the Champions Oncology fourth quarter fiscal year 2025 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. Please note, this conference is being recorded. I will now turn the conference over to your host, Ronnie Morris, Chief Executive Officer. You may begin.

Good afternoon. I am Ronnie Moore, 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 I 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 those indicated. Additional information on risk factors can be found in our Form 10-Q and Form 10-K filings. A reconciliation of non-GAAP financial measures to GAAP financial measures is available in our earnings release. Looking back, fiscal 2025 may ultimately be seen as a pivotal year for Champion's Oncology, one marked by renewed momentum, strategic execution, and foundational growth. Following a challenging fiscal 2024, we successfully reestablished revenue growth and returns to profitability. A highlight of the year was closing our inaugural data licensing deal in the third quarter, followed by several smaller transactions in the recent quarter, as well as a growing pipeline showing clear validation of our long-term vision and strategic direction. Our core services business continues to be the foundation of Champions Oncology. Built on our industry-leading PDX bank and its extensive multi-omic characterization, our platform remains a critical resource for pharmacology studies across the biopharma sector. We have made targeted investments to strengthen our team and streamline operations resulting in improved quality, greater efficiency, and increased scalability. These enhancements have contributed meaningfully to our margin expansion and overall profitability. This progress is especially significant given ongoing macroeconomic headwinds. While there are early signs of recovery, biotech and pharma R&D budgets remain constrained. Despite the challenging market, we have begun to see a decrease in customer cancellations leading to a greater bookings to revenue conversion rate. We have also made strengthening our relationship with Big Pharma a core strategic focus, as these customers are generally more resilient through market cycles and tend to engage in larger multi-study programs. Another major milestone was the launch of our radio pharmaceutical services platform. This achievement was enabled by expanding our radioactive materials license, adding radiochemistry infrastructure, and screening more than 30 PDX models in collaboration with pharma and biotech partners. Champions now offers fully integrated radiopharmaceutical workflows, including in vitro and ex vivo biodistribution studies and therapeutic efficacy testing across a range of isotopes. What truly sets us apart is our use of clinically relevant PDX tumor models, allowing radiopharma developers to test compounds and systems that closely mirror human biology. As highlighted before, our first data licensing deal underscored the potential of our rich multi-omic functional PDX data bank. We licensed both existing data and prospective omics generated data, aligning with our vision to create the world's most comprehensive clinically relevant tumor data set. This resource aims to bridge the gap between legacy data sets and the depth required to power next-generation AI ML-driven discovery pipelines. As the market increasingly values rich, high-fidelity data sets, Champions is well-positioned to lead in that effort. As we enter this next phase of transformative growth, I will be stepping down as CEO and passing the reins to Rob Brannan. Rob brings over 25 years of experience at the intersection of life sciences and data-driven innovation. He has a proven track record of scaling companies rooted in scientific and computational excellence. His unique background makes him the ideal leader to connect our robust services with our emerging data platform. In summary, we have made significant strides in fiscal 2025. We stabilized and reignited our core services business. We returned to revenue growth and profitability. We validated our data platform with initial licensing deals. and we launched our radio pharmaceutical services. We believe the structural improvements made this year will continue to bear fruit in the quarters ahead. Despite external challenges, we have maintained strong momentum, advanced our platform, and upheld our scientific leadership. On a personal note, leading Champions Oncology has been a great privilege, and I am very proud of the extraordinary company that we have built. I am confident that under Rob's leadership, Champions will continue to advance, innovate, and excel. I look forward to supporting him in my new role. Now I will turn the call over to David Miller for a more complete review of the financial results.

Thanks, Ronnie, and good afternoon, everyone. I'll review our results for the fourth quarter and full fiscal year 2025 and frame how we're thinking about fiscal 2026. Before I dive in, a reminder that our full audited results will be filed on Form 10-K with the SEC by Wednesday, July 29th. As always, today I'll reference certain non-GAAP metrics, but reconciliations for GAAP are included in our earnings release. Fiscal year 2025 was a turnaround year for Champions, a return to growth and profitability after the decline we saw in fiscal 2024. Our total revenue was a record $57 million, compared to $50.2 million last year, a 14% increase. Our research services revenue was $52.3 million, up 4% year-over-year, and our data revenue stream contributed $4.7 million, reflecting our initial data licensing deals. Due to the combination of disciplined cost execution and revenue increase, including high margin data, our adjusted EBITDA was $7.1 million versus an adjusted EBITDA loss of $3.9 million in fiscal 2024. Turning to our fourth quarter, as expected, our fourth quarter came in weaker both sequentially and compared to Q4 last year. Revenue was $12.1 million compared to $14 million last year. We recorded a GAAP operating loss of $2 million compared to a loss of $200,000 in 2024. This included approximately $800,000 in non-cash expenses, mainly stock-comp based compensation, depreciation, and a charge related to equipment disposal. Excluding those, adjusted EBITDA for the quarter was a loss of $1.2 million compared to a gain of $900,000 last year. Turning the focus to our cash-based results, cost of sales for the fourth quarter was $7.3 million, relatively flat versus last year, resulting in gross margin of 41%. down from 48% in Q4, 2024. The margin decline reflects lower revenue on a relatively unchanged cost base, something we expect to reverse next quarter as revenue increases and costs remain stable. Operating expenses for the quarter rose 400,000 or 7% driven by a $500,000 increase in sales and marketing due to the formation of our data sales team, along with continued marketing efforts such as conferences that were heavily concentrated in the quarter. These operating expenses were partially offset by modest declines in R&D and G&A. We're encouraged that the business development investments are already contributing to pipeline expansion and will support growth in high margin data revenue moving forward, while at the same time remain focused on expense management and reduction in non-core areas of the business. Now summarizing our results for the full year. As mentioned, revenue reached a record $57 million, up 14% from 2024. Cost of sales was $28.3 million, a 3% decrease from $29.2 million, enabling gross margin to expand to 50%, up from 42% last year. This improvement came from two key drivers, the addition of high margin data revenue and operational efficiencies that improved revenue conversion and contained cost. Total operating expense declined by approximately 3.4 million year-over-year. R&D was down 2.7 million, and G&A was down 1.2 million, while sales and marketing rose by 500,000. Again, demonstrating our focus on strategic cost controls while investing were required to our commercial expansion efforts. Adjusted EBITDA for the year was 7.1 million, a dramatic swing from a loss of 3.9 million in fiscal 2024. This is a testament to the team's disciplined execution and our ability to translate top line growth into bottom line improvement. Turning to cash, we ended the year with $9.8 million in cash, up from $2.6 million a year ago, and we remain debt free. Operating cash flow for the fourth quarter was $6.4 million as we converted our accounts receivable and increased our deferred revenue. Looking ahead, We expect to remain cash neutral over the next quarter with projected cash growth in the second half of the year as revenue increases and margin improvements take hold. We do not expect any significant capital expenditures this year, and we believe we're in a strong position to fund operations and organic strategic growth. To summarize, fiscal year 2025 was a turnaround year for champions with record revenue and a return to profitability. As we look ahead to next quarter and beyond, we should see a sequential quarterly revenue increase and adjusted EBITDA profit, and we have growing confidence that revenue will increase over the next few quarters, along with expanding operating margins. Our balance sheet is strong with growing cash and no debt. As a result, we remain confident in our long-term growth trajectory, expanding our data business, enhancing profitability, and driving shareholder value. We look forward to updating you on our first quarter results in about six weeks. We'd now like to open the call for questions.