Standard BioTools Inc.

Hello and welcome to the Standard BioTools Incorporated First Quarter 2023 Financial Results Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Peter Donato, Investor Relations. Thank you, Mr. Donato. You may begin.

Thank you, operator. Good afternoon, everyone. Welcome to Standard BioTools' first quarter 2023 earnings conference call. At the close of the market today, Standard BioTools released its financial results for the quarter ended March 31st, 2023. During this call, we will review our results and provide commentary on our financial and operational performance, market trends, and strategic initiatives. Presenting for Standard BioTools today will be Michael Egholm, Chief Executive Officer and President, and Vikram Jog, Chief Financial Officer. During the call, we may make forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, our outlook for 2023 and future financial results and market trends and opportunities. These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectations. The forward-looking statements in this call are based on information currently available to us and we disclaim any obligation to update these statements, except as may be required by law. During the call, we will also present some financial information on a non-GAAP basis. We encourage you to carefully consider results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, which are disclosed in a table accompanying our earnings release. Please note that management will be referring to a slide presentation, including updated supplemental financial information, within the webcast today, and this presentation is also posted on our website. I would also like to note that the company will not be hosting a question and answer session following prepared remarks during today's conference call. I will now turn the call over to Michael Eggholm, our Chief Executive Officer and President. Michael?

Thank you, Peter, and good afternoon, everyone. We appreciate you joining us on the call today. A year after closing the strategic transaction and with a new management team in place, we are off to a solid start to 2023. We posted year-on-year growth in core products and service revenues and margins and significantly lowered spending, which reduced our cash burn by more than 50% from the fourth quarter of 2022. We're running our playbook and are committed to building the next diversified life science tools company through industry-leading operational execution and scale building strategy. The entire organization is committed to a lean culture based on standard biotools business systems or SPS for short. I want to recognize all our employees for the dedication, focus and execution behind these early but encouraging results. Our lean culture is our common denominator and the team has fully embraced SPS, which we firmly believe will allow standard biotools to become a high performance organization. In review of the quarter and the past 12 months, we made tangible progress against our two first-order priorities outlined when we took over the helm of the company just one year ago. The first was to improve operating discipline and increase productivity to drive this business to profitability, and the second was to rationalize and stabilize the core business, pushing it back towards growth. With these two operating goals, we indicated a third, expand the product offerings by acquiring complementary assets that leverage our infrastructure and accelerate our growth. During the call today, I'll provide a summary of our first quarter financial performance and operational highlights in the context of these three strategic priorities and discuss where the business is headed. I will turn the call over to Vikram for a more detailed look at our financial performance. Let's begin. by discussing our progress towards profitability, which is front and center fundamental to our thesis. Net cash use and operating activities in the first quarter was down to 8.5 million, significantly below the 19.2 million consumed in the fourth quarter and the 15.6 million burned in the first quarter of 2022. We inherited an operating budget that was inefficient and overbuilt for the business and have worked hard since day one across the board to improve quality and manufacturing execution, sales efficiency, and G&A spending, while also improving our internal processes. Most of this restructuring was executed last year with some residual reductions in the first quarter as we realigned our European sales organization. This also included a consolidation of our real estate footprint. as previously discussed, as some operations moved to our Markham, Ontario facilities. We now have subleased a total of 50% of our South San Francisco footprint and are looking for further opportunities for consolidations. While we are pleased with this progress and where we are headed, we are by no means done. Our Kaizen-based approach commits us to continuous improvement. There's always more that can be done, and we are relentlessly getting after it. next to build a leading company you need a stable call and we believe we reached a much stronger place than where we started today the core products deliver tangible signals of stability and a sign of some moderate growth core product and service revenue in the quarter was 24.3 million compared to 23.9 million a year ago The best part was that these sales came in at better margins with non-GAAP product and service margins at 60.9%, moving towards our fourth quarter target of 65 to 68%. The margin increase was primarily driven by product mix, pricing discipline, and the benefits of our manufacturing initiatives. And as I just mentioned, our operating cash burn was 8.1 million in the quarter, compared to 19.2 million in the fourth quarter, resulting in a cash balance of 154.5 million at the end of the first quarter. One can think of our business in three categories, instruments, consumables, and services. Our strategy is to have a portfolio of high quality, high margin instruments that when installed with the right customers, will enable great science and drive higher margin sticky recurring consumables and service revenues. With respect to our consumables and services, over 75% of our core product and service revenue in the first quarter were from these recurring revenue sources. This is a key component of both our businesses where high value instruments drive high levels of recurring revenue in subsequent years. If we are successful growing instrument revenues by extension, we will look for increased high margin recurring revenue the following year when the customer is fully up and running. With that in mind, I would like to provide a bit more color on the two current business lines. First, our proteomics business, which is on the path to healthy margins and increasing growth, up 12% year-over-year in the first quarter. There are currently approximately 400 units in the field with more than $45,000 in average range and pull-through per instrument per year. To drive placements, we are launching new products, including last month's launch of our first new spatial imaging instrument in six years, the Hyperion XTI at the American Association of Cancer Research annual meeting. The Hyperion XTI is five times faster than our legacy system, at 40 slides per day and contrast with cyclic fluorescent approaches that typically take days to scan for a few slides. The XTI has also an improved workflow that approaches a walk-up user experience and with lack of autofluorescence, digital-like resolution quickly expected to become the standard for peer-reviewed papers for more than 20 protein markers. We also launched another exciting product line that increases the utility and pull-through on these instruments, a 33-marker mouse immune profiling panel, expanding our end-to-end solution to mouse and preclinical research, which will further drive our technology as the standard in immune profiling. We believe our flow cytometry technology is inherently advantaged over fluorescent-based spectral flow, And to this point, we are heading to the CITO meeting in Montreal later this month, where we're excited to showcase our capabilities and compare and quantify the advantages over fluorescent-based approaches. Turning to our genomics business, as we acknowledged when we started, our current platform is more mature, and as such, we are focused on running it for profitability. Performance was in line with our expectations for this business, after our product line rationalization and reduction of the headcount. While this translated into a year-to-year decline of 12%, on a non-GAAP basis in the first quarter, our go-to-market strategy now emphasizes OEM partnerships and key accounts, and we expect a positive ramp in placement to maximize the reagent pull-through. This leads us to our third priority, adding to our instruments, reagents, and services through inorganic growth. In doing so, in the smart and prudent way, we can leverage our infrastructure and balance sheet and accelerate scale, growth, and most importantly, profitability. Our thesis is that there are many innovative technologies, but few great companies that have been able to scale and build profitable businesses. We believe Standard BioTools is well positioned, especially in the current macro environment, and provides a uniquely attractive chassis for us to consolidate. Such consolidation is central to our strategy, and our value proposition resonates well with founders that are excited about potentially joining a company where they can have a meaningful impact. Stay tuned. I want to reiterate that we know our mission, We know we work for our shareholders, and I'm excited to share this journey with you all. I will now turn it over to Vikram for review of our financial results. Vikram.