Standard BioTools Inc.

Good day, and welcome to the Standard BioTools, Inc. Third Quarter 2024 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to David Holmes of Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to Standard BioTools' third quarter 2024 earnings conference call. Leading the call today is Michael Eggholm, President and Chief Executive Officer, and Alex Kim, Chief Operating Officer and Interim Chief Financial Officer. At the close of Market Today, Standard BioTools released its financial results for the quarter ended September 30th, 2024. During this call, we will review our results and provide an update of our financial and operational performance, 2024 outlook, market trends, and strategic initiatives. During the call, we will make forward-looking statements about events and circumstances that have not yet occurred. including plans and projections for our business, our outlook for 2024 and future financial results, market trends and opportunities, and our expectations related to the combined operations with Somalogic, including potential synergies and our business outlook for the combined company. These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current circumstances. The forward-looking statements on this call are based on information currently available to us, and we disclaim any obligation to update these statements, except as that may be required by law. During the call, we will also present some financial information on a non-GAAP basis. We believe these non-GAAP financial measures are useful in evaluating our core performance and as a baseline for assessing the future earnings potential of the company. We use these non-GAAP measures in our own evaluation of continuing operating performance. We encourage you to carefully consider our results on a GAAP and non-GAAP basis. The reconciliation between non-GAAP measures and their GAAP equivalents are provided in the tables accompanying today's press release as appendix to today's presentation slides. Please note that management will be referring to a slide presentation, including updated supplement financial information within the webcast today. Following prepared remarks, we will host a question and answer session. Today's slide presentation, along with a replay of the webcast, will be available on the investor section of our website. I would now like to turn the call over to Michael Egholm, President and CEO of Standard BioTools. Michael?

Thank you, David, and good afternoon, everyone. We appreciate you joining us today. Before we discuss our quarterly results, I want to welcome Alex Kim to the call, who is Acting CFO and will be covering our financial performance for the third quarter of 2024. Alex has been with Standard BioTools since its inception, instrumental to its founding and fundamental to its growth. As a co-founder, Chief Operating Officer, Alex brings to the CFO role a deep understanding of our business and seasoned operational acumen honed from a decade at Danaher. In addition, Sean McKay, our Chief Business Officer, who now heads our organic and inorganic growth efforts, is joining the call and will be available to answer questions. With that, let's discuss our results, of which I will be speaking to performer numbers. In the third quarter, we delivered $45 million in revenue, sequentially up 21% from last quarter, but down 5% year-over-year, and $128 million in revenue year-to-date, which is down 9% versus 2023. From last quarter to this one, the industry backdrop remains challenged, with customer budgets for CapEx equipment tight and purchasing behaviors conservative. Operating in a dynamic environment like this one requires deep operational discipline and continuous focus on improvement. Against these metrics the team delivered, we met our adjusted revenue target and accelerated operational efficiency. Our team is now three quarters into the Somalogic integration and a full year ahead on cost reduction, having already operationalized and expected 80 million synergies. While the savings are expected to be fully realized in 2025, we have already seen a 24% year-over-year reduction in non-GAAP operating expenses year-to-date and a 50% improvement in adjusted EBITDA in the quarter. Our operating system, Standard BioTools Business System, or just SBS, has become deeply embedded in the new businesses. Examples of the power of SBS include improved forecasting, improved delivery performance, and an inherent focus on quality. For example, we now have an industry-leading on-time delivery for products and services of 98% versus 78% two years ago for legacy standard bio tools. We also have reduced complaints per installed base for our highest-selling instrument more than fourfold in the same period. This allows our customers to be focused on their exciting research with less downtime and our sales force to be focused on generating new leads. We believe we can still be even more efficient and expect you will see the benefit of our continuous improvement culture in both our bottom and top line going forward. With these results and with full awareness of the current operating environment, we are reiterating our full year 2024 revenue guidance in the previously communicated range of 170 to 175 million. With 368 million in cash and short-term investment as of September 30th, we are well capitalized to advance our strategic vision of building a scaled and profitable life science company. At Standard BioTools, we're building a top-tier life science company leveraging consolidation to overcome the sector's innovation bottleneck and inability to scale. Our goal is to become the preferred industry partner to customers and to innovators. We're focused on providing a portfolio of consumables, instruments, and services which share a platform that drives reliability, performance, and profitability for stakeholders and shareholders alike. We recognize the importance of achieving our profitability objectives, and we are targeting an adjusted EBITDA breakeven for the full year 2026, which will further position the company to partner and consolidate a fragmented and capital-constrained industry. With a high performance culture, streamlined infrastructure, team of seasoned operators, and access to capital, we are positioned to execute this vision. It is early in our journey, if not just the first innings, and we are far from done and far from optimized, but we are on our way. We have a clear strategy and a world-class team operating in one of the most challenged environments, which opens new opportunities for us. Turning to results, our revenue mix in the third quarter was split between lab services at 41%, instrument field services at 14%, instruments at 12 percent and consumables at 31 percent our sequential quarter or quarter revenue growth was driven by our service offerings which is today chiefly so much against services we saw a bounce back from last quarter's result from favorable timing from a few large accounts to this end we're putting pushing hard to expand our all customer mix and then currently Outside our top five SomaScan customers, service revenue grew double-digit in the quarter year-over-year. One component of our strategy is to expand our footprint beyond our core lab located in Boulder and deeper into our authorized SomaScan sites. In the quarter, one of these sites we added was a major U.S.-based BioPharm customer, which should help us expand the customer's use of our product Another diversifier to our service revenue is our omics as a service offering, which leverages all of our products, SomaScan, CyTOF, and imaging mass cytometry, and future platforms developed, acquired, or partnered. This offering expands our assay lab services revenue stream and provides customers premium data with clinical research support. This will increase adoption while avoiding the capital budget constraints currently facing the broader biopharma market. Turning to our instrument business, which is down year-over-year by 42%, with the biggest impact coming from our higher-priced mass cytometry instrument. The industry headwinds have not cleared, and we're working hard with our customers to unlock budgets and adjust to their new purchasing behaviors where we can. Our genomics business, including Fluidics Instruments, consumables and OEM, while down year-over-year is contribution margin positive, and it's a case study of the value the SBS culture can create, a lean, profitable business unit with upside potential. Hence, we're working on additional OEM relationships and identifying new niche growth opportunities which leverages our infrastructure and which will be accretive to the bottom line. Consumable is and remains our most attractive product margin profile. And in an industry with dark clouds, it's a continued bright growing spot in our business. This revenue stream was up 13% year over year in the quarter. Consumables are the most attractive products in the industry and at the top of our product pyramid and a top strategic focus for us both organically and inorganically. A major example of what we can do with consumables is the distributed SomaScan solution on Illumina's sequencing platform, which we believe is becoming, with increasing clarity, the next big thing in proteomics and is an exciting new growth vector for the company. SomaScan is a powerful and compelling competitively differentiated platform with tremendous upside potential. And recent studies confirmed the assay's unique ability to scale with precision. With this alternative distributed solution, we can further unlock our potential to be supplying the leading proteomics solution. Our partnership remains on track with full commercial release in the first half of 2025, democratizing the Somascan assay on a luminous installed base of more than 2,000 NovaSeq instruments. Having now spent time with the team, the technology and customers, it is clear to us that the Somamare technology has more headroom and much more commercial potential than we originally envisaged. We are exploring new ways to leverage the technology and today We announced the launch of single Somomare reagent as a minimal viable product offering, making each of the 11,000 individual Somomares available for purchase. This is a highly differentiated solution in an all-important and large protein reagent end market. This meets an unmet need for protein identification and quantification and insight derived through voice of customer process. We'll proceed with care to ensure the utmost quality of our product and prepare for the full product launch in the future. As we look to the next several quarters and beyond, we believe we're well equipped to execute our vision for Standard BioTools. We're in the business of delivering solutions to our customers, not just focusing on individual applications, as those can evolve over time. What's important is that we have strong exposure to attractive end markets today, particularly in academia and pharma. As we continue to strategically allocate capital to bolster our portfolio, we will expand into other attractive markets. We have an experienced leadership team committed to our continuous improvements initiatives with a track record of driving growth, expanding growth margins, and reducing operating costs. The current market environment is offering many unique opportunities, and we're actively assessing how to accelerate our consolidation theses. Our story is not complete, and we remain focused on scaling the business, driving end market diversification, evolving to a higher margin consumable offerings, and delivering long-term shareholder value. With that, I'll now turn the call over to Alex.